Expenditure over income should have been considered even if the claim of exemption under section 11 was not allowed by CPC – ITAT
In a recent judgment ITAT Guwahati has held that audited income and expenditure account showing net excess expenditure over income should have been considered even if the claim of exemption under section 11 was not allowed, as the expenditure claimed cannot be disallowed while processing the return under section 143(1) of the Act.
ABCAUS Case Law Citation:
4567 (2025) (05) abcaus.in ITAT
In the instant case, the appellant assessee had challenged the order passed by the JCIT(A) in confirming the intimation under section 143(1) of the Income Tax Act, 1961 (the Act) passed by the CPC Bengaluru disallowing exemption u/s 11 and taxing the gross receipts of the assessee.
The assessee trust had filed its return of income for the Assessment Year 2022-23, declaring therein total income of Rs. Nil which was processed u/s 143(1) of the Act by the CPC after disallowing the exemption claimed u/s 11 of the Act on account of non-filing of audit report in Form 10B. The appellant’s income was accordingly computed at the gross receipts and a demand was raised.
The CPC, Bengaluru while processing the appellant’s return of income had denied grant of exemption claimed u/s 11 of the Act in the return of income filed u/s 139(1) of the Act due to the fact that that the appellant failed to furnish the requisite Form No. 10B within the due date prescribed as per the provisions of Section 139(1) of the Act as required under the provisions of Section 12A(1)(b) of the Act.
Aggrieved with the intimation issued, the assessee filed an appeal before the Addl/JCIT(A) who, vide the impugned order, dismissed the appeal.
The JCIT(A) observed that as provided in CBDT Circular No. 2 of 2020 the assessee failed to file any application before the competent authority i.e. CIT(Exemption) for condonation of delay in filing Form 10B.
The JCIT(A) observed that as per provisions of Section 12A(1)(b) of the Act, it is clear that the appellant had not submitted the requisite Form 10B within due date as prescribed and thus, had not fulfilled the necessary conditions for consideration of its claim of exemption u/s 11/12 of the Act.
As regards the appellant’s plea regarding filing of Form 10B subsequently, the JCIT(A) noted that no proof/evidence of filing of any such Form 10B was furnished during the entire appellate proceedings, and hence its claim cannot be acceptable without any documentary proof.
The appellant failed to file any details, proof or evidence of filing Form 10B within the prescribed due date i.e. on 30/09/2022, as claimed in the Grounds of Appeal nor any written reply/submissions had been filed in this matter by the appellant in spite of repeated opportunities granted to it, therefore, the appeal before Ld. Addl/JCIT (A) was dismissed. The Ld. Addl/JCIT(A) has held as under while dismissing the appeal.
Before the Tribunal the assessee contended that Form No. 10B was filed within due date, but the same could be e-verified only after the due date.
It was further submitted that the CPC while processing the ITR took the gross receipts of the assessee as the income and no deduction for the expenses claimed had been allowed.
It was submitted that if the exemption were not allowed, the income should have been computed after allowing the expenses claimed, which has not been done and the gross receipts have been added. The assessee also submitted that filing of Form No. 10B is directory and not mandatory and relied upon various case laws. Itw as also submitted that no show cause notice was served before denying the claim of exemption under section 11.
In support of its contentions, the assessee relied upon the decision of the Kolkata ITAT Bench wherein the delay of 24 days in filing the audit report was condoned.
The Tribunal observed that as per the acknowledgement of filing audit report on Form No. 10B, it was verified on the portal after the due date. However, as per the screenshot of the portal the same was uploaded within due date.
The Tribunal further observed that the audited income and expenditure account for the year ended 31.03.2022 showing net excess expenditure over income was also filed by the assessee along with the Form 10B which should have been considered even if the claim under section 11 was not allowed, as the expenditure claimed cannot be disallowed while processing the return under section 143(1) of the Act.
Accordingly, following the decision of the coordinate Bench of Kolkata and others relied upon by the assessee, the order of JCIT (A) was set-aside and the AO was directed to allow the exemption claimed under section 11 of the Act by the assessee as per law as the requisite audit report is available on the portal and the delay, if any, in filing the same was condoned in view of the finding that filing of the same within the due date is directory and not mandatory in nature.
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