Facts of the Case

The assessee, Parantap Charitable Trust, filed its return of income for Assessment Year 2017-18 under Section 139(4) after getting its accounts audited. However, Form 10B was not filed electronically along with the return. The Central Processing Centre issued an intimation under Section 143(1) denying exemption under Section 11 due to non-filing of Form 10B.

The assessee subsequently filed Form 10B and moved a rectification application under Section 154, which was initially rejected. A second rectification application was filed and allowed by CPC, granting exemption under Section 11. Meanwhile, the assessee had also filed an appeal before the CIT(A) against rejection of the first rectification.

The CIT(A), NFAC passed an order holding that filing of Form 10B was a procedural requirement and directory in nature, but directed the Assessing Officer to verify whether delay in filing Form 10B stood condoned under CBDT Circular No. 10/2019 dated 22.05.2019. In the appeal effect order, the Assessing Officer reversed the exemption earlier granted, holding that Form 10B was filed beyond the due date under Section 139. The assessee thereafter filed an appeal before the Tribunal with a delay of 368 days.

Issues Involved

Whether the delay of 368 days in filing the appeal before the Tribunal was liable to be condoned, whether filing of Form 10B was a mandatory or procedural requirement, and whether exemption under Section 11 could be denied where the audit report was filed during rectification proceedings prior to finalization of assessment.

Petitioner’s Arguments

The assessee submitted that the delay occurred due to a bona fide and reasonable belief that the CIT(A)’s order was in its favour, especially since the CPC had already granted exemption under Section 11 in the rectification order and the CIT(A) had held filing of Form 10B to be procedural in nature. It was argued that the assessee became aware of the adverse consequence only upon passing of the appeal effect order by the Assessing Officer.

On merits, the assessee contended that Form 10B was filed and available on record during rectification proceedings and therefore the requirement of law stood satisfied. Reliance was placed on binding judgments of the Gujarat High Court and coordinate bench decisions of the Tribunal.

Respondent’s Arguments

The Revenue opposed condonation of delay and supported the order of the Assessing Officer. However, the Revenue was unable to dispute the factual chain of events or distinguish the judicial precedents relied upon by the assessee.

Court Order / Findings

The ITAT Ahmedabad condoned the delay of 368 days, holding that the assessee had shown sufficient cause and acted under a reasonable belief based on the CPC rectification order and findings of the CIT(A).

On merits, the Tribunal held that filing of Form 10B is a procedural and directory requirement. Once the audit report is filed at any stage before completion of proceedings, exemption under Section 11 cannot be denied. The Tribunal noted that the CIT(A) himself had recorded categorical findings that Form 10B was available before the Assessing Officer during rectification proceedings and could not be ignored.

Relying on the judgments of the Gujarat High Court in Association of Indian Panelboard Manufacturer and Sarvodaya Charitable Trust, as well as coordinate bench decisions, the Tribunal held that the assessee was entitled to exemption under Section 11.

Important Clarification

The Tribunal clarified that the stage of filing Form 10B is procedural in nature. Delay in electronic filing does not disentitle a charitable trust from exemption under Section 11 if the audit report is available before completion of assessment or rectification proceedings.

Final Outcome

The delay in filing the appeal was condoned. The appeal filed by the assessee was allowed, and the Assessing Officer was directed to grant exemption under Section 11 to the assessee in accordance with law.

 

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