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2024 Supreme(Online)(GUJ) 21933
HIGH COURT OF GUJARAT
MR. JUSTICE BHARGAV D. KARIA, MR. JUSTICE NIRAL R. MEHTA, JJ
THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) AHMEDABAD – Appellant
Versus
SHRI LAXMANARAYAN DEV SHRISHAN SEVA KHENDRA – Respondent
R/TAX APPEAL NO. 905 of 2024
Substantial compliance with procedural requirements is sufficient for public charitable trusts to claim exemptions under the Income Tax Act, despite late filing of necessary documents.
Headnote:(A) Income Tax Act, 1961 - Sections 10B, 11, and 12A - Appeal under Section 260A challenging the Tribunal's decision regarding the procedural requirement of filing audit report in Form 10B - The Tribunal upheld the CIT(A)'s decision allowing exemption despite late filing of the audit report, emphasizing substantial compliance over strict adherence to procedural timelines. (Paras 2, 3.5, 3.8, 4, 6, 9)
(B) Procedural Compliance - The court reiterated that while filing an audit report is mandatory, substantial compliance is sufficient, and the authority should exercise discretion equitably in cases involving public charitable trusts. (Paras 3.7, 8)
Facts of the case:
The appellant-Revenue challenged the Tribunal's ruling that allowed a public charitable trust to claim exemption under Section 11 despite not filing the audit report in Form 10B by the due date, citing procedural delays.
Findings of Court:
The Tribunal's decision was upheld, affirming that the late filing of Form 10B did not negate the trust's eligibility for exemption under Section 11.
Issues: The main issues were whether the Tribunal erred in treating the filing of Form 10B as a procedural requirement and whether the late submission affected the exemption claim.
Ratio Decidendi: The court found that the Tribunal correctly prioritized substantial compliance over strict procedural adherence, particularly for public charitable trusts, and that the delay in filing did not warrant denial of exemption.
Result: Appeal dismissed.
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Standing Counsel Ms.Maithili D. Mehta for the appellant and learned advocate Mr.B.S.Soparkar through video conference with learned advocate Mr.Manya Anjaria for the respondent.
2. By this Appeal under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’), the appellant-Revenue has proposed the following questions as substantial questions of law arising out of order dated 19th May, 2023 passed by the Income Tax Appellate Tribunal-Ahmedabad, ‘C’ Bench (for short ‘the Tribunal’) in ITA No.410/Ahd/2022 for Assessment Year 2017-18:
“(i) Whether in the law and facts and circumstances of case, Hon'ble Income Tax Appellate Tribunal was right in holding that furnishing of audit report in form 10B is a procedural provision in spite of specific provisions of clause (b) of sub- section (1) of Section 12A of the Income Tax Act, 1961 and in view of the decision of Hon'ble Supreme Court of India in the case of Wipro in Civil Appeal No. 1499 of 2022 where in it has been held that "That Section 10B of the Income Tax Act is an exemption provision and the condition for seeking an exemption is required to be complied with strictly with the provision.
(ii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal is justified in upholding the order of CIT(A) admitting report in form 10B filed during the course of appellate proceedings and allowing the benefit of Section 11 of Rs.3,57,53,725/- to the assessee ignoring the fact that the assessee had not filed the audit report in Form No. 10B before due date as prescribed under the Act/
notified by the CBDT.”
3. The brief facts of the case are as under:
3.1. The assessee is a public charitable trust engaged in various educational activities and running of Schools and Yogashram. The assessee-Trust is registered as a charitable Organization under Section 12AA of the Act with effect from 01.04.2004 and also approved for the purpose of Section 80G of the Act.
3.2. Te assessee filed its return of income for the Assessment Year 2017-18 on 11.10.2017 declaring income of Rs. ‘NIL’. However, the assessee had not uploaded the Audit Report in Form 10B along with the Return of Income. The assessee was sent a communication from Centralised Processing Centre (for short ‘the CPC’), however, the assessee did not respond to the same.
3.3. The CPC processed the return under Section 143(1) of the Act on 24.03.2019 denying the benefit of exemption under Section 11 of the Act to the assessee and determined the tax of Rs.1,52,42,281/-.
3.4. Being aggrieved by this, the assessee filed Aappeal before the CIT(A). After filing of the Appeal, the assessee electronically uploaded Form 10B on 27.02.2021. During the appellate proceedings, the assessee admitted that there was a procedural delay in furnishing Form 10B and the delay was on account of various technical issues.
3.5. The CIT(A) vide order dated 02.09.2022 allowed the Appeal of the assessee stating that if audit report under Section 12(1)(b) of the Act is filed at any stage before the completion of assessment or even at the appellate stage, then the CPC cannot deny exemption under Section 11 of the Act and directed Assessing Officer to allow claim of exemption under Section 11 of the Act as claimed in the return of income.
3.6. Being aggrieved by the decision of the CIT(A) dated 02.09.2022, the Revenue preferred Appeal before the Income Tax Appellate Tribunal, Ahmedabad, ‘C’ Bench (for short ‘the Tribunal’) being ITA No.410/Ahd/2022.
3.7. The Tribunal, after considering the submissions of both the sides, referred to and relied upon the decision of this Court in the case of Social Security Scheme of GICEA v. Commissioner of Income Tax (Exemptions), Ahmedabad dated 21st December, 2022 in Special Civil Application No.17612 of 2022 wherein, this Court has held as under.
“5. Having heard learned advocates for the respective parties and having gone through the materia
