THE EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT, 1961 IS NOT TO BE DENIED FOR THE DELAY IN UPLOADING FORM 10B

[DR.MARIAPPAN GOVINDARAJAN]

In BENGAL EDUCATION FOUNDATION VERSUS ITO, WARD-1 (2), EXEMPTION, KOLKATA - 2025 (5) TMI 1498 - ITAT KOLKATA the appellant in this case is an assessee, a public trust (‘appellant’ for reference).  It had filed its return of income for the assessment year 2022-23 in the form ITR – 7 on 02.11.2022 under the status of ‘Association of Persons/Body of Individuals’.  The appellant declared NIL income in its return, claiming an exemption to the tune of Rs.1.15 crores.  The said return was processed by Central Processing Centre (‘CPC’ for short0, Bengaluru.  In this regard, an intimation was given to the appellant along with a demand of Rs.50.28 lakhs.  The exemption claimed by the appellant under Section 11 was denied by the Department.  The Department also informed the appellant of the proposed adjustments on 14.02.2023. 

The appellant filed an appeal against the assessment order before the Commissioner of Income Tax (Appeals).  Before the first appellant authority the appellant submitted that it filed the tax audit on 28.09.2022 and filed income tax return on 02.11.2022.  However, the appellant did not upload the  Form 10B on line as required under the Income Tax Act, 1961 (‘Act’ for short). Form 10B was uploaded by the appellant on 11.10.2022 which is much before the date of filing of income tax return.  The Commissioner of Income Tax (Appeals) rejected the appeal filed by the appellant as Form 10B was not filed along with the income tax return.  The Commissioner of Income Tax (Appeals) further advised the appellant to file a condonation delay petition in this regard before the competent authority.

The appellant filed the present before the Income Tax Appellate Tribunal (‘ITAT’ for short) against the order of Commissioner of Income Tax (Appeals).   The appellant submitted the following before the ITAT-

• The lapse/delay was technical in nature.
• The failure of the appellant to upload Form 10B in time was due to bona fide belief that the auditor of the appellant who was responsible of such compliance duly filed Form 10B.
• Once the issue was identified to the appellant on 11.10.2022, the appellant promptly has taken collective measure well before the due date of filing of the return.
• Filing of Form 10B is a procedural aspect and directory in nature, therefore, exemption under section 11 of the Act should not be denied merely on this technical ground. 

The appellant relied on High Court judgment in COMMISSIONER OF INCOME TAX EXEMPTIONS KOLKATA VERSUS M/S. INDIAN SUGAR MILLS ASSOCIATION - 2024 (1) TMI 1445 - CALCUTTA HIGH COURT, the High Court held that filing of Form 10B along with the income tax return is a procedural provision and therefore, it is directory in nature.  In this case the High Court decided against the Revenue and in favour of the Revenue.  The Revenue supported the impugned order.

The ITAT considered the submissions of both the sides.  The ITAT observed that the audit report in Form 10B was filed on 28.09.2022 and Income tax return was also filed on 02.11.2022.  The said Form 10B was uploaded on 11.10.2022, whereas, as per the requirement under Section 139(1) of the Act, the Form 10B was required to be uploaded at least one month prior to the due date of filing of return i.e. on or before 07.10.2022, thus there was a small delay of only 3 days in uploading the Form 10B.   The ITAT further observed that the delay is procedural in nature and does not go to the root of the eligibility of appellant to claim exemption under section 11 of the Act.   Such procedural lapse should not be the denial of the substantive claim. 

The ITAT held that filing of Form 10B cannot be a ground for denying the legitimate exemption under section 11(2) of the Act, when all the conditions precedent for allowing such exemption have been fulfilled by the appellant. The activities of the trust are not in doubt and therefore, the exemption under section 11(2) of the Act could not be denied on technicalities.   The ITAT further relied on another judgement of Gujarat High Court in COMMISSIONER OF INCOME-TAX VERSUS GUJARAT OIL AND ALLIED INDUSTRIES - 1992 (9) TMI 67 - GUJARAT HIGH COURT.  In that case the High Court held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso.  It is directory in nature and its substantial compliance would suffice.  The ITAT was of the view that benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the appellant to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause.  The Department also failed to place before the ITAT any other binding precedents. 

The ITAT, therefore, held that small delay in uploading the Form 10B is condonable. The appellant cannot be denied benefit of exemption on such technical ground.  The ITAT set aside the demand raised in the intimation under section 143(1) of the against the appellant.  The ITAT directed the CPC to allow the claim of exemption under Section 11 of the Act of the appellant.