2024 (6) TMI 1348 - AT - Income Tax

Denial of claim for exemption u/s.11(2) - Form 10B a/w. return of income were not furnished electronically within the due date specified u/s.139(1) - HELD THAT - The assessee trust had obtained the audit report in Form 10B on 10.08.2016 i.e. prior to filing of its return of income on 10.10.2016 but the third limb/condition provided in Para 4(i) which requires that the audit report in Form 10B should be filed before the date specified u/s.139 of the Act is not found to be satisfied. We say so for the reason that the date specified u/s.139 in the case of the assessee society for filing of its return of income for the year under consideration i.e. A.Y.2016-17 was 17.10.2016 (as was extended from 30.09.2016). As the date specified u/s. 139 of the Act for filing of return of income in the case of the assessee society before me for A.Y.2016-17 was 17.10.2016 while for it had e-filed/uploaded the audit report in Form 10B on 06.12.2018 which is much beyond the said specified date therefore it s case would clearly fall beyond the scope and gamut of Para 4(i) of the CBDT Circular No. 10 dated 22.05.2019. On the basis of the aforesaid facts the case of the assessee society before me would not fall within the meaning of Para 4(i) of the CBDT Circular (supra.). As the assessee s case with respect to condonation of delay in filing of Form 10B would not be covered by Para 4(i) (supra) therefore the same would fall within the sweep of Para 4(ii) of the CBDT Circular No.10 (supra) which as observed by me hereinabove would be applicable to all other cases prior to A.Y.2018-19 where Form 10B is belatedly filed. Accordingly I am of the considered view that the case of the assessee due to non-satisfaction of the conditions contemplated in Para 4(i) of CBDT Circular No. 10 would fall within the sweep of Para 4(ii) of the said circular (supra.). As the assessee-society does not cumulatively satisfy the set of conditions specified in Para 4(i) of the CBDT Circular No.10 and also had not filed any application for condonation of delay u/s.119(2)(b) of the Act as provided in Para 4(ii) of the said circular therefore there remains no occasion for condoning the delay involved in filing of Form 10B by it beyond the stipulated time period. Thus no infirmity in the view taken by the lower authorities who had rightly declined the assessee s claim for exemption u/s.11 of the Act. Disallowance of the assessee s claim for salary expenditure - assessee had claimed to have paid a salary of Rs.6 lacs to Dr. Ashish Dubey cardiologist (trustee of the assessee society) - No justification for disallowance of the entire salary paid by the assessee society to Dr. Ashish Dubey as the rendering of professional services by him to the assessee society had admittedly been accepted by the department while framing assessment in the case of the assessee society for the immediately preceding year i.e. A.Y.2015-16. As per Section 13(2)(c) r.w.s.13(3) of the Act it is only the amount which is inter alia paid in excess to a trustee/member of the society as against what may reasonably be paid for the services rendered by him that is to be deemed to have been used or applied for the benefit of the person referred to in Section (3) of Section 13 of the Act therefore find no justification in declining of the assessee s entire claim for deduction of salary expenditure of Rs.6 lacs. Though the assessee society had not placed on record supporting documentary evidence to substantiate the authenticity of its claim of salary expenditure of Rs.6 lacs paid to Dr. Ashish Dubey but at the same time we cannot remain oblivion of the fact that the A.O had not called upon the assessee society to furnish any specific details with respect to its aforesaid claim of expenditure. In my considered view the matter in all fairness requires to be restored to the file of the A.O who is directed to verify the authenticity of the aforesaid claim of the assessee society. Appeal of assessee is partly allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of Rs. 2,32,649/- due to non-filing of Form No.10B.
2. Addition of Rs. 6,00,000/- on account of unverified payment of salary.

Issue-wise Detailed Analysis:

1. Addition of Rs. 2,32,649/- due to non-filing of Form No.10B:

The assessee society, a charitable trust registered under Section 12A of the Income-tax Act, 1961, filed its return of income for the assessment year 2016-17 on 10.10.2016, declaring nil income after claiming exemption under Section 11 of the Act. The Assessing Officer (A.O) disallowed the exemption under Section 11(2) because Form No.10B was not filed electronically within the due date specified under Section 139(1). The CIT(Appeals) upheld this disallowance, noting that the Form 10B was filed on 06.12.2018, well after the due date. The CIT(Appeals) also observed that the assessee did not approach the jurisdictional commissioner/Director of Income Tax to get the delay condoned.

The assessee argued that the audit report in Form 10B was obtained on 10.08.2016 but could not be filed due to technical issues and was eventually filed on 06.12.2018. The assessee contended that the delay should be condoned as per CBDT Circular No.10 [F.No.197/55/2018-ITA-I], dated 22.05.2019. However, the Tribunal noted that while the audit report was obtained before filing the return, it was not filed before the date specified under Section 139, which was 17.10.2016. Therefore, the case did not fall within the scope of Para 4(i) of the CBDT Circular No.10. As the assessee did not file an application for condonation of delay under Section 119(2)(b) as provided in Para 4(ii) of the circular, the Tribunal upheld the lower authorities' decision to decline the exemption under Section 11.

2. Addition of Rs. 6,00,000/- on account of unverified payment of salary:

The A.O disallowed the salary expenditure of Rs.6 lacs paid to Dr. Ashish Dubey, a trustee of the assessee society, due to a lack of supporting documentary evidence. The CIT(Appeals) upheld this disallowance. The assessee argued that the salary was paid for consultancy/professional services rendered by Dr. Dubey and that details of the salary and nature of services were provided during the assessment proceedings. The assessee also noted that similar salary payments in the preceding year were accepted by the A.O.

The Tribunal found that while the assessee provided details of the salary expenditure, it failed to substantiate the claim with documentary evidence. However, the Tribunal also noted that the A.O did not specifically request such evidence. Given that similar payments were accepted in the previous year, the Tribunal found no justification for disallowing the entire salary expenditure. The matter was remanded to the A.O for verification, with instructions to afford the assessee an opportunity to substantiate its claim with fresh evidence.

Conclusion:

The Tribunal upheld the disallowance of the exemption under Section 11 due to the late filing of Form 10B but remanded the issue of the salary expenditure to the A.O for further verification. The appeal was partly allowed for statistical purposes.