2023 (1) TMI 1456 - AT - Income Tax

Assessee's Appeal Granted: Deductions Allowed under Sections 11 & 12

The Tribunal allowed the appeal of the assessee, granting the claimed deductions under sections 11 and 12, based on compliance with the conditions ... Exemption u/s 11 - requirement of filing of audit report and income tax return by the trust or institutions registered u/s 12A - CPC while processing u/s 143(1)(a) denied the said exemption on account of two reasons; firstly the return of income was not filed before due date as prescribed u/s 139(4) of the Act and secondly audit report on Form 10B not uploaded before due date prescribed under the Act - HELD THAT:- As per Circular issued by CBDT on 23.04.2019 giving clarification with regard to time allowed for filing of return of income subsequent to insertion of clause (ba) in sub-section 1 of section 12A CBDT has issued and while dealing with this issue, the returns filed within the time allowed u/s 139 of the Act have been directed to be accepted for the purpose of considering benefit of deduction u/s 11 of the Act. Now, since only section 139 of the Act has been mentioned and does not specify whether it is about u/s 139(1) of the Act or section 139(5) of the Act, the view beneficial to the assessee needs to be accepted and, since section 139(1) and section 139(5) are part of section 139 only and in this section 139 and sub-section (5) provides the mechanism to file a belated return, therefore, for A.Y 2018-19, even if the assessee files the return before the last date of filing of belated return the same should be treated as due compliance to section 12A(1)(ba) of the Act. For the year under appeal, the belated return could have been filed before 31.03.2019, and since the assessee has filed the return on 15.11.2018, therefore, considering the directions of CBDT Circular dated 23.04.2019, which are binding on the Revenue authorities, we are of the view that the assessee has fulfilled the conditions provided under sub-clause (ba) of section 12A(1) of the Act and has filed the return of income within the time allowed. Filing the belated audit report on form 10B - As in the given facts and circumstances and respectfully following the judgment of Sarvodaya Charitable Trust [2021 (1) TMI 214 - GUJARAT HIGH COURT] we are of the considered view that since the case of assessee is for A.Y 2018-19 and CBDT came up with a circular dated 23.04.2019 specially for A.Y 2018-19 providing that return of income to be filed within the time allowed u/s 139 of the Act, the assessee has complied with the conditions provided in sub-clause (b) and (ba) to section 12 and there is no dispute at the end of the revenue authorities that the assessee is carrying on charitable activities, for which it has been granted registration u/s 12A of the Act, the benefit of section 11 and 12 should be given to the assessee and deductions claimed by the assessee are, therefore, allowed. Thus, Ground Nos.1 to 4 of the assessee are allowed. Issues Involved:1. Validity of the assessment under section 143(1).2. Denial of exemption under sections 11 and 12.3. Non-consideration of the audit report in Form 10B.4. Treatment of gross receipts as total income instead of net income.5. Applicability of interest and late filing fees under sections 234A, 234B, 234C, and 234F.Detailed Analysis:1. Validity of the Assessment under Section 143(1):The assessee challenged the assessment made under section 143(1) by the Dy. Commissioner of Income Tax, CPC, Bengaluru, and the subsequent dismissal of the appeal by the CIT(A), National Faceless Appeal Centre. The Tribunal noted that the assessment was based on the facts that the return was filed belatedly and the audit report was not submitted on time.2. Denial of Exemption under Sections 11 and 12:The assessee, a charitable trust registered under section 12AA, claimed deductions under sections 11 and 12. The CPC denied these deductions because the return was filed after the due date and the audit report was not submitted within the prescribed time. The Tribunal referred to CBDT Circular dated 23.04.2019, which clarified that for A.Y. 2018-19, returns filed within the time allowed under section 139, including belated returns, should be accepted for the purpose of claiming deductions under sections 11 and 12. Consequently, the Tribunal held that the assessee had complied with the conditions of section 12A(1)(ba) and was entitled to the claimed deductions.3. Non-Consideration of the Audit Report in Form 10B:The audit report in Form 10B was filed on 30.03.2019, after the return was filed on 15.11.2018. The Tribunal noted that the audit report was signed before the filing of the return and referred to the Gujarat High Court judgment in Sarvodaya Charitable Trust vs. ITO(Exemption), which held that the filing of the audit report is directory in nature. The Tribunal concluded that the CIT(A) should have considered the audit report, given its co-terminus powers with the A.O.4. Treatment of Gross Receipts as Total Income:The assessee argued that even if the benefit of sections 11 and 12 were denied, only the net income should be taxed, not the gross receipts. Since the Tribunal allowed the deductions under sections 11 and 12, this issue became academic and was not adjudicated further.5. Applicability of Interest and Late Filing Fees under Sections 234A, 234B, 234C, and 234F:The CIT(A) confirmed the charging of interest under sections 234A, 234B, and 234C, citing it as a statutory charge. The late filing fee under section 234F was also upheld, as the return was filed after the due date. The Tribunal did not interfere with these findings.Conclusion:The Tribunal allowed the appeal of the assessee, granting the claimed deductions under sections 11 and 12, based on compliance with the conditions provided in section 12A(1)(ba) and the CBDT Circular dated 23.04.2019. The issues of interest and late filing fees were upheld as per statutory provisions.