2022 (7) TMI 1050 - AT - Income Tax

Appeal denied for late Form 10B filing, exemption revoked under Income Tax Act

The Tribunal dismissed the appeal against denial of exemption under section 11 of the Income Tax Act for Assessment Year 2018-19 due to belated filing of ... Mandatory filing of Form No.10B with return as condition for exemption under Section 11 - power of Commissioner under section 119(2)(b) to condone delay in filing Form No.10B - distinguishability of pre 2016 precedents after Finance Act, 2015 amendmentMandatory filing of Form No.10B with return as condition for exemption under Section 11 - Denial of exemption under Section 11 for failure to file Form 10B with the return. - HELD THAT: - The Tribunal upheld the denial of exemption granted in the intimation under section 143(1) where the assessee filed Form 10B belatedly after the return. In view of the amendments made by the Finance Act, 2015 (effective 01.04.2016) and the consequent Rule changes, filing Form 10B electronically with the return has become mandatory for claiming the Section 11 benefit. The Tribunal noted that the assessee acknowledged the delay and did not seek condonation before the appropriate Commissioner prior to filing the appeal, and therefore the denial of exemption in the CPC intimation was sustained. [Paras 3, 6]Failure to file Form 10B with the return justified the denial of exemption under Section 11 for the assessment year under consideration.Power of Commissioner under section 119(2)(b) to condone delay in filing Form No.10B - Whether the Commissioner of Income tax (or PCIT/CIT/DIT) has power to condone belated filing of Form 10B and whether the CIT(A) could exercise such power. - HELD THAT: - Relying on CBDT Circular No.7/2018, the Tribunal recorded that the Board authorized Commissioners to admit belated Form No.10 applications for AY 2016-17 under section 119(2)(b). The Tribunal agreed with the CIT(A)'s conclusion that the CIT(A) does not possess the power under section 119(2)(b) to condone the delay and that the appropriate remedy for the assessee was to apply to the jurisdictional Commissioner for condonation. Consequently, the appellate route under section 250 was not the correct mechanism to seek condonation of the belated Form 10B. [Paras 3, 6]Condonation of delay in filing Form 10B falls within the powers of the Commissioner (under section 119(2)(b) as authorized by CBDT), and the CIT(A) has no power to condone such delay; assessee must approach the Commissioner for condonation.Distinguishability of pre 2016 precedents after Finance Act, 2015 amendment - Whether earlier judicial precedents (pre Finance Act, 2015) relied upon by the assessee are applicable. - HELD THAT: - The Tribunal held that the case law relied upon by the assessee was rendered prior to the amendment effected by the Finance Act, 2015 and therefore is distinguishable. The mandatory e filing regime introduced with effect from 01.04.2016 changed the legal landscape regarding Form 10B, making earlier decisions inapplicable to the post amendment regime. Accordingly, the Tribunal rejected the assessee's reliance on those precedents. [Paras 4, 6]Pre 2016 authorities are distinguishable and not applicable to the post amendment mandatory filing requirements.Final Conclusion: The Tribunal dismissed the appeal, upholding the disallowance of exemption for A.Y. 2018-19 on account of belated filing of Form 10B; the assessee's remedy is to seek condonation of delay before the appropriate Commissioner under the Board's authorisation rather than by the appellate order. Issues:Appeal against denial of exemption under section 11 of the Income Tax Act for Assessment Year 2018-19 due to belated filing of Form 10B.Analysis:1. The appellant, a Trust registered under section 12AA of the Act, filed its Return of income for A.Y. 2018-19 declaring Nil income. However, the Assessing Officer denied exemption under section 11 of the Act and demanded tax of Rs. 16,55,288/- due to the belated filing of Form 10B. The NFAC upheld the disallowance, stating that the belated filing justified the action.2. The CIT(A) held that as per Rule 12(2) of the Income Tax Rules, Form 10B must be submitted electronically from 01.04.2016 onwards. The appellant's argument for condonation of delay was dismissed as the CIT(A) lacked the power under section 119(2)(b) to grant such relief. The appellant was advised to seek remedy from the jurisdictional CIT/PCIT/DIT for condoning the delay.3. The appellant contended before the Tribunal that the requirement to file Form 10B along with the Return of Income is directory, and failure to do so should not lead to denial of exemption under section 11. Citing relevant case laws, the appellant argued that the belated filing was a technical breach causing no revenue loss. However, the Revenue supported the lower authorities' decision, emphasizing the mandatory nature of filing Form 10B post the Finance Act, 2015 amendment.4. The Tribunal noted the appellant's awareness of the filing requirement and the belated submission of Form 10B. Referring to Circular No. 7/2018, the Tribunal highlighted the obligation to file Form 10B electronically due to the amendment in 2015. The Tribunal agreed with the lower authorities that the CIT(A) rightly dismissed the appeal, as the appellant consistently filed Form 10B belatedly without seeking condonation. The Tribunal rejected the appellant's arguments and upheld the dismissal of the appeal.5. In conclusion, the Tribunal dismissed the appeal, stating that the appellant's consistent belated filing of Form 10B did not warrant interference with the lower authorities' decision. The Tribunal emphasized the mandatory nature of filing Form 10B post the 2015 amendment and advised the appellant to seek appropriate legal remedies in line with the Income Tax Act.This detailed analysis covers the issues raised in the legal judgment comprehensively, outlining the arguments presented by both parties and the Tribunal's reasoning for dismissing the appeal.