Charitable trust wins challenge against rejection of delayed audit report filing under Section 119(2)(b)

M/s. Shilparamam Arts, Crafts And Cultural Society, Hyderabad Versus Additional / Joint / Deputy / Assistant Commissioner of Income Tax /Income Tax Officer

M/s. Shilparamam Arts, Crafts And Cultural Society, Hyderabad Versus Additional / Joint / Deputy / Assistant Commissioner of Income Tax /Income Tax ... Issues Involved:

1. Rejection of application for condonation of delay in filing Form 10B.
2. Validity of assessment order under Section 147 read with Section 114 and Section 144B.
3. Service of notices and procedural fairness.
4. Interpretation of Section 119(2)(b) and its application to the case.

Summary:

1. Rejection of Application for Condonation of Delay in Filing Form 10B:
The petitioner challenged the impugned order dated 31.07.2023 by the Commissioner of Income-Tax (Exemptions), which rejected the application for condonation of delay in filing Form 10B for the assessment year 2017-18 under Section 119(2)(b) of the Income Tax Act, 1961. The petitioner argued that the non-filing of the audit report in Form 10B should not be fatal to the exemption under Section 11 of the Act. The audit report was prepared in time but was uploaded belatedly due to technical reasons. The court observed that the impugned order was "cryptic" and a "non-speaking order," failing to provide sufficient reasoning.

2. Validity of Assessment Order Under Section 147 read with Section 114 and Section 144B:
The respondent initiated proceedings under Section 147 of the Act, issuing notices under Sections 148 and 142(1). The assessment order passed on 24.09.2021 added an amount of Rs. 87,13,060/- as unexplained money under Section 69A read with Section 115BBE. The petitioner contended that the notices were not duly served, and the assessment order was challenged on these grounds.

3. Service of Notices and Procedural Fairness:
The petitioner claimed that none of the notices, including show cause notices, were served upon them. The respondent-Department countered that notices were issued and served both electronically and physically. The court found that the petitioner's contention of non-service was not substantiated and rejected this argument.

4. Interpretation of Section 119(2)(b) and Its Application to the Case:
Section 119(2)(b) empowers the Commissioner to condone delays to avoid genuine hardship. The court emphasized a liberal approach in such cases, especially for entities registered under Section 12A, which provides tax exemption to charitable trusts. The court referred to precedents, including the High Court of Gujarat and Punjab and Haryana, which held that procedural provisions regarding audit reports are directory and not mandatory. The court concluded that the authority should have considered the application for condonation of delay more liberally.

Conclusion:
The writ petition was allowed, setting aside the impugned order dated 31.07.2023. The consequential orders were also quashed, and the application for condonation of delay was accepted. The respondent No. 3 was directed to pass an appropriate consequential order in accordance with the law.