2024 (2) TMI 1171 - AT - Income Tax

Charitable organization wins exemption after technical glitch prevented Form 10B audit report upload despite timely preparation

Asha Modern Educational Society Versus ITO Exemption Ghaziabad

ITAT Delhi allowed the appeal of a charitable organization that was denied exemption under sections 11 and 12 due to failure to upload audit report in ... Denial of exemption u/s 11 and 12 - not uploading the Audit Report - delay in filing Form 10B - It is the case of the Assessee that the Assessee had uploaded in its Audit Report in Form No. 10B through its auditor, due to some technical mistake in the software the Audit Report uploaded was neither accepted by the system nor was it rejected immediately and no intimation either through e-mail or any post from the Department has given to the Assessee on this regard HELD THAT:- As seen from the record that the Form No. 10B was ready as on 29/09/2017 i.e. before filing Return of Income u/s 139 of the Act i.e. 26/10/2017. After coming to know about the said mistake of not uploading the Audit Report, the same has been uploaded on 06/09/2019. After coming to know about not uploading the Audit Report, the Assessee filed a letter for condonation of delay uploading the Form 10B along with certificate from auditors explaining the reason for delay and hard copy of Form No. 10B was sent through registered post to the Jurisdictional Commissioner of Income Tax (Exemptions). Thus, it can be safely construed that the Revenue has rejected the plea of the Assessee based on mere technicalities and it is not the case of the Revenue that the Audit Report was not ready as on the date of filing of the return or Assessee is not eligible for any other reason for claiming charitable status by claiming application of income for charitable purpose u/s 11 & 12 of the Act. It is well settled law that the Revenue Authorities have to tax the right person in right manner and shall not disallow the eligible deductions on mere technicalities. The Revenue authorities have not followed the ratio laid down in the case of Pawan Kumar Agarwal [2014 (5) TMI 449 - DELHI HIGH COURT], therefore, in our considered opinion the Revenue Authorities should have allowed the benefit of exemption to the Assessee. Thus we allow the Grounds of appeal of the Assessee by deleting the addition made by the A.O, which has been confirmed by the CIT(A). Issues Involved:The issues involved in this case are:1. Confirmation of addition to total income of the appellant Trust by CPC without considering non-adherence to conditions of section 143(1).2. Failure to consider compliance with filing of audit report and time limit for passing order of condonation.3. Failure to consider relevant case law while framing the appellate order.4. Request for leave to add, modify, and amend grounds of appeal.Issue 1:The appellant Trust filed an appeal against the order of the Learned Commissioner of Income Tax (Appeals) regarding the addition of Rs. 3,34,32,351 to its total income by the CPC without verifying registration under section 12AA of the Income Tax Act. The appellant contended that the order made by the CPC did not adhere to the conditions of Section 143(1) of the Act.Issue 2:The appellant Trust had complied with the filing of the audit report in Form 10B as per Circulars issued by the authorities. The appellant argued that the time limit for condonation in filing the audit report had expired, and the failure to consider this compliance by the Ld. CIT(A) was raised as a ground for appeal.Issue 3:The appellant Trust raised the issue of the Ld. CIT(A) failing to consider a relevant case, M/s Shrimati Gitadevi Kondoi Seva Nidhi Vs. ITO (Exemption), while framing the appellate order. The appellant sought to set aside the order of the Ld. CIT(A) based on this failure.Issue 4:The appellant prayed for leave to add, modify, and amend any grounds of appeal and to introduce sub-grounds of appeal within the existing grounds. This request for flexibility in presenting additional arguments was a key issue in the appeal.In the detailed analysis of the case, it was found that the appellant, an Educational Trust registered under section 12AA of the Income Tax Act, had filed its income tax return claiming charitable status. The CPC processed the return under section 143(1) without verifying the registration under section 12AA, resulting in the disallowance of application of income for charitable purposes. Subsequently, the appellant filed a rectification application under section 154 for reprocessing the return, which was denied, leading to the appeal before the Ld. CIT(A) and eventually to the Tribunal.During the proceedings, the appellant argued that the delay in filing Form 10B was due to a technical mistake, and despite the readiness of the audit report before the filing of the return, the system did not accept it. The appellant made efforts to rectify the error by uploading the report and seeking condonation for the delay, which was not granted by the authorities. The Tribunal, citing relevant case law, emphasized the importance of rectifying mistakes to ensure justice and held that the revenue authorities should not disallow eligible deductions on mere technicalities.Consequently, the Tribunal allowed the appeal of the Assessee by deleting the addition to the total income made by the A.O, which was confirmed by the CIT(A). The decision was based on the principle that revenue authorities must tax the right person in the right manner and not disallow eligible deductions based solely on technicalities, as established by previous legal precedents.The Appeal filed by the Assessee was allowed, and the addition to the total income was removed, in line with the principles of justice and adherence to legal provisions.Order pronounced in open Court on 22nd February, 2024.