Trust loses Section 11(2) exemption for late e-filing Form 10B beyond Section 139(1) deadline

ITAT Raipur denied trust's exemption claim under Section 11(2) due to failure to file Form 10B electronically within the due date specified under Section 139(1). The trust obtained audit report on 10.08.2016 but e-filed it on 06.12.2018, well beyond the 17.10.2016 deadline. The case did not satisfy conditions under CBDT Circular No. 10 Para 4(i) for condonation of delay, and no application was filed under Section 119(2)(b). However, regarding salary expenditure disallowance of Rs.6 lacs paid to trustee-cardiologist, ITAT remanded the matter to AO for verification of authenticity, noting similar payments were accepted in previous assessment year. Appeal was partly allowed for statistical purposes.

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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.

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