Well Being Research & Rehabilitation Centre vs Asst. Director of Income Tax, CPC, Bengaluru

1.

The learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in law and on facts by upholding the disallowance of exemption claimed under Section 11 of the Income Tax Act solely on the ground of delay in filing the return of income. The learned CIT(A) failed to consider the appellant's submission that the delay in filing the return was due to genuine hardship caused by the COVID-19 pandemic, which affected key personnel and disrupted operations. The learned CIT(A) violated the principles of natural justice by rigidly adhering to procedural timelines under Section 139(1) without considering the extraordinary circumstances that led to the delay. The learned CIT(A) disregarded judicial precedents that emphasize substantive compliance over procedural lapses, especially for charitable trusts fulfilling their objectives.

2.

The learned CIT(A) failed to adjudicate the appellant's contention that expenses incurred for charitable purposes exceeded total revenue during the relevant assessment year, resulting in a loss of Rs. 4,58,941/-. Taxing gross receipts of Rs. 94,62,362/- as income, instead of net income (after application. of funds), is contrary to the principle of taxing real income.

3.

Appellant has every right to make, add, delete, modify or alter any grounds of appeal at the time of hearing.

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7.

We have heard the rival contentions, perused the relevant material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that, the appellant is a religious institution under the management and administrative control of Endowment Department of the Govt. of Telangana. It is also not in dispute that, the appellant is registered u/s 12A and 12AA of the I.T. Act, 1961. The appellant has claimed exemption u/s 11 of the Act and filed relevant audit report in Form 10BB on 28/11/2023 along with the return of income filed for the impugned A.Y. There is no dispute that, the audit report in Form 10BB BB is filed beyond the due date provided under the Act. The due date for filing the audit report for the year under consideration was 31/10/2023. whereas the appellant has filed the audit 28/11/2023. Admittedly, there is a delay of 28 days in filing Form 10BB. But, the said audit report was filed udit report on before the Assessing Officer passed the assessment order u/s 143(1) of the Act on 19/11/2024. No doubt, the assessee needs to file audit report on or before the due date in order to get the benefit of exemption u/s 11 of the Act. However, in a case where the assessee has filed the audit report with a small delay of 28 days and further when such audit report was filed before the Assessing Officer who passed the assessment order, in our considered view, the Assessing Officer ought to have taken a lenient view going by the facts of the case to consider the claim of the assessee for exemption u/s 11 of the I.T. Act, 1961. This legal position is supported by the decision of the ITAT Bangalore Bench in the case of Sardeivatha Education Trust (supra), wherein it was held that filing of Form 10BB was not mandatory but directory and that when audit report was available while passing intimation u/s 143(1) of the Act and requirement of law were complied with, exemption u/s 11 should not be denied to the assessee. The Hon'ble High Court of Telangana in the case of Shilparamam Arts, Crafts and Cultural Society (supra) had considered an identical issue and held that, where the assessee trust filed its return of income for the relevant A.Y on due date but, uploaded Form 10BB belatedly i.e. 2% years before the assessment order was passed, application for condonation of delay in filing Form 10BB ought to have been decided by the Commissioner by taking a liberal approach. The sum and substance of ratio laid down by the Hon'ble High Court of Telangana and the ITAT Bangalore Bench of the Tribunal that, if audit report in Form 10BB was made available to the Assessing Officer before he passes his assessment order, then merely for the reason of delay in filing the relevant report, exemption claimed u/s 11 of the Act cannot be denied. In the present case, admittedly. the assessee has filed return of income on or before the due date on 28/11/2023 and also filed audit report in Form 10BB on the very same day i.e. on 28/11/2023. Although, there is a small delay of 28 days in filing the audit report but, such audit report was made available to the Assessing Officer when he passed order u/s 143(1) on 19/11/2024. Therefore, in our considered view, the Assessing Officer ought not to have denied exemption u/s 11 of the Act. The learned CIT (A) without considering the relevant facts has simply upheld the additions made by the Assessing Officer by rejecting exemption u/s 11 of the Act. Thus, we set aside the order passed by the learned CIT (A) and direct the Assessing Officer to allow exemption claimed u/s 11 of the I.T. Act, 1961 and delete the additions.