Gujarat High Court
Shri 108 Parshwanath Bhakti Vihar Jain ... vs Commissioner Of Income Tax (Exem) Or His ... on 13 August, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 17385 of 2023
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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SHRI 108 PARSHWANATH BHAKTI VIHAR JAIN TRUST
Versus
COMMISSIONER OF INCOME TAX (EXEM) OR HIS SUCCESSOR
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Appearance:
MR SN DIVATIA(1378) for the Petitioner(s) No. 1
MS MAITHILI D MEHTA(3206) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 13/08/2024
ORAL JUDGMENT
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NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr. S.N. Divatia for the petitioner and learned advocate Ms. Maithili D. Mehta for the respondent.
2. Having regard to the issue involved in this petition which is in a very narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.
3. Rule returnable forthwith. Learned advocate Ms. Maithili Mehta waives services of notice of rule on behalf of the respondent.
4. By this petition under Article 227 of the Constitution of India, the petitioner Page 2 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined has prayed for quashing and setting aside the order dated 21.12.2021 passed under section 119(2)(b) of Income Tax Act, 1961 (For short "the Act") whereby the application filed by the petitioner to condone the delay in filing Form No.10B for Assessment Year 2018-2019 is rejected.
5. Brief facts of the case are that the petitioner is a public charitable trust constituted under the Deed of Settlement dated 22.08.1974 which is registered under the Bombay Public Trust Act, 1950 (as applicable to the state of Gujarat) having registration no. A/744/Patan Dt. 22.10.2003. The Petitioner is also registered under section 12A(a) of the Act vide certificate dated 05.11.1976 issued by Commissioner of Income-tax Bombay City- Page 3 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024
NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined 4 Bombay. The petitioner trust derives income by way of voluntary contributions, corpus donation and other sources.
6. The Petitioner Trust is engaged mainly in public charitable and religious activities. The Petitioner trust had filed its return of income for A.Y.2018-2019 on 26.09.2018 declaring total income at Rs.Nil wherein inter-alia it had claimed voluntary contributions amounting to Rs.2,47,01,720/- and corpus donation of Rs. 16,67,534/- against which the exemption under section 11 aggregating to Rs.3,69,08,845/- (but limited to income) was claimed.
7. This return was processed under section 143(1) by Centralized Processing Centre Bengaluru (CPC) vide order dated Page 4 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined 17.10.2019 wherein the exemption claimed aggregating to Rs. 3,69,08,845/- was rejected and the total income was assessed at Rs.3.26,61,664/- and demand totaling to Rs. 1,34,40,907/- was raised.
8. The petitioner thereafter had filed rectification application under section 154 of the Act against the order passed under section 143(1) by CPC which was disposed of by the Assessing Officer on 30.12.2020 vide order under section 154 read with section 143(1) whereby the exemption under section 11 was restored.
9. The petitioner thereafter preferred an application dated 13.09.2021 for condonation of delay in e-filing of form 10B for AY 2018-2019 on 27.09.2021. In the said application, the petitioner pointed Page 5 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined out that the Form 10B could be filed on 30.10.2018 due to technical error in the system and the delay was not intentional and that the tax audit report in form 10B was already obtained on 28.08.2018 whereas return was filed on 26.09.2018.
10. The claim of deduction under sections 11 and 12 of the Act towards application of income for the objects of the trust was rejected by CPC Bengaluru for the reason of failure to file Form No.10B for A.Y.2018-2019 within the due date stipulated under the Act.
11. It is the case of the petitioner that the petitioner had filed Form 10B on 30.10.2018 after filing the ITR on 30.09.2018. Therefore, the petitioner made application on 27.09.2021 for condonation Page 6 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined of delay for 34 days in e-filing of Form 10B which was rejected by the respondent vide order dated 21.12.2021 on the ground that the petitioner had failed to furnish reply in response to the letters dated 5.10.2021 and 12.11.2021 asking to furnish specific reasons of the delay.
12. The petitioner thereafter made a re- request to condone the delay vide letter dated 27.12.2021 to the respondent but the said re-request was rejected by the respondent vide communication dated 31.12.2021 on the ground that the period of delay of 34 days was a long time and a reminder letter dated 12.11.2021 was issued which was not responded.
13. In the meanwhile, the respondent issued notice on 04.07.2022 proposing to Page 7 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined amend the order passed under section 154 on 31.12.2020 and 19.05.2022 on account of the mistakes as detailed in the said notice.
14. In response to the said notice under section 154 dated 04.07.2022, the petitioner submitted its reply dated 04.07.2022.
15. The respondent thereafter issued notice on 12.12.2022 stating that the order passed under section 154 on 31.12.2020 and 19.05.2022 were required to be amended as per the details given and asked the petitioner to respond on or before 20.12.2022. The petitioner submitted reply dated 21.12.2022.
16. It is the case of the petitioner that Page 8 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined recently, the ITO(Exem.), Palanpur has passed order under section 154 read with section 143(1) on 05.01.2023 disallowing the exemption under section 11 of Rs.3,69,08,845/-.
17. Being dissatisfied with the impugned order passed by the Respondent rejecting the application for condonation of delay filed under section 119(2)(b) of the Act, the petitioner has preferred the present petition.
18. Learned advocate Mr. S.N. Divatia for the petitioner submitted that the respondent Commissioner of Income Tax (Exemption) has failed to consider that the petitioner trust was prevented by a sufficient cause from filing Form No. 10B within the stipulated time which was Page 9 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined explained in the application dated 13.09.2021 filed by the petitioner to the effect that the delay had occasioned due to technical glitch in the system.
19. It was submitted that due to long leave of the accountant for operative reasons, there was delay which came to the notice on checking online data.
20. Learned advocate Mr. Divatia further submitted that when the petitioner was served with a copy of order under section 154 read with section 143(1) of the Act passed on 19.05.2022 by ITO (Exemption), Palanpur giving effect to the order passed by the respondent under section 119(2)(b) of the Act, an impression was gathered by the petitioner that the application to condone the delay in filing Form 10B was Page 10 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined allowed. However, only when the notice under section 154 of the Act dated 4.07.2022 was received by the petitioner, it was realised that the application to condone the delay was rejected.
21. It was submitted that the respondent has rejected the application on the ground that no specific reason is given for the delay caused by the petitioner and the assessee has failed to furnish any reply so time was granted but the assessee has filed the reply in detail explaining the delay.
22. It was pointed out that delay of 34 days has occurred as the petitioner trust is situated at interior place of a small town at Sami, wherein it is difficult to get expert advice. It was pointed out that Page 11 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined professional preparing the audit report in Form 10B and preparing computation of income tax returns were at different places resulting into communication gap and the return was filed earlier to the filing of Form 10B.
23. Learned advocate Mr. Divatia submitted that the respondent has already condoned the delay in filing Form 10B for AYs 2013- 2014, 2016-2017 and 2017-2018 and considering the same it ought to have condoned the delay of 34 days caused in filing Form 10B for AY 2018-2019 also so that the petitioner can avail the exemption under sections 11 and 12 of the Act.
24. In support of his submissions, reliance was placed on the decision of Page 12 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined this Court in case of Social Security Scheme of GICEA v. Commissioner of Income- tax (Exemption) reported in (2023) 147 taxmann.com 283 (Gujarat) wherein in similar facts it was held as under:
"5. Having heard learned advocates for the respective parties and having gone through the material on record, the only question which falls for consideration is whether respondent committed an error in passing the order by not condoning the delay in filing Form No.10B along with the return filed. In the decision of this Court in Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption), this Court has observed that furnishing of audit report along with return filed is to be treated as a procedural requirement. It is though mandatory in nature the substantial compliance is required to be made. In the case of Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption) the assessee had produced the audit report after processing the return under Section 143(1). This Court in the said order has observed that the approach of the authority in these type of cases should be equitable, balancing and Page 13 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined judicious. Technically speaking, respondent No.2 might be justified in denying the exemption under Section 11 of the Act by rejecting such condonation application, but an assessee, which is a public charitable trust for past 30 years which substantially satisfies the conditions for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay. Applying the said principle, the petition is allowed. The impugned order passed by respondent dated 12.3.2021 is quashed and aside. The impugned order of rectification under Section 154 of the Act dated
25.1.2019 is also quashed and set aside. The application for condonation of delay filed by the petitioner before the respondent is allowed.
6. The respondent is now directed to process the return in accordance with law. It is noticed that no assessment is framed and only an intimation under Section 143(1) of the Act was issued. No scrutiny could be carried out by the respondent since the audit report under Section 10B was not on record. Learned advocate for the petitioner Mr. B.S.Soparkar fairly submitted that the issue of Page 14 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined benefit of exemption may be examined by issuance of notice u/s 143(1)/ 143(2) and the petitioner shall not object to the said proceedings by taking the ground of limitations."
25. Reliance was also placed on the decisions in case of Sarvoday Charitable Trust v. ITO reported in 125 Taxman.comm 75 and Trust for Reaching the Unreached v. CIT reported in 126 Taxman.com 77, wherein this Court has held as under:
"31. Having given our due consideration to all the relevant aspects of the matter, we are of the view that the approach in cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, the respondent No.2 might be justified in denying exemption u/s 12 of the Act by rejecting such condonation application, but an assessee a public charitable trust passed 30 years who substantially satisfies the condition for availing such exemption should not be denied the same merely on the bar of limitation especially when the legislature has conferred Page 15 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined discretionary powers to condone such delay on the authorities concerned."
26. Learned advocate Mr. Divatia submitted that expression "genuine hardship"
contained in section 119(2)(b) of the Act should be construed liberally, particularly, in the matter of entertaining applications seeking condonation of delay as held by this Court in case of Sitaldas Motwani v. DIT reported in 323 ITR 223, wherein this Court held as under:
"The phrase genuine hardship" used in s. 119(2)9b) should have been construed liberally even when the petitioner has complied with all the conditions mentioned in Circular dt 12-10-1993. The legislature has conferred the power to condone delay to enable the authorities to do substantive justice to the parties by disposing of the matters on the merits. The expression 'genuine" has received a liberal meaning in view of the law laid down by the Apex Court referred to hereinabove and while considering this aspect, the authorities are expected to bear in Page 16 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined mind that ordinarily the applicant applying for condonation of delay does not stand to benefit by lodging its claim late. Refusing to condone the delay can result in a meritorious matter being thrown out at the very threshold an cause of justice being defeated......... When substantial justice and technical justice are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have a vested right in injustice being done because of non-deliberate delay. There is no presumption that delay is occasioned deliberately or on account of culpable negligence or on account of malafides. A litigant does not stand to benefit by resorting to delay in fact he runs a serious risk....."
27. It was further submitted that in case of Bombay Mercantile Co-op Bank Ltd. reported in 332 ITR 287 (Bom.) Bombay High Court has held that in the matter of condonation of delay, highly pendantic approach should be eschewed and a justice oriented approach should be adopted and the assessee should not be made to suffer on account of technicalities. Page 17 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024
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28. It was therefore, submitted that the impugned orders are required to be quashed and set aside as the petitioner is likely to suffer huge tax liability of Rs.1,48,29,450/- on account of consequential rejection of exemptions under sections 11 and 12 of the Act if the delay is not condoned in filing Form 10B. It was also pointed out that the petitioner has obtained audit report prior to the due date of filing the return and Form 10B and as such there was sufficient compliance as per the ratio laid down in case of Gujarat Oil and Allied Industries reported in 201 ITR 325 (Guj) wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural and directory in nature and its substantial Page 18 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined compliance would suffice.
29. On the other hand, learned advocate Ms. Maithili Mehta for the respondent submitted that the application dated 13.09.2021 to condone the delay on e- filing of Form 10B for AY 2018-2019 is rightly rejected as the petitioner has failed to point out any genuine hardship in late filing of Form 10B. It was submitted that the petitioner is habitual in late filing of Form 10B in past and the respondent was considerate in condoning the delay for earlier assessment years 2013-2014, 2016-2017 and 2017-2018 but for the year under consideration, delay in filing Form 10B was not found to be reasonable and therefore, the impugned order is just and proper which requires no interference while exercising Page 19 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined extraordinary jurisdiction under Article 227 of the Constitution of India.
30. It was submitted that in earlier years, delay was of short period of one day for AY 2013-2014, 11 days for AY 2016- 2017 and 08 days for AY 2017-2018 whereas for the year under consideration i.e. AY 2018-2019, there is a delay of 34 days and the petitioner has failed to point out any genuine hardship for such delay.
31. It was further pointed out that inspite of giving an opportunity to explain the delay by the respondent, the petitioner has failed to furnish reply in response to letter dated 12.11.2021 issued by the respondent and therefore, the respondent has no option but to presume that the petitioner has no reasonable Page 20 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024 NEUTRAL CITATION C/SCA/17385/2023 JUDGMENT DATED: 13/08/2024 undefined caused for delay in filing Form 10B as well as the petitioner was not serious regarding his application to condone the delay.
32. It was submitted that though the petitioner had obtained audit report on 28.08.2018 in Form 10B, same was filed on 30.10.2018 and the delay in filing Form 10B was not explained by the petitioner with regard to the genuine hardship as per the provisions of section 119(2)(b) of the Act.
33. Having heard the learned advocates for the respective parties and considering the facts of the case, it is not in dispute that the petitioner has explained in detail the cause for late filing of Form 10B.
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34. It also emerges from the record that the petitioner was under an impression that the delay was condoned however, only when the order under section 154 of the Act was proposed by the Assessing Officer, pursuant to the rejection of the application of the petitioner to condone delay under section 119(2)(b) of the Act by disallowing the amount applied for charitable purpose under section 11 of the Act amounting to Rs. 3,69,08,845/- and thereafter the petitioner has preferred this petition. The petitioner has also placed on record the audited balance sheet dated 27.08.2021. It is also not in dispute that that the petitioner is getting benefit of sections 11 and 12 of the Act for past many years.
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35. In the decision of this Court in case of Sarvoday Charitable Trust (supra), it is held that furnishing of audit report along with refund filed is to be treated as procedural requirement though it is mandatory in nature but substantial compliance is required to be made. It was further observed that the approach of the authority in such type of case should be equitable and judicious. It is also not in dispute that the petitioner trust for past many years has substantially satisfied the conditions for claiming the exemption which should not be denied for non filing of Form 10B in time. The petitioner has explained the reason for delay in filing Form 10B due to illness of the Accountant who was on leave for a long time due to medical reasons.
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36. In view of foregoing reasons, the petition is allowed. The impugned orders are quashed and set aside. The matter is remanded back to the respondent to pass appropriate order to condone the delay in filing the Form 10B for AY 2018-2019 by the petitioner. Such exercise shall be completed within a period of 12 weeks from the date of receipt of a copy of this order.
37. Petition is accordingly disposed of. Rule is made absolute to the aforesaid extent. No order as to costs.
(BHARGAV D. KARIA, J) (NIRAL R. MEHTA,J) RAGHUNATH R NAIR Page 24 of 24 Uploaded by RAGHUNATH R NAIR(HC00196) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:47:43 IST 2024