Little Angels Education Society vs. UOI (Bombay High Court)

Little Angels Education Society &Anr v. UOI &Ors WP No. 1061 of 2020 March 25, 2021 ( Bom) ( HC) , dated  25 th March 2021  

Charitable Trust – ( S.2(15) , 11)- School – Exemption – For delay in filing form Nom 10B denial of exemption is not justified –  Petitioner is directed to file an application before the CBDT within a period of three weeks from today, and CBDT shall pass an appropriate order in terms of direction No.1 above within a period of four weeks from the date of receipt of such application with due intimation to the petitioner

Facts:
The petitioners are charitable trusts providing education to students belonging to middle class families through various schools situated in Mumbai. Both the petitioners are assessed to income tax under the Income Tax Act, 1961(Act).

Challenge made in both the writ petitions is to the orders dated 19.02.2020 passed by the Commissioner of Income Tax (Exemptions), Mumbai declining to condone the delay in filing Form No.10B of the Act for the assessment year 2018-2019.

It is stated that for the assessment year 2018-19, petitioner filed return of income on 25.07.2018 declaring nil income. Form No.10B was obtained on 15.08.2018 from the auditor. It is stated instead of uploading Form No.10B in the income tax portal, petitioner uploaded Form No.10BB because of mistake of the chartered accountant and accountant.

the CPC under section 143(1) of the Act raising a demand of Rs.1,46,01,489.00 as payable by the petitioner for the assessment year 2018-19 by denying exemptions under sections 11 and 12 of the Act.

Petitioner uploaded Form No.10B on the income tax portal on 06.11.2019 and also filed an application for condonation of delay. As a matter of fact, petitioner filed Form No.10B for assessment years 2017- 18 and 2018-19.

Respondent No.2 i.e., Central Board of Direct Taxes issued Circular No.2 of 2020 dated 03.01.2020 empowering the Commissioner of Income Tax (Exemptions) to condone the delay in filing Form No.10B for a period upto 365 days from the assessment year 2018-19 onwards.

However, vide the impugned order dated 19.02.2020, Commissioner of Income Tax (Exemptions), Mumbai rejected the application of the petitioner for condonation of delay for the assessment year 2018-19. The said order was passed following Circular No.2 / 2020 of the Central Board of Direct Taxes.

Aggrieved, the related writ petition has been filed for quashing of order dated 19.02.2020 and for a direction to the Commissioner of Income Tax (Exemptions) to condone the delay in filing Form No.10B for the assessment year 2018-19.

Held:
That being the position and having regard to the mandate of section 119(2)(b), we feel that even at this stage, petitioner may approach CBDT under the aforesaid provision seeking a special order to the Commissioner of Income Tax (Exemptions), Mumbai to condone the delay in filing Form No.10B for the assessment year 2018-19 which isbeyond 365 days and thereafter to deal with the said claim on merit and in accordance with law.

Petitioner shall file an application before the CBDT under section 119(2)(b) of the Act to authorize the Commissioner of Income Tax (Exemptions), Mumbai to condone the delay in filing Form No.10B for the assessment year 2018-19 and to deal with the same on merit in accordance with law;

If such application is filed by the petitioner within a period of three weeks from today, CBDT shall pass an appropriate order in terms of direction No.1 above within a period of four weeks from the date of receipt of such application with due intimation to the petitioner

(Editorial: Where the CIT(E) passed order section 119 (2)(b) of the Act rejecting the application  the assessee  can approach the CBDT with application for condonation of delay

WP1061&1288_20.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.1061 OF 2020
Little Angels Education Society … Petitioner
Vs.
Union of India and others … Respondents
WITH
WRIT PETITION NO.1288 OF 2020
Rev. C. F. Andrews Education Society (Regd.) … Petitioner
Vs.
Union of India and others … Respondents
Dr. K. Shivaram, Senior Advocate a/w. Shashi Bekal for Petitioner.
Mr. Sham Walve for Respondents.
CORAM : UJJAL BHUYAN &
MILIND N. JADHAV, JJ.
Reserved on : FEBRUARY 15, 2021
Pronounced on: MARCH 25, 2021
Judgment and Order : (Per Ujjal Bhuyan, J.)
This order will dispose off both writ petition Nos.1061 and 1288
of 2020.
2. We have heard Dr. K. Shivaram, learned senior counsel for the
two petitioners and Mr. Sham Walve, learned standing counsel revenue
for the respondents.
3. In Writ Petition No.1061 of 2020, Little Angels Education
Society, Santacruz (West), Mumbai is the petitioner whereas in Writ
Petition No.1288 of 2020, Rev. C. F. Andrews Education Society,
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Santacruz (East), Mumbai is the petitioner. Both the petitioners are
charitable trusts providing education to students belonging to middle
class families through various schools situated in Mumbai. Both the
petitioners are assessed to income tax under the Income Tax Act, 1961
(briefly ‘the Act’ hereinafter).
4. Challenge made in both the writ petitions is to the orders dated
19.02.2020 passed by the Commissioner of Income Tax (Exemptions),
Mumbai declining to condone the delay in filing Form No.10B of the
Act for the assessment year 2018-2019.
5. Since facts are identical in both the petitions, for the sake of
convenience we may refer to the facts pleaded in Writ Petition No.1061
of 2020.
6. It is stated that for the assessment year 2018-19, petitioner filed
return of income on 25.07.2018 declaring nil income. Form No.10B was
obtained on 15.08.2018 from the auditor. It is stated instead of uploading
Form No.10B in the income tax portal, petitioner uploaded Form
No.10BB because of mistake of the chartered accountant and
accountant.
7. Centralized Processing Centre (CPC) of the Income Tax
Department informed the petitioner vide letter dated 26.07.2019 about
proposed adjustment in the income tax return for the assessment year
2018-19. Subsequently, petitioner received an intimation / order dated
17.10.2019 from the CPC under section 143(1) of the Act raising a
demand of Rs.1,46,01,489.00 as payable by the petitioner for the
assessment year 2018-19 by denying exemptions under sections 11 and
12 of the Act. This has been challenged by the petitioner in appeal before
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the Commissioner of Income Tax (Appeals).
8. Petitioner uploaded Form No.10B on the income tax portal on
06.11.2019 and also filed an application for condonation of delay. As a
matter of fact, petitioner filed Form No.10B for assessment years 2017-
18 and 2018-19.
9. Respondent No.2 i.e., Central Board of Direct Taxes issued
Circular No.2 of 2020 dated 03.01.2020 empowering the Commissioner
of Income Tax (Exemptions) to condone the delay in filing Form
No.10B for a period upto 365 days from the assessment year 2018-19
onwards.
10. Commissioner of Income Tax (Exemptions), Mumbai requested
the petitioner vide letter dated 04.02.2020 to furnish documents in
connection with the application for condonation of delay for the
assessment year 2018-19 which was complied with by the petitioner.
11. However, vide the impugned order dated 19.02.2020,
Commissioner of Income Tax (Exemptions), Mumbai rejected the
application of the petitioner for condonation of delay for the assessment
year 2018-19. The said order was passed following Circular No.2 / 2020
of the Central Board of Direct Taxes (for short ‘CBDT’).
12. Petitioner has stated that it had filed an application for
condonation of delay in filing Form No.10B for the assessment year
2017-18 which was allowed by the Commissioner of Income Tax
(Exemptions) by condoning the delay.
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13. Aggrieved, the related writ petition has been filed for quashing of
order dated 19.02.2020 and for a direction to the Commissioner of
Income Tax (Exemptions) to condone the delay in filing Form No.10B
for the assessment year 2018-19.
14. Respondents have filed reply affidavit. It is stated that petitioner
had filed return of income under section 139(1) of the Act on 15.08.2018
and revised return of income on 30.03.2019. Form No.10B was filed on
06.11.2019 which was after lapse of more than 365 days from the due
date of filing of return of income. Reference has been made to the
Circular No.2 of 2020 dated 03.01.2020 to contend that Commissioners
of Income Tax are authorized to condone the delay in filing of Form
No.10B upto 365 days for the assessment year 2018-19 and subsequent
years. In the case of the petitioner, the delay was more than 365 days.
Therefore, no fault can be found in the action of the Commissioner in
rejecting the application of the petitioner for condonation of delay in
filing Form No.10B. Circular of the CBDT is binding on all lower
authorities. There is thus no infirmity in the impugned order. Writ
petition should be dismissed.
15. While Dr. Shivaram, learned senior counsel for the petitioner
submits that approach of the Commissioner of Income Tax (Exemptions)
is too technical, Mr. Walve, learned standing counsel revenue however
justifies the approach adopted by the Commissioner. Referring to section
119(2)(b), Dr. Shivaram submits that this Court in Sitaldas K. Motwani
Vs. Director General of Income Tax, 323 ITR 223 had observed that the
phrase ‘genuine hardship’ appearing in section 119(2)(b) should be
construed liberally. When substantial justice and technical considerations
are pitted against each other, cause of substantial justice deserves to be
preferred because the other side cannot claim to have a vested right in
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injustice being done on account of a non-deliberate delay. He submits
that in a number of judgments this Court had remanded the proceedings
back to the Commissioner.
16. Submissions made by learned counsel for the parties have been
considered.
17. Section 11 which deals with income from property held for
charitable or religious purposes provides that the categories of income
mentioned thereunder shall not be included in the total income of the
previous year of the person in receipt of the income. On the other
hand, section 12 deals with income of trusts or institutions from
contributions. Section 12A lays down the conditions for applicability
of sections 11 and 12. As per Rule 17B the report of audit of accounts
of a trust or institution which is required to be furnished electronically
under clause (b) of section 12A shall be in Form No.10B. In other
words, where the total income of the trust or institute as computed
under the Act without giving effect to the provisions of section 11 and
section 12 exceeds the maximum amount which is not chargeable to
income tax in any previous year, the accounts of the trust or institution
for that year should be audited by an accountant as defined in the
explanation below sub-section (2) of section 288 which should then
be furnished along with the return of income for the relevant
assessment year.
18. Before we advert to the impugned order, it would be apposite to
deal with section 119 of the Act which confers power upon the CBDT to
issue instructions and directions to other income tax authorities as it may
deem fit for proper administration of the Act which are required to be
observed and followed by the income tax authorities. Section 119(2)(b)
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is relevant and the same is extracted hereunder:-
“Section 119(2)
(a) …
(b) the Board may, if it considers it desirable or expedient so
to do for avoiding genuine hardship in any case or class of
cases, by general or special order, authorise any income-tax
authority, not being a Commissioner (Appeals) to admit an
application or claim for any exemption, deduction, refund or
any other relief under this Act after the expiry of the period
specified by or under this Act for making such application or
claim and deal with the same on merits in accordance with
law.”
19. From the above, we find that CBDT if it considers it desirable or
expedient so to do for avoiding genuine hardship in any case or class of
cases by general or special order, authorize any income tax authority, not
being a Commissioner (Appeals), to admit an application or claim for
any exemption, deduction, refund or any other relief under the Act after
the expiry of the period specified under the Act for making such
application or claim and deal with the same on merit in accordance with
law. Thus, in an appropriate case CBDT can pass a general order or a
special order; by such an order it can authorize any income tax authority
not being a Commissioner (Appeals) which would include
Commissioner of Income Tax (Exemptions); to admit an application or
claim for any exemption etc. after expiry of the period specified under
the Act; and to deal with the same on merit in accordance with law.
20. Having noticed the above, we may now examine Circular No.2 /
2020 dated 03.01.2020 issued by the CBDT. The subject of the circular
is condonation of delay under section 119(2)(b) of the Act in filing of
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Form No.10B for the assessment year 2018-19 and subsequent years.
Referring to the earlier circulars issued by the CBDT, it was noticed that
the delay in filing Form No.10B for the assessment year 2016-17 and
assessment year 2017-18 in all such cases where the audit report for the
previous year had been obtained before filing of return of income and
had been furnished subsequent to the filing of the return of income but
before the dates specified under section 139 of the Act should be
condoned; in all other cases of belated applications in filing Form
No.10B for assessment years prior to assessment year 2018-19,
Commissioners of Income Tax have been authorized to admit and
dispose of such applications by 31.03.2020. While entertaining such
belated applications, Commissioners should satisfy themselves that the
assessees were prevented by reasonable cause from filing such
application within the stipulated time. By the Circular No.2 / 2020, the
following portions have been added:-
“5. In addition to the above, it has also been decided by the
CBDT that where there is delay of upto 365 days in filing Form
No.10B for Assessment Year 2018-19 or for any subsequent
Assessment years, the Commissioner of Income-tax are hereby
authorized to admit such belated applications of condonation of
delay u/s. 119(2) of the IT Act and decide on merits.
6. The Commissioners of Income-tax shall, while
entertaining such belated applications in filing Form No.10B,
satisfy themselves that the assessee was prevented by
reasonable cause from filing such application within the
stipulated time.”
21. As per the above it has been decided by the CBDT that when
there is delay of upto 365 days in filing Form No.10B for assessment
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year 2018-19 or for any subsequent assessment years, Commissioners of
Income Tax have been authorized to admit such belated applications for
condonation of delay under section 119(2) of the Act and to decide the
same on merit. It has further been clarified that while entertaining such
belated applications, Commissioners of Income Tax should satisfy
themselves that the assessees were prevented by reasonable cause from
filing such applications within the stipulated time. Thus, by the above
Circular No.2 of 2020, CBDT has issued general order under section
119(2)(b) empowering the Commissioners of Income Tax to condone
delay in filing Form No.10B for the assessment year 2018-19 or for any
subsequent assessment years.
22. Let us now deal with the impugned order dated 19.02.2020 passed
by the Commissioner of Income Tax (Exemptions), Mumbai. The same
reads as under:-
“The assessee has filed application for condonation of delay in
filing Form No.10B for A.Y. 2018-19 on 07.11.2019. It was
stated in the application that due to oversight on part of the
Chartered Accountant Form 10B was delayed in e-filing. The
assessee has requested for condonation of delay in filing Form
No.10B.
2. On perusal of application for condonation of delay of
assessee as well as relevant provisions of the Income Tax Act,
1961 (the Act), Circulars & Notifications, it is observed that the
power u/s. 119(2)(b) of the Act lies with the CBDT. However,
for the condonation of delay u/s.119(2)(b) of the Income-tax
Act, 1961 in filing of Form No.10B for A.Y.2018-19 and
subsequent years, has been delegated to the Commissioner of
Income-tax (Exemptions), vide Circular No.02/2020 in
F.No.197/55/2018-ITA-I dated 03rd January, 2020. The relevant
excerpts from the circulars is reproduced as under:
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“5. In addition to the above, it has also been
decided by the CBDT that where there is delay of
upto 365 days in filing Form No.10B for
Assessment Year 2018-19 or for any subsequent
Assessment Years, the Commissioners of Incometax
are hereby authorized to admit such belated
applications of condonation of delay u/s.119(2) of
the Act and decide on merits.”
3. As per para 5 of the above Circular dated 03.01.2020, it
is very clear that the delay of upto 365 days in filing of Form
No.10B for Assessment Year 2018-19 and subsequent
Assessment Years, the Commissioners of Income-tax are
authorized to admit such belated applications of condonation of
delay u/s 119(2) of the Act and decide on merits.
3.1. In this case, the assessee has filed its return of income u/
s. 139(1) on 15.08.2018 and revised return of income
u/s.139(5) on 30.03.2019. Further, the original and revised
Form No.10B was filed on 06.11.2019. The details and the
documentary evidences filed by assessee have been examined
during the course of proceedings. It is seen that the Form
No.10B is filed electronically after lapse of more more than
365 days of the due date of the filing of return of income i.e.
31.10.2018. The case of the assessee is not covered under para
5 of the CBDT Circular dated 03.01.2020 wherein the CBDT
has delegated the power to the Commissioner of Income-tax to
admit belated applications of condonation of delay u/s. 119(2)
of the Act only upto 365 days in filing of Form No.10B and
decide on merits.
4. In view of the above, the application for condonation of
delay for A.Y.2018-19 is hereby rejected.”
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23. Commissioner noted that petitioner had filed return of income on
15.08.2018 and revised return of income on 30.03.2019. Form No.10B
was filed on 06.11.2019. Form No.10B was required to be filed within
the due date of filing of return, in this case 31.10.2018. There was thus
delay of more than 365 days in filing Form No.10B. Referring to the
Circular dated 03.01.2020, Commissioner noted that CBDT has
delegated the power to the Commissioner to admit belated applications
in filing Form No.10B for the assessment year 2018-19 and onwards for
a period of only upto 365 days. Since in this case the delay is more than
365 days, Commissioner expressed inability to condone the delay and
hence rejected the application for condonation of delay.
24. We do not find any error or infirmity in the view taken by the
CBDT vide Circular No.2 / 2020 or by the Commissioner while passing
the impugned order dated 19.02.2020. Fixing a period of one year’s
delay i.e., 365 days of delay for condonation of delay in filing Form
No.10B for the assessment year 2018-19 and onwards cannot be said to
be arbitrary or irrational. Therefore the general order passed by the
CBDT in this regard under section 119(2)(b) cannot be faulted.
However, there is also nothing in section 119(2)(b) preventing or
precluding CBDT from passing a special order in any given case from
condoning the delay in filing Form No.10B beyond 365 days despite
passing a general order.
25. That being the position and having regard to the mandate of
section 119(2)(b), we feel that even at this stage, petitioner may
approach CBDT under the aforesaid provision seeking a special order to
the Commissioner of Income Tax (Exemptions), Mumbai to condone the
delay in filing Form No.10B for the assessment year 2018-19 which is
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beyond 365 days and thereafter to deal with the said claim on merit and
in accordance with law.
26. Thus, having regard to the above and upon due consideration we
deem it appropriate to issue the following directions:-
1. Petitioner shall file an application before the CBDT
under section 119(2)(b) of the Act to authorize the
Commissioner of Income Tax (Exemptions), Mumbai
to condone the delay in filing Form No.10B for the
assessment year 2018-19 and to deal with the same on
merit in accordance with law;
2. If such application is filed by the petitioner within a
period of three weeks from today, CBDT shall pass an
appropriate order in terms of direction No.1 above
within a period of four weeks from the date of receipt
of such application with due intimation to the
petitioner.
27. Ordered accordingly.
28. The above directions in paragraph No.26 shall also cover Writ
Petition No.1288 of 2020.
29. Both the writ petitions are accordingly disposed of. However,
there shall be no order as to cost.
(MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.)
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