Telangana High Court
M/S Shilparamam Arts, Crafts And ... vs Additional / Joint / Deputy / Assistant ... on 24 November, 2023
Author: P.Sam Koshy
Bench: P.Sam Koshy, N.Tukaramji
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE N.TUKARAMJI
WRIT PETITION No.31360 of 2023
ORDER :
(per Hon'ble Sri Justice P.SAM KOSHY) The present writ petition is filed by the petitioner assailing the impugned order dated 31.07.2023 passed by the respondent No.3/The Commissioner of Income-Tax (Exemptions) and the subsequent consequential orders passed thereon.
2. Heard Sri A.V.A. Siva Kartikeya, learned counsel for the petitioner and Sri A. Ramakrishna Reddy, learned counsel for the respondent-Department.
3. Vide the said impugned order, the respondent No.3 had rejected an application for condonation of delay in filing Form 10B for the assessment year 2017-18 under Section 119(2)(b) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act').
4. The brief facts relevant for adjudication of the present writ petition are that the petitioner which is a establishment having got registered itself under Section 12A of the Act, submitted its income tax returns on 31.10.2017. However, as there were certain defects, the same was returned and revised income tax returns were furnished on 02.11.2017. While submitting the returns, nil income was declared 2 claiming exemption under Section 12A of the Act. Thereafter, the respondent No.1 initiated proceedings under Section 147 of the Act and a notice under Section 148 of the Act is said to have been issued on 19.09.2019 and further notice under Section 142(1) of the Act was also issued calling upon the petitioner to submit certain additional details. Finally an order was passed under Section 147 read with Section 114 and Section 144B of the Act on 24.09.2021.
5. The respondent No.1 while passing the said order held that the petitioner has failed to prove the source of cash deposited by him in their respective banks amounting to Rs.87,13,060/- and the entire amount was being treated as unexplained money and was added under Section 69A read with Section 115BBE of the Act.
6. It was the contention of the learned counsel for the petitioner that none of the notices issued including the show cause notices were served upon the petitioner and neither was there any material available on record to show that the notices were duly served upon the petitioner. When the petitioner came to know about the impugned order passed at a belated stage, he had preferred a statutory appeal under Section 246A of the Act vide Form No.35 before the respondent No.2/The Commissioner of Income Tax (Appeals). The respondent No.2 had issued notice on the said appeal and the matter is still under consideration before the respondent No.2. While the matter was seized by the respondent No.2, the petitioner filed an application 3 before the respondent No.3 on 14.02.2023 to condone the delay in filing the audit report in Form 10B for the Assessment Year 2017-18.
7. It was the further contention of the learned counsel for the petitioner that non-filing of the audit report in Form 10B would not be so fatal requiring initiation of proceedings so far as denial of exemption under Section 11 of the Act. It is this application for condonation of delay in filing of the audit report which stands rejected vide the impugned order dated 31.07.2023 which is under challenge in the present writ petition.
8. The contention of the learned counsel for the petitioner all along was that filing of the audit report in Form 10B is only a directory and not mandatory in nature. Non-filing of the same cannot be fatal to the exemption which the petitioner is otherwise entitled under Section 11 of the Act. It was further contended there was no as such a default on the part of the petitioner except for the fact that the audit report could not be brought on record. According to the learned counsel for the petitioner, there is no dispute to the fact that within the prescribed period itself the petitioner had submitted returns and even the audit report was prepared in time i.e. on 20.09.2017. Because of technical reasons, it could not be uploaded and filed with the authorities concerned and the same was ultimately uploaded on 10.04.2019. The fact that it was uploaded on 10.04.2019 goes to show that uploading of the audit report was done about 2.5 years before the assessment 4 order was passed and the same also stood uploaded well before the assessment order was passed on 24.09.2021. In the given circumstances taking into consideration the provisions of Section 119(2)(b) of the Act, the authority concerned ought to have taken a liberal approach and should have condoned the delay caused in filing of the audit report.
9. According to the learned counsel for the petitioner, the impugned order passed by the respondent No.3 is totally arbitrary, without proper application of mind and being passed in a mechanical manner. It was specifically contended that the authority concerned has not dealt with it in any manner or discussed upon any of the grounds raised in the application under Section 119(2)(b) of the Act. For the said reason, the prayer of the petitioner was for issuance of an appropriate Writ in the nature of Mandamus declaring the impugned order dated 31.07.2023 rejecting the application under Section 119(2)(b) of the Act to be arbitrary, bad in law and for an appropriate direction to hold that the consequential decisions taken also to be bad in law. In support of his contentions, learned counsel for the petitioner relied upon the decisions in the case of MADHU DADHA vs. ASSISTANT COMMISSIONER OF INCOME TAX 1, COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI VERSUS M/S. DILIP KUMAR 1 (2009) 317 ITR 458 (Mad) 5 AND COMPANY & ORS. 2 so also the case of M/s. Myadam Kishan Rao Charitable Establishment vs. The Commissioner of Income Tax (Exemption) 3 of this Court on the question of alternative remedy.
10. Per contra, learned counsel for the respondent-Department referring to the assessment order dated 24.09.2021 for the Assessment Year 2017-18 contended that the petitioner was issued with the notices at every stage of the proceedings. In addition, apart from issuance and serving of notices through e-mail through the Income Tax Business Application (ITBA) portal, all these notices were also issued and served upon the petitioner through speed post. Thus, the contention of the petitioner that they are not being served effectively is not worth accepting and is far from truth deserving rejection of the said contention.
11. It was the contention of the learned counsel for the respondent- Department that the petitioner was issued and served with the notices both electronically and also physically and if the petitioner chose not to contest the case or to respond to any of the notices so issued, the petitioner cannot be permitted to agitate the same at this belated stage and having done at this inordinately belated stage without any justification and plausible explanation, the respondent-Department 2 CIVIL APPEAL NO.3327 of 2007 of Supreme Court of India 3 WP 24005 of 2023 dated 30.08.2023 of High Court for the State of Telangana 6 cannot be blamed for having rejected the application for condonation of delay.
12. Learned counsel for the respondent-Department referring to the impugned order contended that the authority concerned has rightly considered the application on its own merits and keeping in view the circulars of the Government of India so far as delay and condonation of delay is concerned and the impugned order cannot be found fault with. In the absence of any representation by the petitioner before the authority concerned and also in the absence of any response from the petitioner side and also without there being enough materials available for the authority concerned, they could not have done anything but what has been done while dismissing the application under Section 119(2)(b) of the Act. According to the learned counsel for the respondent-Department, the petitioner had ample opportunity if he wanted to upload or made available the audit report and having not done so goes to establish the fact that the petitioner has deliberately not shown any keen interest on the proceedings so drawn. Thus, he would not be entitled for any sympathetic treatment or anything as such. For the aforesaid reason, the learned counsel for the respondent-Department prayed for rejection of the writ petition holding it to be devoid of merits.
13. Learned counsel for the respondent-Department in support of his contentions had relied upon the decisions in the cases of 7 ASSISANT COMMISSIONER (CT) LTU, KAKINADA Versus GLAXO SMITH KLINE CONSUMER HEALTH CARE 4 and yet another decision of the Division Bench of this Court in M/s. Zoos and Parks Authority of Telangana vs. The Commissioner of Income Tax (Exemptions) 5 to be adopted in an appropriate case.
14. Having heard the contentions put forth on either side and on perusal or records, for proper adjudicating the dispute raised in the present writ petition, it would be relevant at this juncture to take note of the contents of the impugned order itself which for ready reference is reproduced herein under:
" With reference to the assessee's application for condonation of delay in filing Form 10B for the A.Y.2017-18, cited under reference 1 above, it is to state that the assessee has filed Form 10B belatedly. The assessee has been requested to furnish certain information vide above cited reference 2, justifying its application for condonation of delay. However, the assessee has not submitted sufficient reason which prevented the assessee from filing the same, within the due date.
As per Board's circular, "The Commissioner of Income-tax are authorized to admit and dispose off such applications for condonation of delay u/s.119(2)(b) of the Act where, the assessee was prevented by reasonable cause from filing such application within the stipulated time.
In view of above reasons, it is concluded that the application filed by the assessee for condonation of delay u/s 119(2)(b) in filing Form 10B for the assessment year 2017-18 is hereby rejected."4
(2020) 19 Supreme Court Cases 681 5 WP 8794 of 2023 dated 04.04.2023 of High Court for the State of Telangana 8 If we look into the contents of the above said impugned order, what is apparently reflected is that the impugned order is cryptic. Cryptic to the extent that the order is totally unreasoned and non-speaking order.
15. Further to deal with issue, it would now be necessary to take note of the statutory provisions dealing with the condonation of delay which stands decided by the respondent-Department and which is under challenge in the present writ petition. Section 119(2)(b) of the Act empowers the Commissioner to entertain an application for condonation of delay which for ready reference is being reproduced herein under:
"Section 119(2)(b)- The Board may, if 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, 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 under this Act for making such application or claim and deal with the same on merits in accordance with law."
A plain reading of the aforesaid provision of law would clearly indicate that the intention of the framers of the law was to provide a liberal approach where there is a delay occurred. What is necessary to be considered at this juncture also is the fact that the petitioner is a registered establishment under Section 12A of the Act. Section 12A of the Act provides tax exemption to charitable trust that is registered with the Income Tax Department. So far as registration is concerned, 9 there no quarrel on the same. The dispute in the present case is only in respect of the assessment order for the Assessment Year 2017-18.
16. The admitted factual matrix from the facts of the case is that the return of income was filed by the petitioner for the Assessment Year 2017-18 on 02.11.2017. Before filing of the said return itself, the accounts of the petitioner were got audited and the audit report was prepared well in time on 20.09.2017. The due date for filing of the return was on or before 31.10.2017 and the petitioner herein did file his return on 31.10.2017. However, on account of certain defects detected, the same was returned and revised return was filed on 02.11.2017. Thus, the return stands submitted within the time. However, there was a requirement for uploading of the audit report. The audit report meanwhile was uploaded though at a belated stage on 21.02.2019, nonetheless the uploading of the audit report was much before (before 2.5 years) the assessment order dated 24.09.2021 was passed. It is in this factual backdrop that the application for condonation of delay filed by the petitioner ought to have been decided by the authority concerned.
17. Now if we look into the statutory provisions, what is reflected is that the provisions under Section 119(2)(b) has been enacted with a specific purpose empowering the authorities concerned to condone the delay on the part of the assessee in furnishing or in submitting of the returns or an appropriate application within a reasonable period 10 of time. The said provision of law does not provide for any specific period of time within which the application for condonation of delay needs to be filed. The said provision has also been enacted to ensure that genuine hardship which an assessee may face can be avoided by condoning the delay if any that has occurred and an appropriate application seeking for condonation of delay is filed.
18. The High Court of Gujarat in the case of Sarvodaya Charitable Trust v. Income Tax Officer. (Exemption) 6 dealing with similar issue under the provisions of law in paragraph Nos.31 and 32 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 the 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 the exemption under section 12 of The Act by rejecting such condonation application, but an assessee, a public charitable trust past 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 wide discretionary powers to condone such delay on the authorities concerned.
32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 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 proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had nto produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible 6 [2021] 124 taxmann.com 75 (Gujarat) 11 for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause."
19. The High Court of Gujarat further in the case of COMMISSIONER OF INCOME-TAX v. GUJARAT OIL AND ALLIED INDUSTRIES 7 held as under:
"In our view, the aforesaid reasoning of the Allahabad High Court and the Patna High Court would squarely apply to the facts of the present case. The provision about furnishing of the auditors' report along with the return has to be treated as a procedural provision, directory in nature, and its substantial compliance should suffice, meaning thereby that such report should be made available by the assessee to the Assessing Officer latest when the question of framing of assessment is taken up by the Income-tax Officer and when he applies his mind to the claim of the assessee and if by that time, the assessee has put his house in order and has furnished the report of the auditor for supporting the return, he can be said to have satisfied the requirement of section 80J(6A) of the Act."
20. A similar view is available from the High Court of Punjab and Haryana in the case of COMMISSIONER OF INCOME TAX v. SHAHZEDANAND CHARITY TRUST 8, where again the Division Bench of High Court of Punjab and Haryana dealing with similar facts and circumstances of the case referring to the circular of the Income Tax Department itself held as under:
"The provisions of section 80J(6A) and section 12A of the Act are pari material. The ratio of the law laid down in CIT v. Jaideep Industries [1989] 180ITR 81 (P & H) would have been applicable to the facts of the present case as well had the Central Board of Direct Taxes not 7 [1993] 201 ITR 325 (Guj) 8 228 ITR 292(P&H) 12 issued the circular dated February 9, 1978, reproduced in the earlier part of the judgment. As per the circular it is not mandatory under section 12A(b) to file the audit report along with the return of income. Normally, a charitable or religious trust or institution is expected to file the auditor's report along with the return but in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report, the Income-tax Officer, for reasons to be recorded, has been authorized to condone the delay in furnishing the auditor's report and accept the same at a belated stage. It has been clarified that the exemption available to the trust under section 11 may not be denied merely on account of delay in furnishing the auditor's report. The word ''shall" occurring in section 12A cannot, under the circumstances, be read as a "must" making it mandatory for the trust to furnish the auditor's report along with the filing of the return. If for certain unavoidable circumstances, the assessee is unable to furnish the auditor's report along with the return then the same can be furnished at a later date with the permission of the Assessing Officer who may permit the assessee to do so after recording his reasons for so doing.
Counsel appearing for the Revenue then argued that as per the circular, the auditor's report could only be furnished up to the stage of framing of assessment as the power to condone the delay for accepting the auditor's report at a later date has only been given to the Income-tax Officer and not thereafter, i.e., at the appellate stage. We find no merit in this submission. The Central Board of Direct Taxes by issuing the circular dated February 9, 1978, has treated the provisions regarding furnishing of the auditor's report along with the return to be procedural and, there-fore, directory in nature. By showing sufficient cause, the auditor's report could be produced at any later stage either before the Income-tax Officer or before the appellate authority."
21. Coming to the decisions relied upon by the learned counsel for the respondent-Department, those decisions were rendered under 13 entirely different contextual background and thus in both the cases it was not a situation where the income tax return was filed and the audit report also stood uploaded more than 2.5 years much before the Assessing Officer had passed the assessment order. Therefore, the said judgments cannot be applied in a straight jacket manner to the facts of the present case.
22. For the aforesaid reasons, we are inclined to allow the writ petition setting aside the impugned order dated 31.07.2023. As a result, the consequential order passed subsequent to the rejection of the application under Section 119(2)(b) of the Act would also get automatically quashed and the application of the petitioner for condonation of delay stands allowed. Wherefore the respondent No.3 would be required to pass an appropriate consequential order in accordance with law.
23. Accordingly, the writ petition stands allowed. No costs.
Miscellaneous petitions, pending if any, shall stand closed.
________________ P.SAM KOSHY, J __________________ N.TUKARAMJI, J Date: 24.11.2023 GSD