Delay in Filing Return and Forms for Charitable Trust Exemption Justified, Matter Remanded

Issue: Whether a charitable trust, engaged in the upliftment of the poor, should be denied exemption under Section 11(2) of the Income-tax Act, 1961, solely due to an 18-day delay in filing its return of income and accompanying Forms 9A and 10B, when a reasonable explanation for the delay is provided.

Facts:

The assessee is a trust dedicated to the upliftment of poor ‘Adivasi’ people.
For the assessment year 2019-20, the assessee filed its return of income along with Forms 9A and 10B, claiming a deduction under Section 11(2) of the Income-tax Act.
There was a delay of 18 days in filing both the return and Form 10B.
The Assessing Officer (AO) rejected the deduction claim due to this delay.
The assessee explained that its trustees were senior citizens and not highly proficient with digital filing requirements.
Additionally, the assessee stated that a requirement for filing Form 9A was the linking of the signatory’s Aadhaar, which caused some delay in compliance.

Decision: The impugned order of the Assessing Officer was set aside, and the matter was remanded back to the Assessing Officer. The AO was directed to allow the assessee’s claim for deduction under Section 11(2) after due verification of the relevant forms filed along with the return, as the explanation provided for the delay was reasonable and satisfactorily justified.

Key Takeaways:

Reasonable Delay Justified: Minor delays in compliance, especially for charitable organizations with genuine difficulties (like trustees being senior citizens unfamiliar with digital processes or technical issues with Aadhaar linking), may be condoned if a reasonable and satisfactory explanation is provided.
Substance over Form: Courts may prioritize the substantive compliance and charitable objectives of a trust over strict adherence to procedural timelines, especially when no malafide intent is evident.
Importance of Explanation: Providing a detailed and credible explanation for any delay is crucial for assessee-trusts seeking relief from strict compliance penalties.
Remand for Verification: When an explanation for delay is found reasonable, the matter may be remanded to the AO to verify the submitted forms and then grant the rightful deduction.

IN THE ITAT ITAT BENCH ‘J(SMC)’

Archana Foundation

Assistant Director of Income-tax

ANIKESH BANERJEE, Judicial Member
and Girish Agrawal, Accountant Member

IT Appeal No. 848 (Mum) OF 2025
[Assessment year 2019-20]

MAY 6, 2025

Amit Agrawal for the Appellant. Asif Karmali for the Respondent.

ORDER

Anikesh Banerjee, Judicial Member. – The instant appeal of the assessee was filed against the order of the Learned Commissioner of Income-tax (Appeal) / Addl / JCIT(A), Bubhaneshwar [in short, ‘Ld.CIT(A)’] the order passed under section 250 of the Income tax Act, 1961 (in short, ‘the Act’) for A.Y 2019-20, date of order 20/01/2025. The impugned order emanated from the order of the CPC, Bengaluru (for brevity the “Ld. AO”), passed under section 143(1) of the Actdate of order 18/05/2020.

2. The brief facts of the case are that the assessee is a registered public charitable trust and registered under section 12A of the Act and is engaging in upliftment of poor “Adivasi” people. It runs old-age home in the name of ‘Matoshree Vriddhashram’ at Khadavli, Balwadi, Shahpur and BMC School at Juhu. During the impugned assessment year, the assessee filed the return on 18/11/2019. The due date for filing the return was 31/10/2019. So there was a delay of 18 days in filing the return of income. The assessee filed Forms 9A&10B under rule 17B of the Income tax Rule,1962 (in short the “Rule”) with the ROIin the Income-tax Department. The assessee claimed deduction under section 11(2) of the Act related its income over expenditure. Due to delay in filing ROI and Form 10B, the Ld. AO rejected the deduction claimed U/s 11(2) of the Act, determined the total income amount to Rs.56,41,972/- and the tax liability was computed amount to Rs.20,30,885/- during the processing of return under section 143(1) of the Act. Being aggrieved on the assessment order, the assessee filed an appeal before the Ld.CIT(A). In an alternative remedy, the assessee filed a petition under section 119(2)(b) for condonation of delay in filing Form 10B and ROI considering the CBDT circular No.17/2022 dated 17/07/2022 and the circular No.6/2020 dated 19/02/2020 before the Ld. Commissioner of Income tax (Exemption), Mumbai. The assessehas taken plea that related to assessment year 2019-20, theabove mentioned circularsand the reason for delay in filing forms are duly explained. But finally, the assessee was remained unsuccessful as the said petition was duly rejected by the Ld.CIT(E), Mumbai by an order dated 05/01/2023. So, the assessee has no option to challenge the order of the Ld.CIT(A) dated 20/01/2025 before us.

3. During the argument before the bench, the Ld.AR submitted that the assessee has filed the return with a delay of 18 days and the reason for the same was well explained before the authority by form 9A. The reason of delay is mentioned as below:-

“6. Reason for delay in filing income tax return and form no 9A – The Trust does not have any fulltime staff. It is managed only by women who are all Senior citizens who devote their time on honorary basis. There were some issues in the system while filing ITR and Form No. 9A due to which Appellant was unable to file the same within time. Most of the trustees are senior citizens and averse of digital filing requirements. Since one of the requirements of filing the Form No. 9A was that the signatory’s Aadhaar should be linked, there was some delay in getting it complied. There was no malafide intention in filing the income tax return and Form No. 9A late,

7. These reasons for delay in filing of form 10/9A and ITR were communicated to Ld CIT(A) vide our submissions on 27-1-2021, 23-10-2021, 29-11-2023, 4-1-2024 and 6-11-2024.”

4. The Ld.DR argued and fully relied on the orders of the revenue authorities on the record.

5. During the argument before the bench, the Ld.AR further mentioned that this reason for delay in filing return was duly explained before the revenue authority. The trustees are senior citizens and not very much conversant with the digital filing compliance, etc. So once the requirement of filing form 9 was that the signatory’s Adhaar should be linked with the digital signature, but the trustee was unable to comply with the requirement due to its inability. The Ld. AR respectfully stated that the issue is squarely covered by the order of the coordinate bench, Mumbai Bench ‘SMC’ for A.Y. 2017-18 in assessee’s own case bearing Archana Foundation v. ITO (Exemption) [IT Appeal No.1431(Mum) of 2021, dated 5-9-2022]. The relevant paragraphs 9 to 11 are extracted below:-

“9. To arrive at this conclusion we found support from various judicial pronouncements as mentioned below:

Commissioner of Income-tax v. Nagpur Hotel Owners’ Association.

It is abundantly clear from the wordings of sub-section (2) of section 11 that it is mandatory for the person claiming the benefit of section 11 to intimate to the assessing authority the particulars required, under rule 17 in Form No. 10. If during the assessment proceedings the Assessing Officer does not have the necessary information, the question of excluding such income from assessment does not arise at all. As a matter of fact, the benefit of excluding this particular part of the income from the net of taxation arises from section 11 and is subject to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time it completes the assessment. In the absence of any such information, it will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, it would be futile to find fault with the assessing authority for having included such income in the assessable income of the assessee. Therefore, even assuming that there is no valid limitation prescribed under the Act and the Rules, even then it is reasonable to presume that the intimation required under section 11 has to be furnished before the assessing authority completes the concerned assessment because such requirement is mandatory and without the particulars of the income, the assessing authority cannot entertain the claim of the assessee under section 11. Therefore, compliance of the requirement of the Act will have to be any time before the assessment proceedings. Further, any claim for giving the benefit of section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment will have to be reopened. The Act does not contemplate such reopening of the assessment. In the instant case, it was evident from the records of the case that the respondent did not furnish the required information till after the assessments for the relevant years were completed. In the light of the above, the stand of the revenue that the High Court erred in answering the question in favour of the assessee was correct, and that finding was to be reversed.

Section 11 of the Income-tax Act, 1961 read with rule 17 of the Income-tax Rules, 1962 – Charitable or religious trust – Exemption of income from property held under (Accumulation of income) -Assessment years 2000-01 and 2001-02 – Whether for excluding an income of a charitable trust from net of taxation under section 11, intimation in Form 10 was to be filed with Assessing Officer before completion of assessment proceedings – Held, yes – Whether even if Form 10 was filed during re-assessment by assessee-trust, benefit of accumulation under section 11(2) was available because such filing would be considered within time allowed for furnishing return of income under section 139(4) – Held, yes [Paras 12 & 13][In favour of assessee]

Shree Dadar Jain v. Income-tax Officer (E), Mumbai

Income-tax Act, 1961, read with rule 17 of the Income-tax Rules, 1962 – Charitable or religious trust – Exemption of income from property held under (Accumulation of income) – Assessment year 2014-15 – Assessee a religious trust claimed deduction under section 11(2), amounting to Rs. 6.50 crores – Assessing Officer denied deduction so claimed on ground that assessee had not filed Form No. 10 for accumulation of income electronically alongwith resolution of Trustee – However, all requirements for claiming accumulation of income as stipulated under section 11(2) were satisfied except that Form No. 10 was not submitted before stipulated time as provided under section 139(1) but same was filed in physical mode before completion of assessment proceedings and there was no dispute between rival parties as to genuineness of deduction so claimed – It was also undisputed that purpose of accumulation of income under section 11(2) was to purchase property for furtherance of activities and objects of assessee, and assessee had invested said accumulation of income in one mode prescribed under section 11(5) by taking FDR’s with banks – Moreover, assessee did purchase property in immediately succeeding financial year and aforesaid accumulation of income under section 11(2) stood applied in immediately succeeding year for purposes of objects and activities of assessee trust – Whether therefore, assessee would be entitled to deduction under section 11(2) as claimed – Held, yes [Para 8.19] [In favour of assessee].

Commissioner of Income-tax v. Moti Ram Gopi Chand Charitable Trust

Section 11 of the Income-tax Act, 1961 – Charitable or religious trust – Exemption of income from property held under (Accumulation of income) – Assessment year 2008-09 – Whether benefit of exemption under section 11 is available on setting apart of 85 per cent amount to be spent in next year before assessment is complete – Held, yes – Whether even when a request by way of letter, which complies with requirement and furnishes all information required in Form 10 was made available on record and there was sufficient proof before Assessing Officer that amount was not only kept apart but was also spent in next year, exemption was to be granted – Held, yes [Paras 9 and 11] [In favour of assessee]”

10. Keeping in view the facts of the case and judicial pronouncements by the Honorable Apex Court, Honorable Jurisdictional High court and coordinated bench of ITAT, we are inclined to allow the appeal of the assessee. It is hereby directed to the authorities below for deletion of addition made in the guise of withdrawal of exemption u/s. 11(1) of the Act.

11. In the result, appeal filed by the assessee is allowed.”

5.1 In our considered opinion, the explanation provided by the assessee for the delay of 18 days in filing the ITR and the requisite reports is found to be reasonable and satisfactorily justified. In this regard, we place reliance on the decision of the Coordinate Bench of the ITAT, Mumbai in ITA No. 1431/Mum/2021 (supra). Accordingly, the impugned appellate order is set aside, and the matter is remanded to the file of the Ld. Assessing Officer for the purpose of allowing the assessee’s claim for deduction under Section 11(2) of the Act, after due verification of the relevant forms filed along with the ITR. The grounds raised by the assessee are allowed. Consequently, the addition of Rs. 56,42,973/- made by the Learned Assessing Officer stands deleted.

6. In the result, the appeal of the assessee bearing ITA No.848/Mum/2025 is allowed.