Recently, The New Delhi Bench of Income Tax Appellate Tribunal(ITAT) set aside the denial of exemption under sections 11 and 12 of the Income Tax Act,1961 by the Commissioner of Income Tax (Appeals).
Sufi Kathak Foundation,the appellant-assessee was denied a tax exemption for the year 2018-19.The Reason for denial was that the organisation filed its tax return and audit report late.
Law and Procedure for Filing of Appeals
The assessee filed income tax return for the assessment year (AY) 2018-19 on October 29, 2018, which was after the due date of September 30, 2018 as per section 139(1) of the Income Tax Act. Additionally, the assessee also submitted the Audit Report (Form 10B), which is required for claiming exemptions under section 11 of the Act, on the same date, October 29, 2018.
The CIT(A) agreed with the Centralized Processing Center (CPC)’s decision to deny the exemptions under sections 11 and 12. According to the law, these exemptions can only be claimed if both the income tax return and the audit report are filed on or before the due date, which was September 30, 2018. Since the assessee filed both documents late, on October 29, 2018, they forfeited the benefits of sections 11 and 12.
Law and Procedure for Filing of Appeals
However the CIT(A) upheld the CPC’s decision because the required documents were filed late, which meant the exemptions could not be granted.
Aggrieved by this,the appellant approached the Tribunal.
The assessee represented by Durgesh Shankar,argued that the CIT(A) wrongly upheld the DCIT(Deputy Commissioner of Income Tax) CPC’s decision to deny the exemption under sections 11 & 12 of the Income Tax Act, despite the assessee meeting all conditions, and claims that the CIT(A) based the decision on incorrect facts, violated natural justice, and should have cancelled the order under section 143(1) as the issue was not applicable under that section.
The Bench Observed that the Central Board of Direct Taxes(CBDT) had extended the deadline for filing tax returns and audit reports to October 31,2018.Since the assessee had filed its documents on October 29,2018, it was within the extended deadline.
Law and Procedure for Filing of Appeals
The Bench Composed of Mahavir Singh(Vice-President) and Pradip Kumar Kedia(Accountant Member) held that the CIT(A)’s decision to deny the benefit on this basis is incorrect and should be cancelled. The CPC/JAO is instructed to reconsider the extended due date when determining the eligibility for the claim under sections 11 & 12 of the Act.
In Conclusion,the appeal is allowed.
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