Belated Filing Of Form 9A Is Not Attributable To Trust: Bombay HC Allows Exemption U/S 11 After Condoning Delay Under IT Act

The Division Bench of Justice G S Kulkarni and Justice Advait M Sethna observed that that the jurisdictional AO completely lost sight of the fact that at the time when assessee claimed deductions towards depreciation and capital expenditure u/s 11(1) by filing the revised computation, the time limit for submission of Form 9A had lapsed, due to change of procedure.

The assessee filed Form 9A though belatedly for reasons not attributable to the assessee, and the Jurisdictional AO wrongly linked up such issue of belated filing of Form 9A with disallowance of the assessees claim of deduction towards depreciation and capital expenditure u/s 11(1), added the Bench.

Facts of the case:

The assessee trust had established various schools at Malad (West) in the year 2006, and since then, it's status was accepted as charitable institution. In its return, the assessee showed Nil income along with Form 10B, after claiming exemption u/s 11. During assessment proceedings, the assessee uploaded a revised computation of income with a view to rectify certain computation mistakes, and after the assessment was completed, the assessee filed Form 9A on the Income Tax portal, along with an application for condonation of delay in filing the said Form 9A. However, an order was passed u/s 119(2)(b) rejecting the said application. Such rejection was mainly on the ground that wrong claim was made by the assessee in the return filed u/s 139(1) in regard to depreciation and capital expenditure which was accordingly disallowed. The assessee therefore, approached the High Court, praying for setting aside of order passed by the Jurisdictional AO.

Observations of High Court

From perusal of record, the Bench found that the assessee had filed Form 9A under Rule 17(1) of the Income Tax Rules, under the heading "Application for exercise of option under clause (2) of Explanation to sub-section (1) of Section 11.

Pursuant to filing of such Form 9A under Rule 17(1), by the assessee though belatedly, it had duly submitted letters justifying such delay, which the jurisdictional AO has totally lost sight to consider, added the Bench.

The Bench highlighted that there is no finding much less reasoning reflected in the order except to harp on the issue that the delay in filing Form 9A belatedly, was not a procedural lapse and thus, cannot be condoned.

The jurisdictional AO failed to take note of a crucial fact the application for condoning delay in filing Form 9A, was filed on Dec 20, 2019, and the assessee adopted this course pursuant to the CBDT Circular No. 30/2019 dated Dec 17, 2019, extending the relief for condoning delay in filing such Form 9A, also for the assessment year in question i.e. 2017-2018, added the Bench.

Thus, the Bench observed that the AO ought to have applied his mind to the fact that merely within 3 days from date of extension granted to file such Form 9A vide the CBDT Circular, the assessee did file it on Dec 20, 2019, along with its application for delay condonation.

The legislature has conferred power to the CIT u/s 119(2)(b) to admit an application to claim any exemption, refund or relief after the expiry of the specified period under the I-T Act which shall be dealt with in accordance with law, added the Bench.

Thus, the Bench observed that there is the legislative intent to permit condonation of delay in filing Form 9A and 10 u/s 119(2)(b) authorizing CIT to admit such applications and decide on merit, in cases where the assesses were prevented to file the said forms in time, after showing sufficient cause.

Hence, the Bench emphasized that pedantic and narrow approach of the AO runs contrary to Sec 119(2)(b) read with the CBDT Circulars, which instead of mitigating hardship to assesses in genuine cases, would augment the same.

Such approach would discourage genuine assesses from coming forward to file their return of income, if their genuine applications, like the present one, are rejected in such arbitrary manner on mere ipse dixit of AO, added the Bench.

Hence, the High Court allowed the petition, while concluding that the statutory discretion conferred on the commissioners to condone delay u/s 119(2)(b) ought to be judiciously exercised so that undue hardship to the assessee is avoided.

Counsel for Petitioner/ Assessee: Ajay Singh

Counsel for Respondent/ Revenue: Dinesh R Gulabani

Case Title: Nav Chetna Charitable Trust vs, CIT (Exemption) (Writ Petition No. 470 of 2024)

Citation: 2024 LiveLaw (Bom) 653

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