Error On Part Of Auditor Should Be Accepted As Reasonable Cause Shown By Trust Management For Delay Condonation: Bombay High Court

The Bombay High Court has held that the error on the part of the auditor cannot be rejected but should be accepted as a reasonable cause shown by the trust management.

The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that an assessee, a public charitable trust with almost over thirty years, which otherwise satisfies the condition for availing 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.

The petitioner/assessee, a charitable trust, which is registered under the Bombay Public Trusts Act, 1950, filed its return of income, declaring income at 'Nil” and claiming a refund of Rs. 70,710/-. Petitioner's accounts were audited, and the audit report for AY 2016–17 was also filed. Along with the ROI, petitioner had to file Form No. 10B, which petitioner did not file. It was filed with a delay of about 1257 days.

The assessee filed an application under Section 119(2)(b) of the Income Tax Act, 1961, for condoning the delay in filing Form 10B. In the application, the petitioner explained the cause of the delay to the chartered accountant or auditor. According to the petitioner, when it sent Form No. 10B to the department for submission after filing the return, the departmental staff refused to acknowledge the manual submission, and the petitioner was told to file the same online.

The application for condonation of delay was rejected. The explanation was rejected because the petitioner should have immediately uploaded Form 10B but waited until February 15, 2020. Moreover, in view of the non-filing of Form 10B, the petitioner's returns were processed on March 17, 2018 under Section 143(1), and the petitioner filed a rectification application only on January 24, 2020, which was disposed of on June 18, 2020. The Form 10B was filed only on February 15, 2020, i.e., after filing the rectification application.

The respondent or department did not accept the petitioner's explanation of 'oversight' and 'inadvertent error', etc. as'sufficient 'cause' for condoning the delay. When Petitioner has been filing its returns and Form 10B for many years, Petitioner must be very well aware of the rules and regulations, and, therefore, the delay cannot be condoned.

The court noted that the petitioner does not appear to have been lethargic or lacking in bona fides in making the claim beyond the period of limitation, which should have relevance to the desirability and expedience of exercising such power.

“We are conscious that such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessments, and further recoveries or refunds would get thrown out of gear if such powers were routinely exercised without considering their desirability and expedience to do so to avoid genuine hardship,” the court said.

The court held that the delay was not intentional or deliberate. The petitioner cannot be prejudiced on account of ignorance or error committed by a professional engaged by the petitioner. The department ought to have exercised the powers conferred.

Counsel For Petitioner: Sham V. Walve

Counsel For Respondent: Dinesh Gulabani

Case Title: Al Jamia Mohammediyah Education Society Versus Commissioner Of Income Tax (Exemptions)

Case No.: Writ Petition No.1689 Of 2024

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