Income Tax Exemption cannot be denied due to Delay in Filing Audit Report due to Virus Attack: ITAT

This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi in Appeal No.CIT(A), Chennai-14/10101/2019-20, order dated 06.09.2021. The return was processed and intimation was issued u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) for the assessment year 2018-19, dated 21.05.2019 by the DCIT, CPC, Bangalore.

The only issue in this appeal of the assessee is that the CIT(A) erred in not considering the few hours delay in filing Form No. 10B after filing the income-tax return due to genuine hardship, unintentional and beyond the control of the assessee.

Brief facts are that the assessee has filed its return of income for the assessment year 2018-19 on 11.10.2018 and audit report in Form No.10B was filed on 12.10.2018 well before the due date of filing of return of income. The CPC, Bangalore processed the return of assessee u/s. 143(1) of the Act and created demand of Rs. 2,27,420/- by denying exemption u/s. 11 of the Act to the assessee’s trust for non-filing of Form No.10B along with the return of income. The CIT(A) also not considered the plea of the assessee and dismissed the appeal of assessee.

the assessee is a registered trust and filed its return of income for the assessment year 2018-19 on 11.10.2018 at 21.01 hours. i.e., 9.01 p.m. and due to malfunctioning / virus attack as claimed by the assessee, in the computer system, the IT return could not be e-verified on the same day. The assessee claimed that after repairing / servicing the computer system, the assessee could file the Form No.10B the very next day i.e., 12.10.2018 at 1.10 p.m. and also e-verified its return of income on the very same day i.e., 12.10.2018 at 12.02 p.m. The assessee before CIT(A) and even now before us filed acknowledgement depicting the time of filing of ITR as well as Form No. 10B.

ITAT noted that both the return of income as well as Form No 10B were filed well before due date and there is no intentional delay in filing Form No.10B after filing the return of income. The delay is of few hours in filing Form No.10B and that is due to malfunctioning / virus attack as claimed by the assessee in computer system, which is beyond the control of the assessee.

Disagreeing with the findings of CIT(A) Income Tax Appellant Tribunal (ITAT) held that tax exemption cannot be denied due to a simple delay of a few hours. Same should be condoned and the demand of the entire contribution received by the assessee’s trust which was accordingly considered as income without taking into account the amount spent towards charity was quashed.

ITAT also noted that this issue has been clarified by the Board vide CBDT Circular No.2/2020 [F.No.197/55/2018-ITA-I], dated 03.01.2020 which stated that CIT(A) has power for condoning belated application in filing Form No.10B wherever the assessee was prevented by reasonable cause for filing of such applications within the stipulated time.

In the present case before us, the delay is for few hours which could be condoned as there is a reason that there is malfunctioning / virus attack in the computer system and consequent data loss which is beyond the control of the assessee. Hence, reversing the orders of lower authorities, ITAT directed the AO to accept the audit report in Form No. 10B as filed within the time and condone the delay.