Benefit of exemption u/s 11 can not be denied for mere delay in filing of audit-report

Benefit of exemption u/s 11 can not be denied for mere delay in filing of audit-report with return of income – ITAT

ABCAUS Case Law Citation:
ABCAUS 3718 (2023) (04) ITAT

Important Case Laws relied upon:
Savitri Foundation vs. ITO
Wipro Ltd. 446 ITR 1
CIT vs. Mumbai Metropolitan Regional Iron & Steel Market Committee 378 ITR 103
M/s Shardaben Education Trust vs. ITO
CIT vs. Gujarat Oil & Allied Industries 201 ITR 325
CIT vs. Mayur Foundation 274 ITR 562

In the instant case, the assessee had challenged the order passed by the  National Faceless Appeal Centre (NFAC)/CIT(A) in not condoning the delay for filing audit report in Form 10B when the return was filed on the basis of the Audit Report obtained by the assessee.

The controversy involved in this case was

whether or not the assessee was entitled for exemption u/s 11/12 as claimed in the return of income, when the audit report Form No. 10B was filed belatedly after processing of return u/s 143(1)?

The appellant assessee was a charitable society registered u/s 12A of the Act and entitled for exemption u/s 11/12 of the Income Tax Act, 1961 (the Act)..

The assessee claimed exemption u/s 11/12 in the return of income. But when the AO processed return u/s 143(1) he did not allow exemption for the reason that the audit report was not filed by assessee with return of income.

Subsequently after processing of return, the Form No. 10B was e-filed/uploaded before filing of first-appeal.

Before the Tribunal, the assessee contended that it was engaged in charitable activities and the registration was granted to it by tax authorities u/s 12A was in force. The assessee had been granted benefit of section 11/12 in preceding assessment-years as well as subsequent assessment-years.

It was further submitted that prior to filing of ITR, the accounts of the assessee were duly audited. However, the auditors of assessee failed to upload the audit-report alongwith the return of income. But, post-processing of return u/s 143(1) and before filing of first-appeal, the assessee arranged to get the audit-report e-filed/uploaded. 

It was contended that the CIT(A) without appreciating facts, dismissed the appeal of assessee merely on a technical defect that the audit report was not filed alongwith the return of income. It was submitted that except such technical defect, there was no other reason  to deny the benefit of section 11/12 to the assessee. 

It was submitted that the e-filing/uploading of audit report is done by auditors and not by assessee; therefore, the defect is not per se attributable to assessee.

It was furrher submitted that in any case, the defect is due to an inadvertent human error and the assessee should not be denied the legitimate  exemption,  when  the  assessee  is  genuinely  doing  charitable activities for the welfare of public and satisfying all conditions prescribed in income-tax law for being entitled to exemption.

The assessee placed heavy reliance on the latest decision of the Coordinate Bench of ITAT on similar facts allowed exemption to assessee.

Non-filing Audit Report with Return is procedural defect which is rectifiable

The Tribunal observed that the controversy is directly settled in favour of assessee by decisions of the coordinate bench where the Hon’ble ITAT, following the decision of Hon’ble High Courts observed that non-filing of Audit Report in Form 10B along with Return of Income is merely a procedural defect which is rectifiable. If the Audit Report was available with the assessee at the time of filing of Return of Income and was not filed due to bonafide reasons the benefit of exemption under section 11 cannot be denied if otherwise assessee is eligible to claim the same.

Following the said decisions, the ITAT opined that in the present case, the assessee can’t be denied the benefit of exemption u/s 11 as claimed in the return of income for mere delay in filing of audit-report.

Accordingly, the case was remanded to the file of AO for a fresh  assessment  after  considering  the  audit-report  filed  by  assessee. 

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