2022 (8) TMI 1372 - AT - Income Tax

Exemption u/s 11 - denial of claim as non-filing of Audit Report in Form 10B along with Return of Income - assessee is a charitable trust registered under section 12AA of the Act and has been purportedly enjoying the benefits of section 11 since 2011 - HELD 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 bona fide reasons the benefit of exemption under section 11 cannot be denied if otherwise assessee is eligible to claim the same. In the case of CIT vs. Mumbai Metropolitan Regional Iron Steel Market Committee 2015 (4) TMI 512 - BOMBAY HIGH COURT has held that late filing of required documents would not disentitle the assessee from availing benefit of section 11 of the Act. Thus, restore the file back to Assessing Officer for de novo assessment after considering the audit report field by the assessee, in accordance with law. Appeal by assessee is allowed for statistical purposes.

Summary

Issues:
1. Denial of deduction under section 11 of the Income Tax Act due to failure to furnish audit report along with the return of income.
2. Whether non-filing of audit report in Form 10B along with the return of income is a procedural defect rectifiable under the law.
3. Applicability of the decision of Hon'ble Bombay High Court in CIT vs. Mumbai Metropolitan Regional Iron & Steel Market Committee to the present case.

Analysis:
Issue 1: The appeal was against the denial of deduction under section 11 of the Income Tax Act for the assessment year 2018-19 due to the failure to upload the audit report along with the return of income, as required by law. The assessee, a Charitable Trust registered under section 12AA of the Act, had been enjoying the benefits of section 11 in previous and subsequent assessment years. The CIT(A) dismissed the appeal solely on the ground that the audit report was not filed along with the return.

Issue 2: The Authorized Representative of the assessee argued that the non-filing of the audit report in Form 10B along with the return of income was a procedural defect that should not disentitle the assessee from claiming the benefit of exemption under section 11, especially when the audit report was available with the assessee at the time of filing the return. The assessee rectified this error by uploading the audit report during the First Appellate proceedings.

Issue 3: The Tribunal, after considering the submissions of both parties and the relevant case law, noted that the late filing of required documents should not automatically disentitle the assessee from availing the benefits under section 11 of the Act. Citing the decision of the Hon'ble Bombay High Court in CIT vs. Mumbai Metropolitan Regional Iron & Steel Market Committee, which held that late filing of documents should not result in denial of benefits under section 11, the Tribunal deemed it appropriate to set aside the impugned order and allow the appeal for statistical purposes. The Tribunal directed the Assessing Officer to conduct a de novo assessment after considering the audit report filed by the assessee, in accordance with the law.

In conclusion, the Tribunal's decision highlighted the importance of substantive compliance over procedural errors, emphasizing that technical defects such as late filing of documents should not unjustly deprive an assessee of legitimate tax benefits, especially when the required documents were available and subsequently submitted.