2023 (3) TMI 613 - AT - Income Tax

Exemption u/s 11 - Disallowance of claim as assessee has not e-filed the audit report in Form No. 10B along with or before filing the return of income - demand created u/s 143(1) - HELD THAT - Considering the fact that the A.O./ CPC, Bangalore has already rectified the mistake dated 06/08/2019 wherein the demand raised against the assessee was reversed and the income return for the Assessment Year 2017-18 was accepted by the Department, the Appeal filed by the Revenue challenging order of the CIT(A) deleting the addition made by the A.O. on merit does not survive. Accordingly, the Grounds of Appeal of the Revenue fails. Appeal filed by the Revenue is dismissed.

Summary

Issues Involved:
The appeal by Revenue against order dated 28.04.2022 of Commissioner of Income Tax (Appeals) for assessment year 2017-18 regarding exemption u/s 11 of the Income Tax Act due to failure to e-file audit report u/s 10B on time.

Substantive Ground of Appeal:
The Revenue contended that the CIT(A) erred in allowing the appeal of the assessee, contravening Section 12A(1)(b) of the IT Act and Rule 12(2) of the Income Tax Rules, as the assessee failed to e-file its audit report u/s 10B on time, thus not entitled to exemption u/s 11 of the Income Tax Act.

Facts of the Case:
The order u/s 143(1) of the Act for Assessment Year 2017-18 disallowed Rs. 1,50,06,077/- as the assessee did not e-file the audit report in Form No. 10B along with or before filing the return of income, resulting in the denial of exemption u/s 11 of the Act.

Appeal Proceedings:
The assessee appealed before the CIT(A) at the national Faceless Appeal Centre, which allowed the appeal on 28/04/2022. The Revenue then appealed against this decision, arguing that the assessee did not comply with e-filing requirements, hence not entitled to exemption u/s 11 of the Act.

Contentions:
The Department argued that the CIT(A) erred in allowing the appeal as the assessee failed to e-file the audit report u/s 10B on time, thus not eligible for exemption u/s 11. The assessee's counsel, on the other hand, stated that all necessary filings were done before the due date, and subsequent rectifications were made to comply with the requirements.

Appellate Decision:
The CIT(A) was made aware of rectifications made by the A.O., CPC, Bangalore, nullifying the demand created u/s 143(1) of the Act. Despite the assessee's request to withdraw the appeal, the CIT(A) proceeded to pass an order on merit, ultimately allowing the appeal filed by the assessee. The Revenue's appeal challenging the deletion of the addition made by the A.O. was dismissed as the rectification had been accepted by the Department.

Outcome:
Considering the rectification made by the A.O./CPC, Bangalore, and the acceptance of the income return for Assessment Year 2017-18, the Revenue's appeal was dismissed. The order was pronounced on 13/03/2023.