2023 (6) TMI 923 - AT - Income Tax

Exemption u/s 11 - Condonation of delay in filing the audit report in Form 10B - main contention of assessee is that the filing of Audit Report is a substantive requirement but the mode and stage of filing is a procedural one. Once it is filed under Form 10B and made available with the Assessment Officer before assessment initiates, the purpose is served - HELD THAT - As relying on case of Association of Indian Panelboard Manufacturer 2023 (3) TMI 1374 - GUJARAT HIGH COURT that non filing of Audit Report along with return of income is a procedural omission and cannot be an impediment in law in claiming the exemption, we allow this appeal condoning the delay in filing the Audit Report in Form No. 10B. However, we also upon condoning the delay, restore the matter to the file of the CIT(A) to pass order in regard to the exemption claimed by the assessee strictly in accordance with law. Assessee s appeal is allowed for statistical purposes.

Summary

Issues:
Delay in filing audit report in Form 10B and its condonation.

Issue 1: Delay in filing audit report in Form 10B

The appeal was against the order passed by the National Faceless Appeal Centre (NFAC), Delhi, arising from the order passed by the DCIT, CPC, Bangalore, under section 154 of the Income Tax Act, 1961 for Assessment Year 2016-17. The appellant filed its return of income for 2019-20 on 31.03.2018, showing gross receipts of Rs. 76,71,487. The CPC, Bangalore, disallowed the expenses claimed by the appellant, raising a demand of Rs. 32,34,000 by denying Form No.10B. The appellant filed a rectification application on 24.07.2019, which was allowed by the CPC, Bengaluru, on 07.08.2019. However, the CPC, in a subsequent order on 23.11.2019, once again disallowed the claim of expenditure due to a delay in filing the audit report in Form 10B.

The main contention by the Ld. Counsel for the assessee was that the filing of the Audit Report is a substantive requirement, and once filed under Form 10B and made available to the Assessment Officer before assessment initiates, the purpose is served. The Ld. Counsel relied on a judgment of the Hon'ble Gujarat High Court in a similar case, wherein it was held in favor of the assessee. The Tribunal noted that the Ld. DR could not provide any judgment against the assessee on this issue.

The Hon'ble Jurisdictional High Court's judgment in the case of Association of Indian Panelboard Manufacturer held that the filing of the audit report is a substantive requirement, and the mode and stage of filing are procedural. The availability of the audit report when the assessment is undertaken by the Assessing Officer, even if not filed along with the return of income, satisfies the legal requirement. The Tribunal was not justified in dismissing the appeal of the assessee. The High Court further held that the non-filing of the audit report along with the return of income is a procedural omission and cannot be an impediment in law in claiming exemptions under Section 11(1) and 11(2) of the Act.

In light of the High Court's ruling, the Tribunal allowed the appeal, condoning the delay in filing the Audit Report in Form No. 10B. The matter was restored to the file of the Ld. CIT(A) to pass an order regarding the exemption claimed by the assessee in accordance with the law. The appeal was allowed for statistical purposes.