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2023 (8) TMI 914 - AT - Income TaxDenial of exemption u/s 11 and 12 - assessee has filed form no. 10B belatedly and not filed the same along with filing of the return of income - mandatory v/s procedural requirement - HELD THAT - As in a recent decision in Social Security Scheme of GICEA 2022 (12) TMI 1172 - GUJARAT HIGH COURT in the matter of exemption provisions contained in section 11/12 of the Act, requiring filing of Form 10B alongwith return of income for claiming exemption, held the requirement of furnishing of report to be a mandatory requirement while that of filing the report alongwith return of income to be a procedural requirement CIT(A) has not appreciated the case of the assessee in the right perspective in the light of various judgments cited by the assessee where it has been held that non-filing of requisite form alongwith return of income is a technical issue, which is curable, and if the assessee has complied with the provisions of the Act in the course of assessment proceedings by curing the defect by filing the audit report, and thereby satisfying substantial compliance, the Revenue cannot ignore the report so filed and reject technically the claim of benefit of exemption under section 11 of the Act, which the assessee was claiming continuously for past so many years, which fact was not disputed by the Department. Appeal of the assessee is allowed.
Issues Involved:
The appeal involves the denial of exemption under sections 11 and 12 of the Income Tax Act due to the belated filing of Form 10B by the assessee. Comprehensive Details of the Judgment: Issue 1: Rectification Order u/s. 154 The sole issue raised in the appeal is the denial of exemption under sections 11 and 12 of the Act due to the belated filing of Form 10B by the assessee. Facts: The assessee, a public charitable trust, had been claiming exemption under section 11 of the Act for previous years. The denial of the exemption for the assessment year 2017-18 was based on the failure to file audit report Form No.10B before filing the return of income. The assessee rectified the omission by filing the audit report and a rectification request, which were rejected by the authorities. Arguments: The assessee contended that non-filing of Form No.10B was a procedural defect, curable by subsequent filing, and cited relevant case laws to support this position. Decision: The Tribunal found merit in the assessee's contentions, noting that the audit report was filed before the appellate proceedings and was available to the authorities. Citing precedents, the Tribunal held that the denial of exemption solely on the grounds of procedural lapses was unjust. The Tribunal set aside the order of the lower authorities and allowed the appeal of the assessee. Significant Legal Principles: The Tribunal emphasized that substantial compliance with the Act's provisions, even if achieved during assessment proceedings, should not result in the denial of rightful claims for exemptions under sections 11 and 12 of the Act. Issue 2: Filing of Form No.10B The contention revolved around the statutory requirement of filing Form No.10B and its impact on the assessee's claim for exemption under sections 11 and 12 of the Act. Legal Precedents: The Tribunal referred to judgments by the Hon'ble Jurisdictional High Court, highlighting the distinction between substantive requirements and procedural aspects of filing the audit report. The Court stressed the need for equitable considerations in cases of procedural lapses by long-standing charitable trusts. Decision: In alignment with the High Court's interpretations, the Tribunal held that the assessee's compliance during assessment proceedings fulfilled the substantial requirements of the law. The Tribunal emphasized that technical issues like non-filing of forms along with the return of income should not impede legitimate claims for exemptions under the Act. Conclusion: The Tribunal set aside the order of the lower authorities, emphasizing the importance of substantial compliance and equitable considerations in granting exemptions under sections 11 and 12 of the Income Tax Act.
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