2023 (12) TMI 640 - AT - Income Tax

Rectification intimation issued by CPC Bangalore u/s 154 denying exemption u/s. 11 - Audit Report in Form No.10B was not filed by the assessee along with return of income - HELD THAT - The undisputed fact that emerges is that the assessee has filed Audit Report much before the processing of return of income by CPC u/s 143(1). Audit Report was very much available at the time of processing of return of income. The CPC have not taken the same into account while processing return of income u/s 143(1) as well as while dealing with 154 rectification application filed by the assessee. CIT(A) merely upheld the rectification intimation on the ground the rectification application filed by the assessee would not fall within the ambit of Sec.154 of the Act overlooking the fact that the grievance of the assessee was not even looked into by CPC in the rectification application. Apparently, the applicable exemption has been denied due to the fact that the assessee did not furnish details of audit in the return of income and Form No.10B was uploaded after filing of return of income. The facts of the present case are covered by the decision of Ahmadabad Tribunal in the case of Shree Charitable Trusts 2023 (7) TMI 282 - ITAT AHMEDABAD as relying on ASSOCIATION OF INDIAN PANELBOARD MANUFACTURER 2023 (3) TMI 1374 - GUJARAT HIGH COURT held that filing of Form No.10B would be directory in nature, as such the Assessing Officer are not powerless to allow an assessee to file Audit Report, it not filed along with return, at any time before completion of assessment. Aslo in SHRI CHANDRAPRABHUJI MAHARAJ JAIN JUNA MANDIR TRUST 2019 (8) TMI 363 - MADRAS HIGH COURT filing of Form No.10 for accumulation of income u/s 11(2) which was filed beyond due date could not disentitle the trust from exemption claimed u/s 11. Thus we direct jurisdictional AO to verify the Form 10B filed by the assessee and allow the claim of exemption uls.11 of the Act. Appeal stand allowed for statistical purposes.

Summary

Issues involved:
The judgment deals with the denial of exemption under section 11 of the Income Tax Act, rectification intimation issued by CPC Bangalore under section 154, and the interpretation of relevant CBDT circulars.

Denial of Exemption under Section 11:
The assessee trust filed its return of income, which was processed denying exemption claimed under section 11 due to the non-filing of Audit Report in Form No.10B along with the return. The assessee challenged the denial, citing a CBDT circular allowing condonation of delay in filing Form 10B. The CIT(A) upheld the denial, stating that rectification under section 154 can only correct errors, not disturb concluded findings. The Tribunal held that the Audit Report was filed before the processing of the return, and the denial of exemption was based on technicalities. Citing various case laws, the Tribunal directed the AO to verify the Form 10B and allow the exemption under section 11.

Rectification Intimation under Section 154:
The assessee filed a rectification under section 154, which was not successful. The CIT(A) upheld the rectification denial, stating that section 154 can only be invoked to correct errors apparent from the record. The Tribunal found that the rectification application was not considered by the CPC and that the denial of exemption was based on technical grounds. Relying on precedents, the Tribunal directed the AO to allow the exemption under section 11 after verifying the Form 10B filed by the assessee.

Interpretation of CBDT Circulars:
The assessee relied on a CBDT circular clarifying the condonation of delay in filing Form 10B for certain assessment years. The Tribunal noted that the Audit Report was filed before the processing of the return, and the denial of exemption was unjustified. Citing relevant case laws and High Court decisions, the Tribunal directed the AO to verify the Form 10B and allow the exemption under section 11.

Separate Judgment:
The appeal was allowed for statistical purposes, and the order was pronounced on 13th December 2023.