2023 (12) TMI 1346 - AT - Income Tax

Denial of exemption u/s 11/12 - audit-report (Form No. 10B) was filed after filing of return of income but before processing u/s 143(1) - HELD THAT - In view of settled judicial rulings noted in foregoing paragraphs as in Indian Panel Board Manufacturer 2023 (3) TMI 1374 - GUJARAT HIGH COURT we find that the assessee can t be denied the benefit of exemption u/s 11/12 as claimed in return of income for mere delay in filing of audit-report (Form No. 10B), when the assessee has in fact filed such report though after filing of return. We, therefore, deem it fit to remand this matter back to the file of AO for a fresh assessment after considering audit-report (Form No. 10B) filed by assessee. The assessee succeeds in this appeal.

Summary

Issues:
Whether the assessee was entitled to exemption u/s 11/12 as claimed in the return of income when the audit report was filed after the return but before processing u/s 143(1)?

Analysis:
The judgment revolves around the issue of whether the assessee, a charitable trust for disabled persons, was entitled to exemption u/s 11/12 despite filing the audit report (Form No. 10B) after the return but before processing u/s 143(1) for AY 2018-19. The assessee's claim for exemption was denied by the AO due to the audit report not being filed with the return. The CIT(A) upheld the denial, leading to the appeal before the ITAT. The assessee argued that the audit report was filed before processing by the AO, fulfilling the procedural requirement. The AR highlighted that the delay was due to the auditors' oversight, not the assessee's fault, and contended that the exemption should not be denied based on a technicality. The AR cited various decisions supporting the view that filing the audit report subsequently does not bar the exemption claim under u/s 11/12.

The Departmental Representative (DR) defended the lower authorities' decision, emphasizing that filing the audit report with the return is a prerequisite for claiming the exemption u/s 11. The DR also pointed out that the assessee had applied for condonation of the delay in filing the audit report under a CBDT Circular, which was pending. In response, the AR argued that the pending application for condonation should not affect the appellate remedy, citing a judgment from the Gujarat High Court.

After considering the arguments and precedents cited, the ITAT concluded that the assessee should not be denied the benefit of exemption u/s 11/12 merely due to a delay in filing the audit report. The ITAT referred to established judicial rulings and decided to remand the matter back to the AO for a fresh assessment, taking into account the filed audit report. Consequently, the ITAT allowed the appeal of the assessee for statistical purposes, indicating that the assessee succeeded in establishing the entitlement to the exemption u/s 11/12.

The judgment highlights the importance of procedural compliance in claiming exemptions under the Income-tax Act, emphasizing that technical defects should not overshadow the substantive eligibility criteria for exemptions.