2024 (6) TMI 808 - AT - Income Tax

Entitlement to to exemption u/s 11/12 - claim made in the return of income when the audit-report (Form No. 10B) was not filed before filing of return but filed before filing of first-appeal - procedural requirement of filing the audit report along with the return of income - HELD THAT - Non-filing of audit report with the return of income is a mere procedural irregularity for which the exemption u/s 11/12 cannot be denied. CBDT Circular No. 10/2019 dated 22.05.2019 empowers the Commissioner of Income-tax for condoning delay in the matter of filing audit report (Form No. 10B) but the assessee has not filed any condonation-petition before Commissioner of Income-tax - This point is also rejected by Hon ble Gujrat in Indian Panel Board Manufacturer 2023 (3) TMI 1374 - GUJARAT HIGH COURT as held tribunal further committed an error in appreciating the import of Section 119(2)(b) of the Act in as much as the application contemplated thereunder is only additional remedy for the assessee which could not be said to be compulsorily resorted to, by the assessee. The circular No. 7/18 dated 20.12.2018 issued u/s 119 of the Act could not be, therefore, said to have taken away the appellate remedy. Assessee ought to have appealed against the intimation u/s 143(1) and not against rectification-order u/s 154 - A similar dispute was decided by ITAT, Jodhpur in Akbar Mohammad 2022 (2) TMI 479 - ITAT JODHPUR as held it is a case in point that the assessee did not file any appeal against the intimations passed us 143(1) of the Act and the Ld. Sr. DR is right to the extent that the assessee cannot be given relief for that reason. However, it is also a settled law that the assessee cannot be taxed on an amount on which tax is not legally imposable. Although, the assessee might have chosen a wrong channel for redressal of his grievance, all the same, it is incumbent upon the Tax authorities to burden the assessee only with correct amount of tax and not to unjustly benefit at the cost of tax payer. Therefore, we find that in present case, the assessee cannot be denied benefit of exemption u/s 11/12 as claimed in return for mere delay in filing of audit report.

Issues Involved:
1. Entitlement to exemption under Section 11/12 of the Income-tax Act, 1961.
2. Filing of audit report (Form No. 10B) after the return of income.
3. Procedural requirements and implications of delayed filing.
4. Jurisdiction and procedural aspects regarding rectification applications under Section 154 and appeals against intimation under Section 143(1).

Detailed Analysis:

1. Entitlement to Exemption under Section 11/12:
The primary issue revolves around whether the assessee, a charitable trust registered under Section 12A, is entitled to exemption under Section 11/12 despite not filing the audit report (Form No. 10B) along with the return of income but filing it before the first appeal. The Tribunal referred to prior decisions, emphasizing that the requirement to file the audit report is procedural and directory. The exemption cannot be denied solely due to the delayed filing of the audit report if the trust meets all other conditions for exemption.

2. Filing of Audit Report (Form No. 10B) After the Return of Income:
The Tribunal noted that the assessee's auditors failed to e-file the audit report with the return of income, which was later filed before the first appeal. The Tribunal cited several judicial precedents, including ITAT decisions and High Court rulings, which support the view that the procedural delay in filing the audit report does not justify denying the exemption under Section 11/12. The Tribunal highlighted that such procedural lapses should not overshadow the substantive compliance by the assessee.

3. Procedural Requirements and Implications of Delayed Filing:
The Tribunal emphasized that the procedural requirement of filing the audit report along with the return of income is directory and not mandatory. It referred to the CBDT Circular No. 10/2019, which allows the Commissioner of Income-tax to condone the delay in filing the audit report. However, the Tribunal clarified that the failure to seek condonation does not preclude the assessee from claiming the exemption if the audit report is eventually filed. The Tribunal cited the Gujarat High Court's decision in Indian Panel Board Manufacturer, which supports the view that procedural delays should not bar the assessee from appellate remedies.

4. Jurisdiction and Procedural Aspects Regarding Rectification Applications under Section 154 and Appeals Against Intimation under Section 143(1):
The Tribunal addressed the procedural aspect where the assessee filed rectification applications under Section 154 instead of appealing directly against the intimation under Section 143(1). The Tribunal referred to the ITAT Jodhpur decision in Akbar Mohammad, which held that even if the assessee took a wrong procedural route, the authorities should ensure that the correct amount of tax is levied. The Tribunal concluded that the assessee's procedural misstep should not result in the denial of legitimate exemptions.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, remanding the matter back to the Assessing Officer for a fresh assessment after considering the belatedly filed audit report. The Tribunal emphasized that procedural lapses should not overshadow substantive compliance and the legitimate entitlement to exemptions under the Income-tax Act. The Tribunal's decision reinforces the principle that procedural requirements should not be used to deny substantive rights when all other conditions for exemption are met.

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