2024 (9) TMI 142 - AT - Income Tax

Denial of exemption u/s 11 - delay in filing Form 10B i.e. Audit Report - HELD THAT - CIT(A) dismissed the appeal simply due to want of jurisdiction by stating that both he and the AO not empowered to condone the delay in question. It is established by law that the requirement of filing Audit Report in Form 10B is procedural in nature and therefore exemption claimed by u/s 11 of the Act may be given in certain circumstances. Not filing of Audit Report alongwith the return of income is a procedural omission only and cannot be impediment in law in claiming the exemption. So far the reason for condonation of delay is concerned, AR submitted that the Auditors who conducted the audit of the society, bonafidely believed that society was not required to obtain and file the audit report in form 10B as the total income being NIL was less than Rs. 2,50,000/- and due to confusion in interpretation of law, filed audit report in form 10B dated 08.10.2022. We inclined to allow this appeal for condoning the delay in filing the Audit Report in Form 10B and restore the matter to the file of the CIT(A) to allow exemption u/s 11 of the Act to assessee and pass order in accordance with law. Assessee appeal allowed.

Summary

Issues:
1. Denial of exemption u/s 11 of the Income Tax Act due to delay in filing Form 10B.

Detailed Analysis:
The appeal was filed by the assessee against the order passed by the Commissioner of Income Tax (Appeal) denying exemption u/s 11 of the Act. The main issue raised was the delay in filing Form 10B, the Audit Report. The assessee, a charitable society, filed its return of income for A.Y. 2021-22 declaring NIL income, which was processed by the Assessing Officer resulting in a total income of Rs. 39,32,700. The Commissioner dismissed the appeal stating lack of authority to entertain the condonation application for the delay in filing Form 10B.

The assessee contended that the delay was due to confusion in the interpretation of the law, as the auditors believed the society was not required to file the audit report since the total income was below the taxable threshold. The Central Board of Direct Taxes issued Circulars empowering authorities to condone delays in filing Form 10B. However, the Commissioner and Assessing Officer were not authorized under Section 119(2)(b) of the Act to grant condonation for the delay in filing Form 10B.

A similar matter was decided in favor of the assessee in another case, where the High Court held that non-filing of the Audit Report along with the return of income was a procedural omission and not a legal impediment to claiming exemption. The High Court emphasized that the substantive requirement was the availability of the audit report during assessment, even if not filed along with the return of income.

Based on the legal position and precedent set by the High Court, the Tribunal allowed the appeal, condoning the delay in filing the Audit Report in Form 10B. The matter was restored to the Commissioner to pass an order allowing exemption u/s 11 of the Act in accordance with the law. The appeal was allowed for statistical purposes, and the order was pronounced on 14.08.2024.