2024 (9) TMI 633 - AT - Income Tax

Disallowance of exemption u/s 11 - Disallowance of exemption due to incorrect details in the return and non-filing of audit report in Form 10B - HELD THAT -Form 10B was based on the audit report prepared on 30th September, 2022. The fact of registration u/s 12A and approval u/s 80G under the old regime is not disputed. It is also not disputed that on 07.11.2022, application for registration u/s 12A under the new regime stood filed. Thus, the audit was completed well before the due date fixed for filing Form 10B i.e., 07.10.2022. The assessee had provided a reasonable cause of lapse on the part of the auditors. Though the condonation of delay in filing audit report in Form 10B may not have been under the jurisdiction of the CIT(E), however, being a quasi judicial authority was supposed to take into consideration the case laws relied wherein it is firmly held that non-filing of audit report along with the return of income is a procedural omission. We are inclined to allow the appeal to the extent that CIT(E) shall take into consideration the Form 10B of the assessee and pass an order afresh on merits as per law.

Summary

Issues:
1. Challenge to disallowance of exemption claimed under section 11 of the Income Tax Act.
2. Disallowance of exemption due to incorrect details in the return and non-filing of audit report in Form 10B.
3. Dismissal of appeal by CIT(E) based on non-filing of Form 10B within the due date.
4. Appeal for condonation of delay in filing audit report and reliance on relevant case laws.

Analysis:

Issue 1: The appellant challenged the disallowance of the exemption claimed under section 11 of the Income Tax Act before the CIT(E). The appellant, a registered society running a primary school, had claimed exemption but faced disallowance by the CPC due to discrepancies in the return.

Issue 2: The disallowance was based on incorrect details in the return and non-filing of the audit report in Form 10B. The appellant explained the discrepancies, citing delays in processing the new registration application and challenges faced during the COVID period, requesting the exemption to be allowed.

Issue 3: The appeal was dismissed by the CIT(E) citing non-filing of Form 10B within the due date as per section 139(1) of the Act. The CIT(E) referred to a CBDT circular authorizing condonation of delay for such filings, which the appellant had not availed.

Issue 4: The appellant filed for condonation of delay, arguing that the non-filing of the audit report was a procedural omission and should not hinder the exemption claim. The appellant relied on relevant case laws to support this argument, while the CIT(E) contended that they had no power to condone the delay.

The ITAT, after considering the facts and submissions, found that the audit report was prepared before the due date, and the delay was due to lapses on the part of the auditors. The ITAT allowed the appeal, directing the CIT(E) to reconsider the Form 10B and pass an order afresh, emphasizing the importance of following the law and providing the appellant with a hearing opportunity.

In conclusion, the ITAT's judgment favored the appellant, highlighting the need for a fair consideration of the facts and adherence to legal procedures in tax matters.