2024 (9) TMI 1508 - AT - Income Tax

Rejection of claim of the assessee u/s 11 - assessee has not filed audit report in Form 10B along with return of income - CIT(A) rejected the grounds raised by the assessee with the observation that power of condonation of delay in filing Form 10B rest with CIT (Exemptions) only and not with CIT(A) - HELD THAT - In the present case, the assessee has to file the audit report in Form 10B before the due date as per Rule 12A(1)(b) of the Rules. As observed that the above conditions of filing the Form 10B was relaxed by the CBDT in the earlier assessment years, therefore, it clearly shows that it is only directory in nature and not mandatory, since, it is in compliance with Rules framed for availing the benefit under the provisions of Sec.11. It is held that to be directory in nature. See Shri Chandraprabhuji Maharaj Jain Juna Mandir Rust 2019 (8) TMI 363 - MADRAS HIGH COURT and Savier Kelavani Mandal (P.) Ltd. 2012 (9) TMI 1049 - GUJARAT HIGH COURT . Thus allow the claim made by the assessee and, accordingly direct the Assessing Officer to allow the claim of the assessee u/s 11 of the Act. Decided in favour of assessee.

Issues Involved:
1. Validity of the intimation passed u/s 143(1) without proper jurisdiction and application of mind.
2. Denial of exemption u/s 11 of the Income Tax Act.
3. Failure to refer the matter to the Jurisdictional Assessing Officer (AO) for enquiry.
4. Authority of the Assessing Officer (Dy. CIT, CPC) to pass the order.
5. Disallowance of application of income of Rs. 7,02,026/-.
6. Filing of Audit Report u/s 10B and its mandatory nature.
7. Opportunity to the appellant.
8. Computation of tax payable.
9. Charging of interest u/s 234B and 234C.

Detailed Analysis:

1. Validity of the Intimation Passed u/s 143(1):
The appellant contended that the intimation passed by the Assessing Officer (Dy. CIT, CPC) u/s 143(1) was "bad in law and void ab-initio" due to improper assumption of jurisdiction and lack of application of mind. However, this ground was not pressed by the appellant during the hearing and was subsequently dismissed.

2. Denial of Exemption u/s 11:
The appellant argued that the exemption available u/s 11 of the Act was duly allowable. The Assessing Officer disallowed the exemption due to the non-filing of the Audit Report in Form 10B along with the return of income. The appellant relied on various case laws, including the Gujarat High Court ruling which stated that the condonation of delay by CIT(E) is an additional remedy and that filing of the Audit Report u/s 10B is directory and not mandatory.

3. Failure to Refer the Matter to Jurisdictional AO:
The appellant claimed that the Assessing Officer erred by not referring the matter to the Jurisdictional AO for enquiry and examination. This ground was also not pressed during the hearing and dismissed.

4. Authority of the Assessing Officer (Dy. CIT, CPC):
The appellant argued that the Assessing Officer (Dy. CIT, CPC) did not have the power to pass the order, and such power lies with the Jurisdictional AO, ITO, Exemption ward 1(3), Delhi. This ground was not pressed and dismissed.

5. Disallowance of Application of Income of Rs. 7,02,026/-:
The appellant contended that the disallowance of Rs. 7,02,026/- was beyond the scope of section 143(1). It was argued that details of the Audit Report u/s 10B were provided in the return, and hence, the claim was correct. The appellant further argued that the filing of the Audit Report u/s 10B was directory and not mandatory, and that the Audit Report in paper format was available with the appellant.

6. Filing of Audit Report u/s 10B and its Mandatory Nature:
The appellant submitted that the Audit Report was given in the Return Form and that the filing of the Audit Report u/s 10B was directory and not mandatory. The appellant relied on several case laws, including the Gujarat High Court and Madras High Court decisions, which supported the view that the provision regarding the filing of the Audit Report is procedural and directory in nature.

7. Opportunity to the Appellant:
The appellant argued that the Assessing Officer disallowed the application of income without providing a proper opportunity to the appellant. This ground was not pressed and dismissed.

8. Computation of Tax Payable:
The appellant contended that the Assessing Officer wrongly computed the tax payable by ignoring the provisions of the Act. This ground was not pressed and dismissed.

9. Charging of Interest u/s 234B and 234C:
The appellant argued that the interest charged u/s 234B and 234C was erroneous. This ground was not pressed and dismissed.

Judgment:
The Tribunal observed that the Assessing Officer rejected the claim of the assessee u/s 11 of the Act due to the non-filing of the Audit Report in Form 10B along with the return of income. The Tribunal noted that the conditions for filing Form 10B were relaxed by the CBDT in earlier assessment years, indicating that it is directory and not mandatory. The Tribunal relied on the decisions of the Madras High Court and Gujarat High Court, which supported the view that the provision is procedural and directory.

The Tribunal directed the Assessing Officer to allow the claim of the assessee u/s 11 of the Act and to reassess the income of the assessee. The appeal was partly allowed with directions for statistical purposes.

Order Pronounced:
The order was pronounced on 31st July, 2024.

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