2024 (12) TMI 70 - AT - Income Tax

Denial of Exemption u/s 11 - non-filing of audit report in Form 10B along with return of income - form No. 10B was filed by after the filling of return of income - HELD THAT - Admittedly, in the instant case the audit report in Form 10B was filed by the assessee through e-portal on 26.12.2020. Hence the audit report in Form 10B was filed prior to one month of the due date for furnishing the return of income under sub-section (1) of section 139 of the IT Act i.e. 15th February, 2021 in the instant case. Although the assessee failed to reflect the fact of filing audit report in its return of income, we are of the considered opinion that this being a technical error inadvertently committed by the assessee needs to be pardoned. Since the audit report in Form 10B was furnished by the assessee prior to one month of the due date for furnishing the return of income, therefore, the compliance of section 12(1)(b)(ii) r.w.s. 44AB, Explanation (ii) was very well made by the assessee and accordingly the order passed by Addl./JCIT(A)-1, Jaipur in our opinion is not justified. Accordingly, we set-aside the order passed by Ld. Addl./JCIT(A)- 1, Jaipur and allow the claim of exemption u/s 11 12 by the assessee in the light of the fact discussed in foregoing paragraphs that audit report for the period under consideration in Form 10B was filed prior to one month of the extended due date of filing return of income. Thus, the grounds of appeal raised by the assessee are allowed.

Issues:
1. Denial of exemption under section 11 due to the timing of filing Form No. 10B.
2. Disallowance of entire expenditure claimed towards the trust's object.
3. Adjustment made by the Assessing Officer beyond the scope of section 143(1).

Analysis:

Issue 1: Denial of exemption under section 11
The appellant contested the denial of exemption under section 11 by the Ld. Addl./JCIT(A)-1, Jaipur, citing that Form No. 10B was filed before the processing of the return under section 143(1) of the Income Tax Act. The Tribunal noted that the return of income and audit report in Form 10B were filed on 26.12.2020, but the CPC disallowed the exemption and expenses claimed. The Ld. Addl./JCIT(A)-1, Jaipur upheld the denial of exemption, emphasizing the mandatory requirement of filing Form No. 10B in due time. However, the Tribunal found that the audit report in Form 10B was filed before the due date for furnishing the return of income, meeting the requirements of section 12(1)(b)(ii) read with section 44AB. Consequently, the Tribunal set aside the order of Ld. Addl./JCIT(A)-1, Jaipur and allowed the claim of exemption under section 11 and 12 of the IT Act.

Issue 2: Disallowance of entire expenditure
The CPC disallowed all expenses claimed by the appellant, leading to the denial of exemption under section 11. The Tribunal observed that the audit report in Form 10B was filed before the extended due date for filing the audited return, satisfying the statutory requirements. Despite the technical error of not reflecting the audit report in the return of income, the Tribunal pardoned this inadvertent mistake. It held that the compliance with section 12(1)(b)(ii) read with section 44AB was fulfilled by filing the audit report before the specified date. Consequently, the Tribunal allowed the appellant's claim for exemption under section 11 and 12 of the IT Act.

Issue 3: Adjustment beyond the scope of section 143(1)
The appellant challenged the adjustment made by the Assessing Officer, contending that denying the entire expenditure and exemption under section 11 was beyond the scope of section 143(1). The Tribunal found that the CPC's disallowance was based on the non-mention of the audit report in the return, categorizing it as a non-audit return erroneously. However, considering the timely filing of the audit report and meeting the statutory requirements, the Tribunal concluded that the denial of exemption and expenses was unjustified. Therefore, the Tribunal set aside the order of Ld. Addl./JCIT(A)-1, Jaipur and allowed the appellant's appeal, granting the exemption under section 11 and 12 of the IT Act.

This comprehensive analysis of the judgment highlights the issues raised by the appellant, the arguments presented, and the Tribunal's findings and conclusions for each issue involved in the case.

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