2024 (12) TMI 188 - AT - Income Tax

Denial of Exemption u/s. 11 - assessee had not filed his audit report in 10B along with the return - assessee contended that the disallowance made by the AO is not correct when the assessee is having a valid registration u/s. 12A of the Act, therefore eligible for exemption u/s. 11 - HELD THAT - We have gone through the audit report filed by the assessee in the paper book in which it was mentioned that the said report was prepared on 15/06/2017 well before the filing of the return of income and passing of the assessment order. We have also seen that the assessing officer had not made any further additions to the books of accounts but only disallowed the claim of exemption. We have also noted that the assessee is also a registered trust u/s. 12AA of the Act and the said fact was not disputed by any of the authorities. The authorities also accepted that in respect of the other years, the assessee was allowed the exemption u/s. 11 of the Act treating the assessee as a charitable institution. In such circumstances, the denial of exemption for the non-filing of 10B will not entitle the assessee for denying the exemption. We have also perused the judgments as well as the orders of the Tribunal in which it was held that exemption cannot be denied merely because of the belated filing of audit report in form 10B. Similar issue was decided in many number of orders by this Tribunal in which the Tribunal had held that the technical ground will not be a reason for denying the exemption u/s. 11 of the Act when the assessee is a registered charitable trust under the provisions of the Act. When the registration is still in existence and also in view of the fact that the assessee was granted the exemptions for the earlier years that is for 2014-15, 2015-16 and 2016-17, the denial of exemption in respect of the A.Y. 2017-18 that too on technical grounds is not correct. Further, the assessee had also uploaded the audit report and also filed the acknowledgement received by the department. As relying on Rai Bahadur Bissesswarlal Motilal Malwasie Trust 1991 (4) TMI 56 - CALCUTTA HIGH COURT assessee was all along treated as a charitable institution and granted exemption u/s. 11 of the Act and no violation has been pointed out by the authorities, in such circumstances, mere delay in filing the audit report would not be a reason for the denial of exemption claimed u/s. 11. Appeal filed by the assessee is allowed.

Summary

Issues:
1. Denial of exemption under section 11 of the Act due to non-filing of audit report in Form 10B along with the return of income.
2. Validity of the order of the Commissioner of Income tax (Appeals) in denying the exemption.
3. Whether the delay in filing the audit report in Form 10B justifies the denial of exemption under section 11 of the Act.

Detailed Analysis:
The appeal before the Tribunal concerns the denial of exemption under section 11 of the Act to the assessee due to the non-filing of the audit report in Form 10B along with the return of income. The Assessing Officer (AO) disallowed the exemption claimed by the assessee under section 11 on the grounds of the missing audit report. The assessee contended that they possessed a valid registration under section 12A of the Act, making them eligible for the exemption under section 11. The assessee argued that the audit report was available before the return filing date but was inadvertently not uploaded with the return. The Commissioner of Income tax (Appeals) partially allowed the appeal, directing the AO to consider the application of money as expenditure while computing the taxable income.

The assessee raised multiple grounds of appeal before the Tribunal, challenging the order of the Commissioner of Income tax (Appeals). The grounds included the assertion that the denial of exemption under section 11 was unjustified due to a technical defect in filing the audit report. The assessee highlighted previous years where exemption under section 11 was granted and cited relevant case laws to support their position.

During the hearing, the Authorized Representative (AR) for the assessee submitted a paper book containing relevant documents such as audited statements, audit report in Form 10B, and approval for registration under section 12A of the Act. The Departmental Representative (DR) argued that since the audit report was not filed on time, the appeal should not be considered.

After hearing both sides and reviewing the case details, the Tribunal found that the only dispute was the non-filing of the audit report in Form 10B along with the return of income. The Tribunal observed that the assessee had prepared the audit report before the return filing and assessment order dates. It was noted that the AO did not make any additional adjustments to the accounts but only disallowed the exemption claimed. The Tribunal also acknowledged that the assessee was a registered trust under section 12AA and had been granted exemptions in previous years.

The Tribunal referred to various judgments and orders, emphasizing that technical grounds should not be a basis for denying exemption under section 11, especially for registered charitable trusts. Citing a judgment of the Calcutta High Court, the Tribunal concluded that the delay in filing the audit report should not lead to the denial of exemption when the assessee has a history of compliance and exemption grants. Consequently, the Tribunal allowed the appeal filed by the assessee, overturning the denial of exemption under section 11 for the assessment year in question.