2024 (12) TMI 1063 - AT - Income Tax

Exemption u/s 11/12 denied - audit report was not filed alongwith Form No. 10B with the return of income - HELD THAT - The undisputed fact is that the audit report alongwith Form 10B was signed prior to filing of return of income. It is true that while denying exemption u/s 11/12 of the Act, no intimation was given to the assessee. As mentioned elsewhere, this issue is squarely covered by the Circular F. No. 173/193/2019 dated 23.04.2019. However, for the sake of verification, we direct the AO to verify the details and decide the issue accordingly after affording reasonable and adequate opportunity of being heard to the assessee.

Summary

Issues:
1. Denial of exemption under section 11/12 of the Income Tax Act for late filing of audit report.
2. Disallowance of exemption despite audit report being signed before filing the return.
3. Application of Circular F.No. 173/193/2019-ITA-I dated 23.04.2019.
4. Judicial pronouncements supporting the assessee's case.
5. Verification and direction to Assessing Officer for further consideration.

Analysis:

The appeal was filed against the order of the ld. CIT(A), Mumbai dated 30.04.2024 regarding the denial of exemption under section 11/12 of the Income Tax Act for the assessment year 2018-19. The assessee, a resident Charitable Trust, filed the return of income declaring NIL income and claiming a refund. The issue arose due to the delay in filing the audit report in Form 10B within the prescribed time limit, leading to the proposed denial of exemption under section 11 of the Act.

The assessee contended that the audit report was signed before filing the return, making them eligible for the deduction. Despite the submissions, the ld. CIT(A) denied the exemption citing the delay in filing the audit report. The counsel for the assessee argued that the Assessing Officer did not raise the point of late filing as the reason for disallowance and relied on Circular F.No. 173/193/2019 dated 23.04.2019 to support their case. Various judicial pronouncements, including the cases of Bangarh Educational Welfare Trust and Debendra and Rohini Memorial Trust, were cited to strengthen the arguments.

During the hearing, the ld. DR supported the findings of the ld. CIT(A). The Tribunal noted that the audit report was signed before the return was filed, and no intimation was given to the assessee regarding the denial of exemption under section 11/12. Referring to the Circular, the Tribunal directed the Assessing Officer to verify the details and decide the issue after providing a fair opportunity for the assessee to be heard. Consequently, the appeal of the assessee was allowed for statistical purposes, emphasizing the need for proper verification and due process in such matters.

In conclusion, the judgment highlighted the importance of adherence to procedural requirements and the need for a thorough examination of facts before denying exemptions to taxpayers. The Tribunal's decision to remand the matter for verification underscores the significance of fair consideration and compliance with legal provisions in tax assessments.