2021 (1) TMI 1004 - AT - Income Tax

Rectification u/s 154 - Exemption u/s 11 denied - audit report in Form no.10B of the Act was filed belatedly - as per assessee since 85% out of the income received has been applied for the objects of the Trust, exemption u/s 11 of the Act is available - HELD THAT - As decided in KASTURI FOUNDATION 2020 (11) TMI 962 - ITAT MUMBAI the claim of the assessee that it has obtained the audit report prior to the date of filing of return of income and has filed audit report before the due date of return of income under section 139(1) of the Act has not been controverted by the learned Departmental Representative. Commissioner (Appeals) has also upheld the disallowance of exemption by simply stating that it is not a rectifiable mistake under section 154 of the Act. In our view, when the assessee has complied with the statutory provisions in terms of the CBDT Circular, the delay if any, in filing the audit report should have been condoned. In view of the aforesaid, we delete the disallowance made and allow assessee s claim of exemption under section 11 of the Act. Grounds raised by the assessee are allowed.

Summary

Issues:
Appeal against disallowance of exemption claimed under section 11 (1) (a) of the Income Tax Act for the assessment year 2014-15.

Detailed Analysis:

Issue 1: Disallowance of exemption claimed under section 11 (1) (a)
The appellant filed a rectification application under section 154 of the Income Tax Act after the Deputy Commissioner of Income Tax disallowed the claim of exemption under section 11 and determined the total income at Rs. 35,44,930. The Commissioner of Income Tax (Appeals) dismissed the appeal, stating that there was no mistake apparent from the record in the order passed under section 143 (1) that could be rectified under section 154. The appellant contended that the failure to mention the auditor's name in the return of income was a technical oversight and should not have led to the rejection of the rectification application. The appellant relied on a similar case where the Tribunal allowed the claim of exemption under section 11 based on compliance with statutory provisions despite a delay in filing the audit report. The Tribunal in the present case set aside the order of the Commissioner of Income Tax (Appeals) and allowed the appellant's appeal, citing the precedent and the compliance with statutory provisions regarding the audit report filing.

Conclusion:
The Tribunal allowed the appeal filed by the assessee against the disallowance of the exemption claimed under section 11 (1) (a) for the assessment year 2014-15. The decision was based on the compliance with statutory provisions regarding the audit report filing, following a precedent where a similar claim of exemption was allowed despite a delay in filing the audit report. The Tribunal found the rejection of the rectification application by the Deputy Commissioner of Income Tax to be unjustified, considering the technical nature of the oversight in mentioning the auditor's name in the return of income.