2022 (8) TMI 520 - AT - Income Tax

Disallowance of exemption u/s 11/12 - no evidence was filed by the assessee demonstrating that the form 10B was filed electronically - AR before us contended that the assessee has made sufficient compliance by furnishing the audit report in form 10B in physical form - benefit of exemption u/s 11 cannot be denied merely on the reasoning that such audit report was not filed electronically - HELD THAT - Where Form 10B is uploaded after the submission of Return of Income, returns are processed without giving benefit of sec. 11 of the Act. The total income becomes subjected to tax without providing any benefit under section 11 of the Act. In the present case, the form 10B was not filed by the assessee electronically but the same was filed before the Ld. CIT-A physically. CIT-A did not consider the same. In this regard, we refer to the decision in CIT v. Gujarat Oil and Allied Industries Ltd. 1992 (9) TMI 67 - GUJARAT HIGH COURT wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment - benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause - we hold that the substantial compliance has been made by the assessee by furnishing the audit report in the requisite form before the Ld. CIT-A. Thus, we set aside the order of the Ld. CIT-A and direct the AO to allow the benefit available to the assessee under section 11 of the Act as per the provisions of law. Hence, the ground of appeal of the assessee is allowed.

Summary

Issues:
Disallowance of exemption under section 11/12 of the Income Tax Act.

Analysis:
The appeal was filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-9, Ahmedabad, regarding the assessment order passed under section 143(1) of the Income Tax Act, 1961 for the Assessment Year 2017-18. The only issue raised by the Assessee was the sustaining of the disallowance of exemption under section 11/12 of the Act by the learned CIT(A).

The delay in filing the appeal by the Assessee for 436 days was condoned by the Tribunal due to an extension granted by the Hon'ble Supreme Court on account of the COVID-19 pandemic. The Assessee, a public charitable trust, claimed exemption under section 11/12 of the Act based on the proviso to section 12A(2) and a CBDT circular. The claim was disallowed by the CPC Bengaluru while processing the return under section 143(1) of the Act.

The learned CIT(A) agreed that the Assessee was eligible for exemption under section 11 and 12 of the Act as per the proviso to section 12A(2), but confirmed the disallowance due to the non-filing of audit report electronically in form 10B as required by section 12A read with rule 17B of the Income Tax Rule. The Assessee contended that physical submission of the audit report sufficed for compliance.

After hearing both parties, the Tribunal referred to a previous court decision emphasizing substantial compliance with procedural requirements. The Tribunal held that the Assessee had substantially complied by furnishing the audit report physically before the CIT(A), setting aside the order and directing the AO to allow the benefit under section 11 of the Act. Consequently, the appeal filed by the Assessee was allowed.

In conclusion, the Tribunal's decision favored the Assessee, emphasizing substantial compliance with the procedural requirements for claiming exemption under section 11 of the Income Tax Act. The physical submission of the audit report was deemed sufficient, overturning the disallowance of the exemption by the lower authorities.