2022 (12) TMI 445 - AT - Income Tax

Denial of exemption u/s 11 - Form 10B was filed by the assessee after filing the return of income for the year under consideration - HELD THAT - The assessee trust is holding a valid certificate of registration u/s 12AA of the Act since 24/09/1982. In its return of income filed u/s 139(4) of the Act, the assessee claimed exemption in respect of revenue expenditure and capital expenses u/s 11 of the Act. While processing the return filed by the assessee u/s 143 (1) CPC Bangalore denied the exemption claimed u/s 11 and raised a demand - It is the plea of the assessee that Form 10B was obtained from the auditor on 15/09/2016, and due to the first year of e-filing Form 10B assessee faced some technical issues causing a delay in uploading the said Form. In the present case, it is undisputed that the assessee trust is registered u/s 12AA of the Act for the past 40 years and the said registration is still in existence. It is also not the case of the Revenue that the assessee has ceased to be a religious or charitable institution. It is also not the case of the Revenue that the accounts of the assessee have not been audited by an accountant, and an audit report in Form 10B has not been obtained. Only on the technical aspect that Form 10B was not filed along with the return of income for the relevant assessment year, the exemption claimed u/s 11 of the Act has been denied to the assessee without going into the merits. Further, no relief was granted to the assessee even when the assessee filed the application u/s 154. As in the present case also the assessee has complied with the procedural requirement of obtaining and filing Form 10B, therefore, respectfully following the aforesaid decision of the Co-ordinate Bench of the Tribunal, the AO is directed to decide the claim of the assessee u/s 11 on merits, after accepting the Form 10B filed by the assessee. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

Summary

Issues:
Challenge to order denying exemption under section 11 of the Income Tax Act, 1961 based on delayed filing of Form 10B.

Analysis:
1. The assessee appealed against the order denying exemption under section 11 of the Act due to the delayed filing of Form 10B after submitting the return of income for the relevant assessment year. The CPC Bangalore initially denied the exemption claimed and raised a demand. The rectification application filed by the assessee under section 154 of the Act was rejected by the ITO, Exemption Ward, citing non-fulfillment of conditions under section 12(1)(b) for claiming the exemption.

2. The learned CIT(A) upheld the denial of exemption, stating that the issue was not a mistake apparent from the record. The assessee contended that the delay in uploading Form 10B was due to procedural and technical issues faced during the e-filing process. The Revenue argued that there was no mistake apparent from the record justifying the rejection of the rectification application.

3. The Tribunal observed that the assessee, a trust registered under section 12AA for over 40 years, had a valid registration and fulfilled the necessary audit requirements. Despite the delayed filing of Form 10B, the denial of exemption solely on technical grounds without considering the merits was deemed unjust. Referring to a similar case, the Tribunal ruled in favor of the taxpayer, emphasizing that compliance with procedural requirements should suffice for claiming the exemption under section 11.

4. Citing relevant High Court decisions, the Tribunal directed the Assessing Officer to verify the claim of the assessee and grant necessary deductions under section 11 after accepting the belatedly filed Form 10B. The Tribunal allowed the appeal for statistical purposes, emphasizing that the procedural compliance was met, warranting a review of the exemption claim on its merits.

5. Consequently, the Tribunal allowed the appeal by the assessee for statistical purposes, instructing the Assessing Officer to reevaluate the claim under section 11 after accepting the Form 10B filed by the assessee. The decision highlighted the importance of procedural compliance in claiming exemptions under the Income Tax Act.

Conclusion:
The Tribunal's judgment favored the assessee, emphasizing the significance of procedural compliance in claiming exemptions under the Income Tax Act and directed the Assessing Officer to reconsider the exemption claim under section 11 based on the accepted Form 10B filing.