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2024 (11) TMI 1212 - AT - Income TaxDenial of exemption u/s. 11 - failure on the part of the assessee to file the Audit Report of the accounts of the Trust (Form 10B) within due time - assessee belatedly filed the same within 32 days - Rejection of rectification-application as dismissed by the Ld.CIT(A). HELD THAT - We note that the CBDT Circular F. No.173/193/2019 ITAI, dated 23-4-2019 permits the assessee-Trust to file an application before the CIT for condonation of delay up to 365 days if the assessee is able to show reasonable cause for not filing the Audit Report within the stipulated time. CIT has been delegated the powers by CBDT to condone the delay. Be that as it may, we note that in this case, assessee Trust has filed return along with Audit Report ( 32 days delay) before the CPC and it had processed the return of the assessee. Therefore, taking into consideration sec.12A(1)(ba) r.w.s.139(4A), we are of the view that the CPC ought not to have denied exemption u/s. 11 of the Act without giving proper opportunity as stipulated by first proviso to sec.143(1) of the Act. Since, there is violation of natural justice and the assessee has complied with stipulation of filing Audit Report which was very well before the CPC, the impugned action of the CPC can t be legally sustained. Therefore, we set aside the impugned order of the Ld.CIT(A), and direct the assessee to file application for condoning delay in filing of Audit Report as per Circular No.2/2020 dated 03.01.2020. As the assessee to prefer an application as stated in Para No.5 (supra) and thereafter, the CPC to process the return of income afresh and pass orders after giving opportunity to the assessee if any adjustments are proposed to be made in accordance to law. Appeal filed by the assessee is allowed for statistical purposes.
Issues:
Appeal against dismissal of rectification application under section 154 of the Income Tax Act, 1961 regarding disallowance of exemption under section 11 for failure to file Audit Report within due time. Detailed Analysis: Issue 1: Dismissal of rectification application by Ld.CIT(A) and CPC The assessee Trust filed an appeal against the order of the Ld.CIT(A) dismissing the appeal and upholding the action of the CPC rejecting the rectification application under section 154 of the Income Tax Act. The main grievance was the disallowance of exemption under section 11 due to the alleged failure to file the Audit Report within the stipulated time. The Ld.AR argued that the assessee had the right to file the return of income along with the Audit Report within the timeline provided by section 139(4) of the Act. The Ld.DR, on the other hand, referred to Circulars empowering the Ld.CIT to condone the delay in filing the Audit Report. Issue 2: Compliance with provisions of the Income Tax Act The Tribunal noted that the assessee Trust, a registered Public Charitable Trust, filed its return of income for the relevant assessment year but with a delay in filing the Audit Report. Due to reasons beyond control, the Audit Report was filed after the due date. The CPC processed the return, taxing the entire receipts as income and raised a demand. The Tribunal observed that the CPC should not have denied the exemption under section 11 without giving proper opportunity as stipulated by the Act. The Tribunal highlighted the violation of natural justice and the compliance of the assessee with the filing requirements. Issue 3: Application for condonation of delay Considering the provisions of section 12A(1)(ba) read with section 139(4A) and Circulars issued by the CBDT, the Tribunal directed the assessee to file an application for condoning the delay in filing the Audit Report. The Tribunal emphasized the need for the CPC to process the return afresh and pass orders after giving an opportunity to the assessee if any adjustments are proposed. The appeal was allowed for statistical purposes. In conclusion, the Tribunal set aside the order of the Ld.CIT(A) and directed the assessee to follow the procedures outlined in the Circulars to address the delay in filing the Audit Report, ensuring compliance with the provisions of the Income Tax Act.
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