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Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
निर्ााररती की ओर से /Assessee by: Ms. Vasanthi Patel /Revenue by: Shri. Bhagirath Ramawat (SR DR) Date of Hearing 31.07.2025 Date of Pronouncement 29.08.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 31.03.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2007-08.
The assessee has raised the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income-tax (Appeals) [CIT(A)] erred in confirming the denial of exemption/deductions under Section 11 of the Act resorted to by the Centralized Processing Centre, Income Tax Department, Bengaluru (herein after referred to as "CPC ITD") while processing the Return of Income under Section 143(1) of the Act on the grounds that the Audit Report in Form 10B was filed belatedly, though with the Return of Income which was filed in prescribed time.
2. The learned CIT(Appeals) and the learned CPC ITD failed to appreciate that the time limit prescribed for filing the Audit Report is only declaratory and not mandatory. The lower authorities failed to appreciate that delay in filing the Audit Report is only a procedural lapse and the same cannot be fatal leading to denial of exemption/benefits under Section 11 of the Act particularly when the said Audit Report was available on record when the Return of Income was processed under Section 143(1) of the Act.
3. The learned CIT (Appeals) failed to appreciate the explanations/submissions furnished by the Appellant and the legal position emerging from the decisions of various High Courts/Income- tax Appellate Tribunals dealing with amended provisions of Section 12A(b) of the Act.
It is submitted that the denial of exemption under Section 11 of the Act, as discussed above, has led to denial of deductions of the following amounts resulting into huge demand of Rs.7,62,590/- after adjusting the TDS refund of Rs.26,721/- against the Appellant:
1. 1. A sum of Rs.9,96,156/- under section 11(1)(a) of the Act being amount accumulated or set apart for application to charitable or religious purposes or for the stated objects of the trust to the extent it does not exceed 15 per cent of income derived from property held in trust.
2. A sum of Rs. 16,00,000/- being amount set aside and deemed to be applied during the previous year as per clause (2) of Explanation to section 11(1) of the Act.
3. A sum of Rs.158/- under section 11 read with Section 11(6) of the Act being the amount of capital expenditure incurred to be allowed as application of income. It is submitted that the disallowances referred to above are unjustified and bad in law as the denial of exemption under section 11 of the Act itself is founded and unwarranted.
5. It is submitted that on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in confirming the adjustments resorted to by the learned CPC ITD while processing the Return of Income under Section 143(1) of the Act.
6. It is submitted that the basic issue leading to denial of exemption under Section 11 of the Act viz. delay in filing the Audit Report in Form 10B, itself is a highly debatable question of law and the same cannot be the ground for adjustment/additions/disallowances under Section 143(1)(a)/143(1) of the Act. It is submitted that the learned CPC ITD has resorted to the adjustments without complying with the provisions of Section 143(1) of the Act.”
Brief facts of the case are that the assessee filed a return, declaring total income of Rs. 2,47,156/- on 13.11.2024 which was processed by the CPC and intimation u/s. 143(1) was issued making certain adjustments over and above the returned income. Vide intimation dated 28.01.2025, the CPC denied the benefit of deduction u/s. 11 & 12 of the Act on the ground that Form 10BB was not filed by the due date. The assessee’s appeal against this intimation was dismissed by Ld. CIT(A) vide order dated 31.03.2025. Aggrieved with the order of Ld. CIT(A), the assessee has preferred an appeal before the Tribunal.
4. Before us, Ld. AR has submitted that the audit report in Form 10 BB was filed with the return and therefore the CPC ought to have considered the same at the time of processing. As per the provisions of section 12A(1)(b), the assessee is required to file the audit report in Form 10BB on or before one month prior to the due date of filing return of income u/s. 139(1) of the Act. In the present case the extended due date of filing of return was 15.11.2024. Accordingly, the assessee was required to e-file Form 10BB on or before 15.10.2024. However, the same has been filed on 13.112024 along with the return. 4.1 It has been further argued by the Ld. AR that firstly the adjustment u/s. 143(1) could not have been made being beyond the scope of adjustments allowed under the section. Further, no opportunity was given to the assessee in this regard before making the adjustment by the CPC. Even otherwise on the merits, it has been argued by the Ld. AR that in several decisions of the co-ordinate Benches, it has been held that requirement to file the audit report by the prescribed time limit is only directory and not mandatory. Ld. AR has placed reliance on the order of the co-ordinate bench for A.Y. 2022-23 in its own case wherein the identical issue has been decided in favour of the assessee.
Ld. DR on the other hand has strongly relied on the orders of lower authorities and has argued that since the audit report was filed beyond the due date, the assessee is not entitled to the benefit of provisions of section 11 of the Act, in view of clear mandate of the law in this regard.
We have heard the rival submissions and perused the material on record. The relevant dates related to the filing of audit report by the assessee are as under: 1. Due date of filing Form No. 10BB : 30TH September 2024 2. Extended Due Date of filing Form No. 10BB : 07th October 2024 (as per circular no. 10/2024 dated 29/09/2024) 3. Date of Filing of Form No. 10BB : 13th November 2024 4. Due Date of Filing Return of Income : 31st October 2024 5. Extended Due date of filing return of income : 15th November 2024 (as per circular no. 13/2024 dated 26.10.2024) 6. Date of filing return of income. : 13th November 2024 Thus the assessee has filed the audit report before and the prescribed date limit on the same date of filing of return. Accordingly, the audit report in Form 10BB was available at the time of processing and therefore the same should have been considered as has been held in the various decisions of the co-ordinate benches as well as the assessee’s own case in /2024 for A.Y. 2022-23.
The relevant para of this order dated 25.07.2024 is reproduced as under: “3. Before us, the Ld. AR submitted that the audit report in Form No. 10B had been filed on 07.11.2022 along with the return of income. The return had been filed within the extended due date as per the CBDT circular No. 20/2022 dated 26.10.2022 vide which the due date had been extended from 31.10.2022 to 07.11.2022. The intimation u/s 143(1) of the Act was issued on 03.03.2023 as such the audit report was on record much before the processing of return. In this regard, the Ld. AR cited several decisions of the ITAT as well as Hon'ble High court of Gujarat in its favour. Specifically reliance was placed on the latest order of coordinate Bench in the case of Snehasadan Vs. ITO in dated 24.07.2024, where in a similar situation it has been held as under: 5. We find force in assessee's foregoing sole substantive grievance in principle. This is for the precise reason that not only there is no denial from the Revenue side that the due date of filing return had been extended for the assessee's return itself is not time barred) but also the relevant Form 10B audit report stood uploaded well with the return and indeed during the course of processing itself. We accordingly conclude in light of the foregoing judicial precedent that the assessee could not have been declined the impugned exemption for this precise reason in other words. We accordingly deem it appropriate to accept the assessee's instant sole substantive grievance and direct the learned Addl./JCIT(A)-3, Bengaluru to examine it's case on merits afresh as per law. Ordered accordingly 4. After considering the facts circumstances and judicial pronouncements on this issue, and respectfully following the decision of the coordinate Bench, we hereby direct the AO to consider the claim of exemption u/s 11 of the Act as per law after taking into account the audit report filed in Form No. 10B on 07.11.2022. ”
Respectfully following the decision of the co-ordinate bench for A.Y. 2022-23 in assessee’s own case, we hereby direct the AO to consider the claim of exemption u/s. 11 of the Act, as per the law on merits after taking into account the audit report filed in Form 10BB on 13.11.2024.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 29.08.2025.