Loading judgment…
Facts
The assessee claimed exemption under Section 10(23C) of the Income-tax Act, 1961, but failed to file the audit report in Form 10BB along with the return of income or before the due date. The CPC disallowed the exemption, and the Addl. CIT(A) directed the AO to examine if the audit report was obtained before the due date.
Held
The Tribunal upheld the directions of the Addl. CIT(A) to verify if the audit report was obtained on or before the due date for filing the return. The Tribunal found the directions to be reasonable and in accordance with the law.
Key Issues
Whether the assessee is eligible for exemption under Section 10(23C) if the audit report in Form 10BB is not filed by the due date, and whether condonation of delay is permissible.
Sections Cited
10(23C), 119(2)(b), 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
आदेश / O R D E R PER JAGADISH, A.M :
Aforesaid cross appeals filed by the assessee and the Revenue for Assessment Year (AY) 2009-10 arises out of the order of Learned Commissioner of Income Tax, Appeal, Addl/JCIT(a)-3, Hyderabad [hereinafter “Addl. CIT(A)”] dated 07.02.2025.
2. The grounds of appeal raised by the Revenue are as under:
“1. The order of the learned Addl/JCIT(A) is contrary to the law and facts of the case.
The learned Addl.JCIT(A) omitted to note that the audit report in Form 10BB was not filed within the due date, i.e. on or before the due date for filing of return of income.
The learned Addl./JCIT(A) erred in overlooking the fact that the Central Board of Direct Taxes has issued instructions u/s 119(2)(b) of the Act authorizing the Administrative Principal Chief Commissioners or the Commissioners of Income-tax alone are authorized to condone the delay in filing audit report, that too if the application for condonation is made within the specified time limit, after satisfying themselves that there was reasonable cause for the delay and in cases of genuine hardship on merits. The facts of the case do not point to any such condonation being granted to the assessee.
The learned Addl./JCIT(A) was not justified in holding that the assessee may be considered for the benefit of exemption u/s 10(23C) of the Income-tax Act, 1961 when the assessee had neither filed valid audit report within the time stipulated as per proviso to section 10(23C) nor had obtained condonation for the delay in fling of audit report from the Competent Authority.”
3. The assessee filed its return of income on 31.10.2019, which was subsequently revised on 14.12.2019. The CPC, Bengaluru, vide intimation order dated 26.05.2020, disallowed the exemption claimed under section 10(23C) of the Income-tax Act, 1961 (hereinafter “the Act”) on the ground that the assessee had not filed the audit report in Form 10BB along with the return of income or before the due date of filing. On appeal, the Addl. CIT(A) has given directions as under:
“5.9 Considering the facts that the appellant has uploaded Form 10BB on 14/03/2020 though of a different entity, the delay in uploading of Form 10BB is seen to be around 5 to 6 months only. Therefore, in the interest of natural justice, respectfully following the ratio of judgment of the Hon’ble Jaipur Tribunal as enumerated above, the claim of the appellant for exemption u/s 10(23) of the Act can be allowed after due verification. The Assessing Officer is therefore directed to examine whether the appellant has obtained audit report in Form 10BB in its case on or before the due date of filing of return of income. The appellant is directed to furnish to the Assessing Officer the audit report obtained in Form 10BB in its case for examination. The Assessing Officer may grant a reasonable opportunity to the appellant for the same. 5.10 After such examination and due verification of the audit report in Form 10BB in appellant’s case, if the claim of exemption u/s 10(23C) of the Act by the appellant is found to be allowable, then the Assessing Officer is directed to delete the adjustment made of Rs.4,34,16,654/- in intimation issued u/s 143(1) of the Act. It will be pertinent to mention here that the appellant has not furnished the audit report obtained if any in Form 10BB in its case during appeal proceedings and if the same is not furnished even during verification to be done by the Assessing Officer, then the adjustment made in intimation will stand sustained. Further, during verification if for any other reason the appellant is not found to be entitled to claim of exemption u/s 10(23C) of the Act, the Assessing Officer may pass a speaking consequential order.”
4. The Ld. Departmental Representative (DR) has argued that the assessee had claimed exemption u/s.10(23C) of the Act, but had failed to file the audit report in Form 10BB along with the return of income.
Therefore, the CPC has rightly disallowed the claim. Further, the Ld. DR argued that the Ld Addl. CIT(A) has noted that the assessee has uploaded Form-10BB on 14.03.2020 for a different entity, he directed the allowance of the exemption without obtaining the condonation of delay from the competent authority.
On the other hand, the Ld. Authorized Representative (A.R) of the assessee has submitted that the assessee had uploaded the audit report on 21.12.2019 vide Acknowledgement No. 275756711211219, obtained from Auditor Mr. M. Gideon Paul in Form 10BB dated 17.12.2019, and submitted a copy of the same. It was therefore argued that the audit report had been both obtained and uploaded prior to the CPC’s processing of the return on 26.05.2020. Hence, the CPC ought to have allowed the exemption under section 10(23C) of the Act. The Ld. AR also contended that the Ld. Addl. CIT(A) had decided the case on the basis of the decision of the ITAT, Jaipur Bench in the case of Rajasthan Medical Relief Society vs. ITO [2024] 162 taxmann.com 264 (Jaipur-Trib.), where the AO was directed to accept the form filed belatedly, the order of Ld. Addl, CIT(A) is in order.
We have heard the rival submissions, and perused the materials available on record. The assessee has filled return of income on 31.10.2019 which was revised on 14.12.2019. The return was processed on 26.05.2020 u/s 143(1) of the Act by CPC denying exemption u/s 10(23C) in want of Form-10BB filed along with the return. The Ld. AR submitted a copy of Form 10BB, e-filed on 21.12.2019 obtained from auditor on 17.12.2019 and argued that CPC/Addl. CIT(A) should have allowed the claim u/s 10(23C) of the Act as audit report was available at the time of processing of return.
The Ld. AR relied upon the decision of Hon’ble Madras High Court in the case of Chandraprabhuji Maharaj Jain vs DCIT(exemption)
Chennai 110 taxmann.com 11(Madras). We note that the assessee did not furnish copy of the Form-10BB filed on 21.12.2019 before the Ld. Addl. CIT(A) and therefore he, in para 5.9 of the appellate order, has rightly directed the A.O to examine whether the assessee had obtained the audit report in Form-10BB in its case. The Ld. Addl.
CIT(A) has decided the case based on decision of the ITAT Jaipur Bench in the case of Rajasthan Medical Relief Society vs. ITO (supra).
As the direction of Ld Addl. CIT(A) is in accordance with the decision of Hon’ble Madras High Court in the case of Chandraprabhuji Maharaj Jain vs DCIT(exemption), supra, we find no infirmity in the order passed by the Ld. Addl. CIT(A). Accordingly, the appeal filed by the Revenue is dismissed.
ITA No.545/Chny/2025 (Assessee’s appeal)
The assessee has filed appeal against the directions issued by the Ld. Addl. CIT(A) in para 5.9 of the appellate order, wherein the A.O was directed to examine whether the assessee had obtained audit in Form-10BB in its own case on or before the due date of filing of return of income.
The Ld. Authorized Representative (AR) has contended that the audit report in Form-10BB was duly obtained and filed on 21.12.2019, well before the return was processed u/s.143(1) of the Act on 26.05.2020. Therefore, the Ld. Addl. CIT(A) direction to examine whether the appellant has obtained audit report in Form 10BB in its case on or before the due date of filling return of income is not in accordance with the decision relied upon.
We have heard the rival submissions and perused the material available on record. The Ld. Addl. CIT(A), relying on the order of the ITAT, Jaipur Bench in the case of Rajasthan Medical Relief Society vs. ITO (supra), has directed the A.O to verify whether the audit report in Form-10BB was obtained on or before the due date for filing the return and, based on such verification, to allow the exemption u/s. 10(23C) of the Act. We, modify the direction of CIT(A) in para 5.9 to A.O to examine whether the appellant has obtained audit report in Form- 10BB in its case on or before due date of filling the return on or before processing of the return. The Ld. Addl. CIT(A) has already issued appropriate directions for such verification in para 5.10 of the order. We find that the said directions to be reasonable and in accordance with law. In view of the above, we uphold the directions of the Ld. Addl. CIT(A) and accordingly, the appeal filed by the assessee is dismissed.
In the result, both the appeals filed by the assessee as well as the Revenue are dismissed.
Order pronounced on 28th day of July, 2025 at Chennai.