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Facts
The appellant, South Indian Federation of Fishermen Societies, registered under section 12A, filed a nil income return for AY 2021-22. The CPC processed the return and made an adjustment, denying exemption under section 11, citing non-filing of the Form 10B audit report within the due date. A petition under section 154 was rejected, and the CIT(A) dismissed the appeal, holding that timely filing of the audit report is mandatory and delay condonable only by the CIT.
Held
The ITAT held that the scope of adjustment under section 143(1) is limited to incorrect claims based on information in the return, and mere non-filing of an audit report does not constitute an "incorrect claim." Following a previous ITAT decision, the tribunal concluded that the adjustment made by the CPC was invalid in law and directed the CPC to amend the intimation.
Key Issues
Whether the CPC was justified in making an adjustment denying exemption under section 11 due to non-filing of the audit report in Form 10B within the prescribed time, under the scope of section 143(1) of the Income-tax Act.
Sections Cited
12A, 11, 143(1), 139(1), 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, COCHIN
Before: Shri Inturi Rama Rao
Asst.Year 2021-2022 South Indian Federation of The Deputy Director of Fishermen Societies v. Income-tax, CPC TC-20/1936, Karamana PO Bangalore. Trivandrum – 695 002. PAN : AACTS0090G. (Appellant) (Respondent) Appellant by : Sri.R.Krishnan, CA Respondent by : Smt.Leena Lal, Senior AR Date of Date of Hearing : 05.05.2025 Pronouncement : 08.05.2025 O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre / Commissioner of Income-tax (Appeals) [hereinafter “the CIT(A)”] dated 06.02.2025 for the assessment year 2021-2022.
Briefly, the facts of the case are that the appellant is a society formed with the object of running welfare / assistance to fishermen, covering the coastal area of Karnataka State, Tamil Nadu State and the Kerala State. The appellant is duly registered u/s.12A of the Income-tax Act, 1965 (hereinafter “the Act”). The return of income for the assessment year 2021-2022 was filed on 15th March, 2022 disclosing Nil income. The said return of income was processed by the CPC vide intimation u/s.143(1) of the Act, on 25.11.2022 by making adjustment denying the exemption u/s.11 of the Act on the ground that the . South Indian Federation of Fishermen Societies. appellant had not filed the audit report in Form 10B one month prior to the due date prescribed for filing the return of income u/s.139(1) of the Act.
Being aggrieved by the said intimation, a petition u/s.154 of the Act was filed on 23.12.2022, which came to be rejected vide order dated 24th January, 2023.
Being aggrieved by the above order, an appeal was filed before the CIT(A), who vide the impugned order held that filing of the audit report within the prescribed time is mandatory and only the CIT alone is empowered to condone the delay in terms of CBDT Circular No.2/2020, and proceed to hold that the appeal is not maintainable. Accordingly, the appeal filed by the assessee is dismissed.
Being aggrieved, the appellant is in appeal before me in the present appeal. It is submitted that making an adjustment u/s.143(1) of the Act for non-furnishing of audit report in Form 10B is beyond the scope of the power u/s.143(1) as filing of the audit report is only procedural in nature and mere failure to file the audit report does not constitute incorrect claim.
On the other hand, the learned Senior DR submits that filing of audit report in Form 10B is mandatory as per Rule 12(2) of the Income- tax Rules, 1962 from assessment year 2016-2017.
I heard the rival submissions and perused the material available on record. The only issue that arises for my consideration is whether the CPC was justified in making adjustment of income claimed to be . South Indian Federation of Fishermen Societies. exempt u/s.11 of the Act for the reason that the appellant had not filed audit report in Form 10B within the due date prescribed u/s.139(1) of the Act nor filed before the processing of the return by the CPC. The scope of adjustment u/s.143(1) of the Act was defined there under. On a mere reading of the provisions of sec.143(1) of the Act, an adjustment can be made where incorrect claim is made in the return of income based on the information contained in the return of income. The said provision nowhere stipulates that the mere non-filing of audit report would amount to “incorrect claim”. Therefore, respectfully following the decision of the Co-ordinate Bench of the ITAT in the case of M/s.Ammini Foundation v. DCIT in (order dated 28.10.2022), I am of the considered view that the adjustment made by the CPC is not valid in law and accordingly I direct the CPC to amend the intimation.
In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 8th day of May, 2025.