THE ABILITY PEOPLE,VISAKHAPATNAM vs. INCOME TAX OFFICER, EXEMPTION WARD, VISAHAPATNAM

Ground Nos. 2 and 3 are general in nature and needs no adjudication.

On this issue, Ld. Authorised Representative [hereinafter “Ld.AR”] argued that Form 10B could not be filed by the assessee during the impugned assessment year which is not intentional. He further submitted that audit report in Form 10B has been filed before CPC on 15.11.2024 whereas the intimation under section 143(1) of the Act was generated on 28.01.2025. He further pleaded that on the date of processing of the return of income by the CPC, Form 10B is available on record and CPC ought to have considered the audit report in Form 10B before denying the exemption under section 11 of the Act. He also argued that various judicial pronouncements including the coordinate benches of the Tribunal have consistently taken a view that filing of Form 10B is only directory and not mandatory. He also further submitted that the Hon’ble High Courts have held that if the audit report in Form 10B is available before CPC, before processing of the return of income it is deemed to have been filed within the due date. He therefore pleaded that the denial of exemption under section 11 of the Act be deleted. Further, he also submitted that the assessee has filed condonation

Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] relied on the orders of the Revenue Authorities and fully supported the same.

We have heard both the sides and perused the material available on record. It is an undisputed fact that the assessee has filed the audit report much before the processing of the return of income under section 143(1) of the Act before CPC. The CPC has not taken the same into consideration while processing the return of income under section 143(1) of the Act, even though the audit report was very much available at the time of processing of the return of income. However, we note that it is a well settled law that delay in filing the Form 10B is a procedural default should not disentitle assessee from claiming exemption under section 11 of the Act, if the other conditions fulfilled by the assessee for making such claim. Hon’ble Gujarat High court in the case of Sarvodaya Charitable Trust v. ITO(E) [125 taxmann.com 75] held that, where assessee is a public charitable trust registered under section 12A of the Act had substantially satisfied the conditions for availing the benefit of exemption as trust would not be denied the exemption merely on bar of limitation in furnishing of audit report in Form 10B. Further, in the case of Association of Indian Panel board Manufacturer v. Dy. CIT [157 taxmann.com 550], the Hon’ble Gujarat High Court held that once the audit report

The moot aspect thus centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B is filed to be available with the Assessing Officer, before assessment proceedings take place, the requirement of law is satisfied. In that view, the Income-Tax Tribunal was not justified in dismissing the appeal of the assessee."

Various case laws as relied on by the Ld.AR also have taken similar views while deciding the delay in filing of Form 10B. In view of the above facts and circumstances, we are of the considered view that the delay in filing of Form 10B being a procedural default should not disentitle the assessee the grant of exemption under section 11 of the Act. From the order of the Ld. CIT(A), we found that claim of exemption under section 11 of the Act was denied only on account of delay in filing of audit report in Form 10B within the stipulated time. While setting aside the impugned order, we direct the jurisdictional AO to take

In the result, appeal of the assessee is allowed for statistical purposes.