PRAGATI EDUCATION AND MEDICAL TRUST VAHERA,BORSAD vs. THE DCIT, CPC, BANGLORE

The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-9, Ahmedabad, arising in the matter of assessment order passed under s. 143(1) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2017-18.

The only issue raised by the assessee is that the learned CIT (A) erred in sustaining the disallowance of exemption under section 11/12 of the Act

At the outset, it was noticed that there was a delay in filing the appeal by the assessee for 436 days. However, we note that there was the extension granted by the Hon’ble Supreme Court on account of pandemic covid-19 virus in MA No. 665 of 2021 which was effective from 15 March 2020 and upto the period of 90 days from 3 October 2021. The case of the assessee was falling within such extended time. Accordingly, we condone the delay and proceed to adjudicate the issue on merit.

However, the claim of the assessee was disallowed by the CPC Bengaluru while processing the return under section 143(1) of the Act.

On appeal the learned CIT (A) agreed with the contention of the assessee that as per the proviso to section 12A(2) of the Act, the assessee is eligible for the exemption under section 11 and 12 of the Act. However the learned CIT(A) confirmed the disallowance by holding that as per the provision of section 12A read with rule 17B of Income Tax Rule, the filing of audit report electronically in form 10B is necessary. However, no evidence was filed by the assessee demonstrating that the form 10B was filed electronically.

Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.

The learned AR before us contended that the assessee has made sufficient compliance by furnishing the audit report in form 10B in physical form. Therefore, the benefit of exemption under section 11 cannot be denied merely on the reasoning that such audit report was not filed electronically.

On the other hand, the learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. Many times, where Form 10B is uploaded after the submission of Return of Income, returns are processed without giving benefit of sec. 11 of the Act. In other words, the total income becomes subjected to tax without providing any benefit under section 11 of the Act. In the present case, the form 10B was not filed by the assessee electronically but the same was filed before the ld. CIT-A physically. The ld. CIT-A did not consider the same. In this regard, we refer to the decision of Hon’ble High Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Guj.), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. The Hon’ble High Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause. In view of the above we hold that the substantial compliance has been made by the assessee by furnishing the audit report in the requisite form before the ld. CIT-A. Thus, we set aside the order of the ld. CIT-A and direct the AO to allow the benefit available to the assessee under section 11 of the Act as per the provisions of law. Hence, the ground of appeal of the assessee is allowed.

In the result, the appeal filed by the assesse is allowed.