G.C.T.ALUMNI ASSOCIATION,COIMBATORE vs. ACIT, EXEMPTIONS,, COIMBATORE

audit report is filed by the taxpayer in support of the claim of tax exemption in terms of Section 11 of the Act, which precisely is what has happened on the facts of the present case. The audit report in Form No. 10B filed belatedly on 09.11.2022 was very much made available in the file of the CPC while processing the return of income filed for the assessment year under consideration.

We find that it is nobody's case before us that the CPC find not have the benefit of the audit report in Form No.10B dated 09.11.2022 while processing the return of income in the intimation order dated 02.06.2023, while in contra, the said audit report in Form No.10B filed for the assessment year under consideration could be said to have been available in the file of the CPC while processing the same.

We draw the above conclusion by placing reliance upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income-tax, Maharashtra v. G. M. Knitting Industries (P.) Ltd, reported in 376 ITR 456, wherein the Hon'ble Supreme Court had held as follows "21 (a). It would be suffice to reproduce para 2 of the impugned order whereby action of Income Tax Appellate Tribunal was held to be justified in allowing additional depreciation as claimed by the respondent-assessee herein: - "Additional depreciation is denied to the assessee on the ground that the assessee has failed to furnish form 3AA along with the return of income. Admittedly, Form 3AA was submitted during the course of assessment proceedings and it is not in dispute that the assessee is entitled to the additional depreciation. In these circumstances, in the light of the judgment of this Court in the case of Commissioner of Income Tax v. Shivanand Electronics [1994] 209 ITR 63 (Bom.), we see no merit in this appeal. The appeal is accordingly dismissed with no order as to costs." 21 (b). We concur with the aforesaid view of the High Court and hold that even if Form 3AA was not filed along with return of income but the same was filed during the assessment proceedings and before the final order of the assessment was made that would amount to sufficient compliance. These appeals are, accordingly, dismissed."

The said ratio laid down by the Hon'ble Supreme Court although in the context of belated filing of Form 3AA in support of claim of additional depreciation by the said assessee, the ratio is equally applicable to the instance at hand, i.e. audit report in Form No.10B filed belatedly, however the same was made available before the passing of intimation order.

Thus, respectfully drawing an analogy from the decision of G.M.Knitting Industries (supra), we hold that intimation order passed by the CPC in terms of Section 143(1) of the Act in disallowing the claim of tax exemption u/s.11 of the Act on the facts of the present case was erroneous in view of the fact that the said report was very much made available while processing the same.

Furthermore, with regard to the question of whether the condition of filing of the audit report in Form No.10B within the time limit prescribed under the Act being either mandatory or directory, the Ld. AR had placed reliance on the GCT Alumni Association :- 4 -:

decision of the Hon'ble Gujarat High Court in the case of CIT v. Xavier Kelavani Mandal (P.) Ltd, reported in 41 taxmann.com 184, wherein the Hon'ble High Court had held as follows: 24 (a). The question whether it is permissible to the assessee to produce the audit report at the appellate stage, has already been answered by this court in CIT v. Gujarat Oil & Allied Industries Ltd. [1993] 201 ITR 325 (Guj.), wherein it is held that the provision regarding furnishing of audit report along with the return has to be treated as a procedural provision. 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 before completion of the assessment. The Punjab and Haryana High Court in CIT v. Shahzadanand Charity Trust [1997] 228 ITR 292/[1998] 96 Taxman 494 has reiterated the same principle holding 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 showing a sufficient cause. This decision of Punjab & Haryana High Court has been relied on by the Tribunal."

Further, the Ld. AR had placed on decision of the Hon'ble Delhi High Court in the case of Associated Chambers of Commerce and Industry of India v. Deputy Commissioner of Income-tax, reported in 165 taxmann.com 510, wherein the Hon'ble Delhi High Court had held that filing of audit report within the time limit prescribed u/s.139(1) of the Act as not mandatory and the filing of the same before the completion of assessment / passing of the intimation order should be reckoned as full compliance to the provisions of the Act as well as the decision of the Hon'ble Gujarat High Court in the case of Sarvodaya Charitable Trust v. ITO (Exemption), reported in 125 taxmann.com 75, wherein the Hon'ble High Court had held as follows: 25 (a). We may also refer to the decision of this 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. This 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 beore the Income-tax Officer or before the appellate authority by assigning sufficient cause."

Thus, we find that Hon'ble High Courts in the aforesaid decisions had held that the condition precedent of filing of the audit report in Form No.10B stipulated time limit prescribed was that of a directory one and not a mandatory one and the non-filing of the audit report in Form No.10B within the time prescribed u/s.139(1) of the Act would not automatically disentitle the tax payers' claim of tax exemption in terms of Section 11 of the Act.

The Departmental Representative during the course of hearing had argued that the assessee had sought for relief in terms of Section 119(2)(b) of the Act by filing a petition for the condonation of delay in filing Form No.10B for the assessment year under consideration before the delegated authority / CIT(E), Chennai and the same was rejected by their order dated 11.01.2025 and as such the argument put forth by the Ld.AR before this Tribunal in the present case cannot be accepted and the same deserves to be rejected.

This argument of the ld.DR. is unable to be countenanced by the Tribunal in view of that the remedy provided for in terms of Section 119(2)(b) of the Act is an additional remedy available for a taxpayer to seek recourse for addressing its grievances on account of non- filing / belated filing of requisite form / return. However, the said remedy is not the only remedy available under the Act and would not close the appellate remedy.

This Tribunal draws support from the decision of the Hon'ble Gujarat High Court in the case of Association of Indian Panelboard Manufacturer v. Deputy Commissioner of Income-tax, reported in 157 taxmann.com 550, wherein the Hon'ble High Court had held as follows: "(a). It is to be observed in the present case that the Form D-the audit report, though was not filed with the return of income, the same was available with the Assessing Officer when he processed the return of income under section 143(1) of the Act. The conditions for claiming exemption under section 11 was satisfied. Although the requirement of furnishing report was mandatory, filing thereof is a procedural aspect. Even though the Form 10B was filed at a later stage, when it was part of the record of the Assessing Officer in course of the processing of the return of income, the Assessing Officer could not have denied the exemption claimed by the assessee under sections 11(1) and 11(2) on the ground that the audit report was not filed. (b). The tribunal further committed an error in appreciating the import of section 119 2(b) of the Act inasmuch as the application contemplated thereunder is only additional remedy for the assessee which could not be said to be compulsorily resorted to by the assessee. The circular No.7/18 dated 20-12-2018 issued under section 119 of the Act could not be, therefore said to have taken away the appellate remedy."

Thus, it can be said that the mere rejection of the application filed in terms of Section 119(2)(b) of the Act by the delegated authority would not operate as a fetter upon the appellate proceedings before this Tribunal, a quasi-judicial authority / final fact-finding authority. The taxpayer can very much independently argue on the claim / disallowance of claim of tax exemption in terms of Section 11 of the Act even after the rejection of condonation petition in terms of Section 119(2)(b) of the Act by the competent authority in any appellate proceedings.

Hence, for all the reasons stated in the preceding paragraphs, the appeal filed by the assessee is allowed. The AO is directed to delete the disallowance of claim of exemption u/s.11 of the Act and to allow the same.

From the perusal of the above order of the coordinate bench, we notice that the issue considered by the coordinate bench is identical to the assessee's case. Therefore, we see merit in the submission of the Ld. AR that the impugned issue is covered by the above decision of the coordinate bench. Accordingly, following the ratio laid down by the coordinate bench in the above case, we hold that the audit report in Form No.10B stipulated time limit prescribed was that of a directory one and not a mandatory one and the non- filing of the audit report in Form No.10B within the time prescribed u/s.139(1) of the Act would not automatically disentitle the tax payers' claim of tax exemption in terms of Section 11 of the Act.

In result, the appeal of the assessee is allowed.