Tribunal affirms audit report submission during assessment for Income Tax Act exemption

The Tribunal upheld the Commissioner's decision, ruling that the failure to file the audit report along with the return of income did not warrant denial of the exemption under section 11 of the Income Tax Act. The Tribunal emphasized that the assessee's submission of the audit report during assessment and appellate proceedings constituted substantial compliance with the provisions, allowing the benefit of deduction under sections 11 and 12. The Revenue's appeal was dismissed, affirming the Commissioner's order.

---

---

Issues:
The judgment involves the issue of whether the claim of deduction under section 11 of the Income Tax Act was justified despite the audit report in Form 10B not being filed along with the return of income, and whether the provisions regarding the audit report are procedural or directory in nature.

Issue 1 - Deduction under Section 11:
The solitary issue raised in the appeal was the disallowance of the claim of benefit under sections 11 and 12 of the Act to the assessee-trust due to the failure to furnish the audit report along with the return of income as required by section 12A(1) of the Act. The Commissioner of Income-Tax(A) reversed this decision, stating that the audit report was indeed filed during the assessment proceedings, which was deemed sufficient compliance with the relevant provisions to claim the benefit under sections 11 and 12 of the Act. The assessee, a registered charitable trust, had declared total income for the assessment year 2018-19, which included business income and voluntary contributions. The CPC, Bangalore initially disallowed the claim of exemption under section 11 as the audit report was not e-filed along with the return of income. However, the Commissioner, after considering various judicial pronouncements on delayed submission of Form No. 10B, allowed the claim of the assessee, emphasizing that filing the audit report at a later stage during assessment or appellate proceedings should not result in denial of the benefit of deduction.

Issue 2 - Compliance with Provisions:
During the proceedings, the Revenue argued that the assessee cannot claim benefits under sections 11 and 12 as the audit report was not furnished along with the return of income, as required by section 12A(1)(b) of the Act. Conversely, the counsel for the assessee supported the Commissioner's order, citing settled law that delay in furnishing the audit report should not lead to denial of exemption under sections 11 and 12. The counsel referred to a recent judgment of the jurisdictional High Court to support this argument. The Tribunal found no infirmity in the Commissioner's order, noting that the assessee had substantially complied with the provisions by filing the audit report during the assessment and appellate proceedings, even though it was not submitted along with the initial return of income.

Conclusion:
The Tribunal upheld the Commissioner's decision, emphasizing that the denial of exemption under section 11 for not filing the requisite form along with the return of income was not in accordance with the law. Citing the judgment of the jurisdictional High Court, the Tribunal concluded that the assessee's actions constituted substantial compliance with the provisions, and therefore, the benefit of deduction under section 11 should not be denied. The appeal of the Revenue was dismissed, affirming the order of the Commissioner.

---