2023 (10) TMI 559 - AT - Income Tax

Form 10B under s.12A treated as directory; AO may accept belated audit report before assessment completion to decide s.11 exemption

Shri Visha Oswal Jain Sewa Samaj Versus Income Tax Officer, (Exemptions), Ahmedabad

ITAT (Ahmedabad) held that filing Form 10B required under s.12A is directory, and AO may accept a belated audit report any time before completion of ... Exemption u/s 11 and 12 - assessee failed to file the Audit Report in Form 10B along with the Return of Income - HELD THAT:- It is no more res integra that filing of Form 10B as required u/s. 12A are directory in nature, as such the Assessing Officer are not powerless to allow an assessee to file Audit Report, if not filed along with return, any time before completion of assessment and also before Appellate Authorities. In the present case before us Audit Report in Form 10B though filed belatedly by the assessee, the same was not considered by the Ld. NFAC and Ld. A.O. Thus none of the authorities had any occasion to verify Audit Report in Form 10B belatedly filed by the assessee. Further there is no regular assessment order passed u/s. 143(3) of the Act in the case of the Assessee Trust. Therefore we hereby direct the Jurisdictional AO to verify the Audit Report in Form No. 10B and then allow the claim of exemption u/s. 11 of the Act, in accordance with law by giving adequate opportunity to the assessee. Thus the grounds raised by the assessee are hereby allowed. Issues Involved:1. Denial of exemption under Section 11 and 12 of the Income Tax Act.2. Prima facie adjustment under Section 143(1)(a) of the Act.3. Rectification of order under Section 154 of the Act.4. Charging tax at the maximum marginal rate.Summary:Issue 1: Denial of Exemption under Section 11 and 12The Assessee, a charitable trust, filed its Return of Income for AY 2015-16 and claimed expenses which were disallowed by the Computer Processing Centre (CPC), resulting in a tax demand. The rectification application filed by the Assessee was rejected due to the non-filing of the Audit Report in Form 10B along with the Return of Income. The National Faceless Appeal Centre (NFAC) upheld this decision, leading to the appeal before the Tribunal. The Tribunal noted that the filing of Form 10B is a procedural requirement and not filing it along with the return should not impede the exemption under Sections 11 and 12 if filed during appellate proceedings. The Tribunal directed the Jurisdictional Assessing Officer (JAO) to verify the Audit Report in Form 10B and allow the exemption.Issue 2: Prima Facie Adjustment under Section 143(1)(a)The Assessee argued that the CPC did not communicate the requirement for filing Form 10B, which led to the denial of the benefit under Sections 11 and 12. The Tribunal observed that the non-filing of Form 10B was the reason for the disallowance of the claim and directed the JAO to verify the belatedly filed Form 10B and allow the exemption.Issue 3: Rectification of Order under Section 154The Assessee's rectification application was rejected on the grounds of non-filing of Form 10B with the Return of Income. The Tribunal referenced various High Court judgments which held that the filing of the audit report is procedural and can be submitted before the completion of assessment or appellate proceedings. The Tribunal directed the JAO to consider the belatedly filed Form 10B and allow the exemption.Issue 4: Charging Tax at Maximum Marginal RateThe Tribunal did not specifically address this issue separately but implied that the resolution of the exemption under Sections 11 and 12 would impact the tax rate applied. By directing the JAO to verify and allow the exemption, the Tribunal indirectly addressed the issue of the tax rate.Conclusion:The Tribunal allowed the appeal for statistical purposes, directing the JAO to verify the belatedly filed Audit Report in Form 10B and allow the exemption under Section 11 of the Act, ensuring compliance with procedural requirements and principles of natural justice.