Tribunal Orders Tax Exemption for Trust, Citing Unjust Denial Based on Technicalities; AO to Verify Audit Report.

The Tribunal directed the AO to grant the exemption under section 11 of the Income Tax Act to the assessee trust after verifying the Audit Report in Form No. 10B, which was filed before the processing of the return. The denial of exemption was deemed unjustified as it relied on technicalities. The Tribunal also addressed the rectification under section 154, finding that the CPC had not considered the application, and instructed the AO to allow the exemption after verification. The Tribunal's decision was influenced by relevant CBDT circulars and case law precedents. The appeal was allowed for statistical purposes.

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Issues involved:
The judgment deals with the denial of exemption under section 11 of the Income Tax Act, rectification intimation issued by CPC Bangalore under section 154, and the interpretation of relevant CBDT circulars.

Denial of Exemption under Section 11:
The assessee trust filed its return of income, which was processed denying exemption claimed under section 11 due to the non-filing of Audit Report in Form No.10B along with the return. The assessee challenged the denial, citing a CBDT circular allowing condonation of delay in filing Form 10B. The CIT(A) upheld the denial, stating that rectification under section 154 can only correct errors, not disturb concluded findings. The Tribunal held that the Audit Report was filed before the processing of the return, and the denial of exemption was based on technicalities. Citing various case laws, the Tribunal directed the AO to verify the Form 10B and allow the exemption under section 11.

Rectification Intimation under Section 154:
The assessee filed a rectification under section 154, which was not successful. The CIT(A) upheld the rectification denial, stating that section 154 can only be invoked to correct errors apparent from the record. The Tribunal found that the rectification application was not considered by the CPC and that the denial of exemption was based on technical grounds. Relying on precedents, the Tribunal directed the AO to allow the exemption under section 11 after verifying the Form 10B filed by the assessee.

Interpretation of CBDT Circulars:
The assessee relied on a CBDT circular clarifying the condonation of delay in filing Form 10B for certain assessment years. The Tribunal noted that the Audit Report was filed before the processing of the return, and the denial of exemption was unjustified. Citing relevant case laws and High Court decisions, the Tribunal directed the AO to verify the Form 10B and allow the exemption under section 11.

Separate Judgment:
The appeal was allowed for statistical purposes, and the order was pronounced on 13th December 2023.

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