Denial of tax exemption due to missing audit report overturned after report filed during assessment; exemption allowed thereafter.

Denial of tax exemption was premised on non-filing of the audit report with the return, but the audit report was produced during assessment proceedings and had been prepared within time. The legal position applied treats filing of the audit report as a substantive requirement rather than a procedural nodal stage, so availability of the Report in Form 12B to the assessing officer during assessment satisfies the statutory requirement, entitling the assessee to exemption. The auditors failure to upload the report on the portal was held not to be imputable to the assessee, and the exemption was therefore allowed.

---

---

Issues: Whether exemption under Section 11 of the Income-tax Act, 1961 claimed by a trust can be disallowed solely because the statutory audit report (Form 10B) was not e-filed with the original return when the audit report was prepared before the return filing and subsequently produced during assessment/appellate proceedings.

Analysis: The matter requires assessment of whether filing of the audit report is a substantive condition precedent to claiming exemption under Section 11 or a procedural requirement as to the stage of e-filing. The statutory framework concerning exemption under Section 11 and registration/audit under Section 12A must be read to determine if availability of an audit report prepared within time but uploaded later satisfies the legislative requirement. Precedential rulings of the High Court treating the audit report filing as substantive compliance where the report was prepared and made available to the assessing authority before completion of assessment are relevant. On the facts, the audit report was prepared on 31.10.2018 (i.e. prior to the return filing date) though the auditor uploaded it later; the audit report was thus available and produced during assessment/appellate proceedings. Procedural lapse in e-filing by the auditor does not negate substantive compliance where the report exists and is placed before the assessing authority before assessment is concluded. The appellate authority therefore had jurisdiction and grounds to allow the exemption by treating the belated filing as satisfying the statutory requirement.

Conclusion: The exemption under Section 11 is allowable because the audit report was prepared before the return filing and was produced during the assessment/appellate proceedings; the disallowance based solely on non e-filing with the original return is not justified.

---