Filing of audit report in Form No.10B for charitable exemption held procedural; delay condoned and exemption allowed on merits.

Filing of the audit report during assessment or appellate proceedings is a procedural requirement, not a substantive condition, so delay in submitting the audit report in Form No.10B is a curable defect; appellate authorities and ITAT relied on Gujarat HC precedents to condone the delay and therefore allowed the claim for charitable exemption on merits, holding denial of exemption solely for late filing was not justified.

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Issues: Whether denial of exemption under section 11 of the Income-tax Act, 1961 at the stage of processing under section 143(1) on the ground of delayed filing of audit report in Form No. 10B is sustainable where Form No. 10B was e-filed with the revised return under section 139(5) and was available on departmental records prior to issuance of the intimation.

Analysis: Relevant legal framework includes Section 11 (claim of exemption), processing under Section 143(1), filing of a revised return under Section 139(5), and the power to condone delay under Section 119(2)(b). The Tribunal examined the facts that the audit report in Form No. 10B was e-filed along with the revised return on 31.12.2022 and was on departmental records before the intimation dated 04.04.2023. The Tribunal reviewed binding decisions of the High Court and coordinate benches holding that filing of Form No. 10B is a procedural requirement and delay in filing is a curable defect; where the form is available on record during assessment or appellate proceedings, exemption under Section 11 cannot be denied solely for delayed filing. The Tribunal found that denial of exemption at the processing stage under Section 143(1) for a form already on record exceeded permissible adjustments under Section 143(1)(a) and that restoring the matter for verification of condonation instead of adjudicating on merits was not sustainable in law.

Conclusion: The denial of exemption under Section 11 on account of delayed filing of Form No. 10B is not justified where the audit report was filed with the revised return and available on record prior to issuance of the intimation; the appeal is allowed in favour of the assessee.

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