Assessee entitled to section 11 exemption despite belated Form 10B filing, delay can be condoned

ITAT held that assessee was entitled to exemption u/s 11 despite belated filing of Form 10B. The tribunal ruled that since the return was filed within section 139 time limits, CIT(E) could condone the delay in Form 10B filing. The court emphasized that while Form 10B is substantive, its filing is procedural and delay cannot be fatal to the claim. Since Form 10B was filed before return processing u/s 143(1)(a) and assessment order u/s 143(3), the exemption was allowed. Appeal was allowed and AO was directed to delete the addition.

---

---

Issues Involved:
1. Rejection of Form 10B audit report.
2. Taxation of gross receipts without allowing expenditure.
3. Rejection of exemption claim u/s 10(23C)(iiiad).
4. Impact of filing return electronically with exemption claimed u/s 11 instead of u/s 10(23C)(iiiad).

Summary:

1. Rejection of Form 10B Audit Report:
The assessee's appeal challenges the rejection of Form 10B audit report, which was belatedly uploaded. The Ld. CIT (Appeals) faceless erred in rejecting the audit report dated 07.09.2018 for A.Y. 2018-19, uploaded on 14.10.2019, disagreeing with the jurisdictional M.P. High Court judgment and a prior ITAT Jabalpur order. The court noted that filing of Form No. 10B is a procedural requirement and its late submission should not be a hurdle in claiming exemption u/s 11 & 12 of the Act, especially when it is filed before the finalization of the assessment.

2. Taxation of Gross Receipts Without Allowing Expenditure:
The Ld. CIT (Appeals) faceless taxed the entire gross receipts of Rs. 96,45,397/- without allowing the expenditure claimed/incurred, showing NIL income u/s 10(23C)(iiiad) in the original ITR filed on 01.10.2018. The court found that the exemption was incorrectly denied by CPC in the intimation dated 31.01.2020 due to the late filing of the audit report in Form No. 10B, which was uploaded on 14.10.2019.

3. Rejection of Exemption Claim u/s 10(23C)(iiiad):
The Ld. CIT (Appeals) faceless wrongly applied the case of Goetze India Ltd Vs CIT, rejecting the claim u/s 10(23C)(iiiad) despite the claim being made in the original ITR and during assessment proceedings u/s 143(3). The court emphasized that the procedural delay in filing Form No. 10B should not disentitle the assessee from claiming the exemption.

4. Impact of Filing Return Electronically with Exemption Claimed u/s 11 Instead of u/s 10(23C)(iiiad):
The assessee filed the return electronically claiming exemption u/s 11 but showed NIL income u/s 10(23C)(iiiad) in part B-TI-8C. The court held that this inadvertent error should not deprive the assessee of the exemption, referencing CBDT Circular No. 14 of 1955. The court also referred to various judicial pronouncements supporting the view that procedural delays in filing Form No. 10B should not be fatal to the claim of exemption.

Conclusion:
The appeal of the assessee was allowed, and the AO was directed to delete the addition and allow the exemption claimed u/s 11 and 12 of the Act. The judgment emphasized that procedural requirements should not override substantive rights, and delays in filing audit reports can be condoned to avoid undue hardship.

Order Pronounced:
The order was pronounced in the open court on 19th June 2024.

---