Tribunal Upholds Deduction, Confirms Audit Report Validity Despite Late Filing Under Income Tax Act Section 11(2.

The Appellate Tribunal dismissed the Revenue's appeal, affirming the Ld. CIT(A)'s decision to allow the deduction under Section 11(2) of the Income Tax Act, 1961. The Tribunal concluded that the audit report in Form 10B, although not filed with the return, was submitted within the permissible time under Section 139(1), validating the assessee's claim.

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Issues:
Appeal against order of National Faceless Appeal Centre for A.Y. 2014-15 disallowing deduction under Section 11(2) of the Income Tax Act, 1961 due to non-filing of Form No.10 along with return of income.

Analysis:
The appeal was filed by the Revenue against the order of the National Faceless Appeal Centre (NFAC) for A.Y. 2014-15, where the assessee's claim for deduction under Section 11(2) of the Income Tax Act, 1961 was disallowed. The assessee had filed its return of income declaring Nil income as the entire income was claimed exempt under Section 11 of the Act. The claim for deduction was disallowed as Form No.10 was not filed along with the return of income. The assessee filed an application under Section 154 of the Act for rectification, which was rejected by the AO. The assessee then appealed before the First Appellate Authority, and the appeal was allowed.

The main issue raised in the appeal before the Appellate Tribunal was whether the Ld. CIT(A) erred in law in deleting the additions made by the Assessing Officer under Section 11(2) of the Income Tax Act, 1961 due to non-filing of Audit report in Form 10B along with the Income Tax Return, as mandated by Section 12A(1)(b) of the Act. The Revenue contended that Form No.10 was necessary for claiming exemption under Section 11 of the Act and was not filed along with the return of income. On the other hand, the assessee argued that Form 10 was filed within the due date as prescribed under the Act and Rules, and thus, the Ld. CIT(A) rightly allowed the claim.

Upon careful consideration of the facts, it was found that the return of income was filed by the assessee one day before the filing of Form No.10. The CPC disallowed the claim for deduction under Section 11(2) presumably due to the non-filing of Form No.10 along with the return of income. However, the deficiency was later corrected, and a revised return was filed. The audit report in Form 10B was filed on 30.11.2014, within the due date as prescribed. The Appellate Tribunal held that as long as the audit report is filed within the time allowed under Section 139(1) of the Act, the claim of the assessee must be allowed. Since the audit report was filed within the permissible time, the direction of the Ld. CIT(A) to allow the claim for deduction under Section 11(2) was upheld, and the appeal of the Revenue was dismissed.

In conclusion, the Appellate Tribunal dismissed the appeal preferred by the Revenue, upholding the decision of the Ld. CIT(A) to allow the deduction under Section 11(2) of the Income Tax Act, 1961 despite the audit report in Form 10B not being filed along with the return of income, as it was filed within the time allowed under the Act.

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