Charitable trust's s.11 exemption vs delayed Form 10B audit report filing; delay treated as procedural, relief allowed

The dominant issue was whether exemption under s.11 could be denied solely for delayed filing of audit report in Form 10B and whether appellate authorities could grant relief despite such delay. The ITAT held that furnishing Form 10B along with the return is a procedural requirement; non-filing within time is a procedural omission that, in appropriate circumstances, cannot defeat a substantive claim to s.11 exemption. On the explanation that the auditor bona fide believed Form 10B was unnecessary due to nil income and resultant interpretational confusion, the ITAT condoned the delay, set aside the jurisdiction-based dismissal by the CIT(A), and restored the matter with a direction to allow s.11 exemption in accordance with law.

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Issues:
1. Denial of exemption u/s 11 of the Income Tax Act due to delay in filing Form 10B.

Detailed Analysis:
The appeal was filed by the assessee against the order passed by the Commissioner of Income Tax (Appeal) denying exemption u/s 11 of the Act. The main issue raised was the delay in filing Form 10B, the Audit Report. The assessee, a charitable society, filed its return of income for A.Y. 2021-22 declaring NIL income, which was processed by the Assessing Officer resulting in a total income of Rs. 39,32,700. The Commissioner dismissed the appeal stating lack of authority to entertain the condonation application for the delay in filing Form 10B.

The assessee contended that the delay was due to confusion in the interpretation of the law, as the auditors believed the society was not required to file the audit report since the total income was below the taxable threshold. The Central Board of Direct Taxes issued Circulars empowering authorities to condone delays in filing Form 10B. However, the Commissioner and Assessing Officer were not authorized under Section 119(2)(b) of the Act to grant condonation for the delay in filing Form 10B.

A similar matter was decided in favor of the assessee in another case, where the High Court held that non-filing of the Audit Report along with the return of income was a procedural omission and not a legal impediment to claiming exemption. The High Court emphasized that the substantive requirement was the availability of the audit report during assessment, even if not filed along with the return of income.

Based on the legal position and precedent set by the High Court, the Tribunal allowed the appeal, condoning the delay in filing the Audit Report in Form 10B. The matter was restored to the Commissioner to pass an order allowing exemption u/s 11 of the Act in accordance with the law. The appeal was allowed for statistical purposes, and the order was pronounced on 14.08.2024.

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