Assessee granted section 11 exemption despite failing to reflect Form 10B audit report filing in return

ITAT Pune allowed the appeal and granted exemption under section 11. The assessee filed Form 10B audit report through e-portal on 26.12.2020, prior to one month of the due date for filing return of income (15.02.2021), satisfying compliance requirements under section 12(1)(b)(ii) read with section 44AB. Although the assessee failed to reflect the audit report filing in the return of income, ITAT considered this a technical error and pardoned the inadvertent omission. The tribunal set aside the lower authority's order denying exemption.

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Issues:
1. Denial of exemption under section 11 due to the timing of filing Form No. 10B.
2. Disallowance of entire expenditure claimed towards the trust's object.
3. Adjustment made by the Assessing Officer beyond the scope of section 143(1).

Analysis:

Issue 1: Denial of exemption under section 11
The appellant contested the denial of exemption under section 11 by the Ld. Addl./JCIT(A)-1, Jaipur, citing that Form No. 10B was filed before the processing of the return under section 143(1) of the Income Tax Act. The Tribunal noted that the return of income and audit report in Form 10B were filed on 26.12.2020, but the CPC disallowed the exemption and expenses claimed. The Ld. Addl./JCIT(A)-1, Jaipur upheld the denial of exemption, emphasizing the mandatory requirement of filing Form No. 10B in due time. However, the Tribunal found that the audit report in Form 10B was filed before the due date for furnishing the return of income, meeting the requirements of section 12(1)(b)(ii) read with section 44AB. Consequently, the Tribunal set aside the order of Ld. Addl./JCIT(A)-1, Jaipur and allowed the claim of exemption under section 11 and 12 of the IT Act.

Issue 2: Disallowance of entire expenditure
The CPC disallowed all expenses claimed by the appellant, leading to the denial of exemption under section 11. The Tribunal observed that the audit report in Form 10B was filed before the extended due date for filing the audited return, satisfying the statutory requirements. Despite the technical error of not reflecting the audit report in the return of income, the Tribunal pardoned this inadvertent mistake. It held that the compliance with section 12(1)(b)(ii) read with section 44AB was fulfilled by filing the audit report before the specified date. Consequently, the Tribunal allowed the appellant's claim for exemption under section 11 and 12 of the IT Act.

Issue 3: Adjustment beyond the scope of section 143(1)
The appellant challenged the adjustment made by the Assessing Officer, contending that denying the entire expenditure and exemption under section 11 was beyond the scope of section 143(1). The Tribunal found that the CPC's disallowance was based on the non-mention of the audit report in the return, categorizing it as a non-audit return erroneously. However, considering the timely filing of the audit report and meeting the statutory requirements, the Tribunal concluded that the denial of exemption and expenses was unjustified. Therefore, the Tribunal set aside the order of Ld. Addl./JCIT(A)-1, Jaipur and allowed the appellant's appeal, granting the exemption under section 11 and 12 of the IT Act.

This comprehensive analysis of the judgment highlights the issues raised by the appellant, the arguments presented, and the Tribunal's findings and conclusions for each issue involved in the case.

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