2025 (9) TMI 653 - AT - Income Tax

Filing prescribed audit report after return but within extended due date meets section 12A(1)(b) for sections 11 and 12 exemption

Jhaiji Shikshan Samiti Versus Dy. Commissioner of Income Tax, Exemption Circle, MP

ITAT held that filing the prescribed audit report after filing the return but within the extended statutory due date satisfies compliance under section ... Denial of exemption u/s 11 & 12 - filing of audit report after filing return of income but within the prescribed/extended due date - HELD THAT:- Filing of report by that date ensures the compliance stipulated u/s 12A(1)(b) of the Act for the purpose of claiming exemption u/s 11 and 12 of the Act. Since in the present case the required audit report in prescribed form was filed by the appellant well within the extended due date, therefore the appellant substantively complied with the provisions of law in establishing its eligibility for the purpose of claiming exemption u/s 11 and 12 of the Act. There was no violation of any condition attributed to filing the audit report when filed either before filing of return or after filing of return so long as the same was filed well within the due date prescribed for. Therefore, the action of the tax authorities below in holding the filing of audit report post filing of return as defective is vacated. The impugned order thus set-aside and the Ld. CPC directed to allow the benefit of exemption of section 11 and 12 of the Act to the appellant. The grounds thus stands allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether filing the audit report in Form No. 10B after filing the return of income, but within the extended due date prescribed under section 44AB and related extensions, disentitles a charitable trust/institution from claiming exemption under sections 11 and 12? ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether the temporal sequence of filing-i.e., audit report filed after return-affects compliance with section 12A(1)(b) and entitlement to exemptions under sections 11 and 12. Legal framework: Section 12A(1)(b) conditions entitlement to exemptions under sections 11 and 12 on furnishing by the specified date the audit report in the prescribed form (Form No. 10B) as required by section 44AB; cross-references include rules under section 139 (filing of return) and rule 17B of the Income Tax Rules for Form No. 10B. The statutory language requires furnishing 'by that date' the audit report referred to in section 44AB. Precedent treatment: The Tribunal considered decisions of coordinate benches relied on by the assessee (identified in the record) supporting the view that filing the audit report within the extended due date suffices even if it is after filing the return. The order does not indicate reliance on any contrary higher-court authority overruling that position; Revenue relied on departmental orders and the authorities below. Interpretation and reasoning: The Tribunal examined the scheme of the relevant provisions and the factual matrix of statutory extensions. The original due date for both return and audit report was extended twice by the competent authority (CBDT/orders under section 119), ultimately to a specified extended date. The Tribunal read the phrase 'by that date' in section 12A(1)(b) against that extended deadline and concluded the statutory condition is met if the audit report is filed by the prescribed/extended date even if the return had been filed earlier. The Tribunal reasoned that the purpose of the condition is substantive compliance with the audit-report requirement by the specified date, not a formal requirement that the audit report and return must be filed concurrently. The denial by the Revenue rested solely on the sequence (audit report filed after return), which the Tribunal found immaterial where both documents were filed within the extended period authorized by the competent authority. Ratio vs. Obiter: Ratio - The operative ratio is that compliance with section 12A(1)(b) is satisfied where the audit report in Form No. 10B is furnished by the specified/extended date under section 44AB, irrespective of whether it was filed before or after the return, and such compliance preserves entitlement to exemptions under sections 11 and 12. Obiter - Observations regarding the policy rationale for extensions granted by CBDT and the general critique of a 'plain and stricter interpretation' advanced by Revenue are ancillary to the dispositive conclusion. Conclusions: The Tribunal set aside the denial of exemption where the audit report was filed within the extended due date, despite being filed after the return; the sequence of filing did not disentitle the assessee from exemptions under sections 11 and 12. The Tribunal directed the assessing/processing authority to allow the exemption. Issue 2 (connected): Effect of statutory extensions under section 119/CBDT orders on the mandatory timelines under sections 12A and 44AB. Legal framework: Section 119/administrative powers of CBDT to extend time-limits; section 44AB prescribes the date by which audit reports must be furnished; section 12A(1)(b) conditions exemption on furnishing the report 'by that date.' Precedent treatment: The Tribunal accepted the practical effect of CBDT/section 119 extensions as determinative of the 'specified date' for compliance; it relied on the factual admission that both return and Form 10B were filed within the final extended date. Interpretation and reasoning: The Tribunal treated the extended date granted by the CBDT as the operative 'specified date' within the meaning of section 12A(1)(b). Where both return and audit report are filed by that operative date, there is substantive compliance with the statutory pre-condition. Consequently, the Tribunal rejected the Revenue's contention that the audit report must accompany the return at the time of filing, when the statutory deadline permits later submission within the extended period. Ratio vs. Obiter: Ratio - Administrative extensions validly alter the operative timeline for compliance; meeting the extended timeline satisfies section 12A(1)(b). Obiter - Discussion as to proportionality or fairness of technical rejections when statutory extensions exist. Conclusions: The Tribunal held that extensions issued by the competent authority effectively extend the 'by that date' timeline in section 12A(1)(b), and compliance with the extended deadline entitles the assessee to claim exemptions. Issue 3 (procedural): Whether summary processing under section 143(1) and subsequent rectification/appeal can sustain denial of exemption solely on the ground of sequence of filing. Legal framework: Processing under section 143(1) may deny exemptions if statutory conditions are not found satisfied on record; rectification under section 154 and appeal under section 246A are available remedies. Precedent treatment: The order treated the CPC's summary processing and subsequent rejection of rectification/appeal as reviewable on merits by the Tribunal, focusing on statutory compliance rather than procedural posture. Interpretation and reasoning: The Tribunal emphasized that the denial of exemption at summary processing was based solely on the sequence of filing and not on non-filing by the operative date. Since both return and audit report were within the extended due date, the Tribunal found the processing authority's denial to be legally unsustainable. The Tribunal therefore vacated the orders below and directed allowance of exemptions. Ratio vs. Obiter: Ratio - Administrative denial based solely on sequence of filing cannot stand where statutory requirements (including valid extensions) have been met; such denials are subject to correction on appeal. Obiter - None material beyond affirming appellate reviewability. Conclusions: The Tribunal allowed the appeal, set aside the orders of the processing and appellate authorities, and directed grant of exemption under sections 11 and 12 where Form No. 10B was filed within the extended statutory period despite being filed after the return.