Procedural filing of audit report cannot defeat exemption claim when Form 10B was already on record.

Entitlement to exemption under sections 11 and 12 was upheld where the audit report in Form 10B had been dated and filed along with the return, and both were already on record when the return was processed. The Tribunal treated the filing requirement as procedural and held that, even if there was any delay during the peak Covid period, it should not have been viewed adversely where the report was available to the Department. Denial of exemption on a late-filing objection was described as hyper-technical, and the disallowance made in rectification proceedings under section 154 was held unsustainable.

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Issues: Whether the assessee was entitled to exemption under sections 11 and 12 of the Income-tax Act, 1961 when the audit report in Form 10B had been issued and filed along with the return, and whether denial of the claim on the basis of alleged late filing of the form was justified in rectification proceedings under section 154.

Analysis: The audit report was dated 04.12.2020 and was filed along with the return of income on 10.02.2021. The return and audit report were both available with the Department when the return was processed. The denial of exemption was based on the view that the form had not been filed within the prescribed time limit, but the Tribunal treated the requirement as procedural in nature. It held that the delay, if any, occurred in the peak Covid period and should not have been viewed adversely where the report was already on record. The Tribunal further held that the revenue had taken a hyper-technical view in denying the exemption under sections 11 and 12.

Conclusion: The assessee was entitled to the exemption claimed under sections 11 and 12, and the disallowance made in rectification proceedings was not sustainable.

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