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Judgment
PER S. RIFAUR RAHMAN, AM :
This appeal is filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)] dated 07.07.2025 for the Assessment Year 2022-23 raising the following grounds of appeal :-
“Ground No.1 That on the facts and circumstances of the case and in law, the assessment order passed order passed by the Ld. AO and order passed by the Hon'ble CIT(A) are bad in law and liable to quashed.
Ground No.2 That on the facts and circumstances of the case and in law, the Ld. AO/ Hon'ble CIT(A) has erred in rejecting exemption u/s 11 of the Act merely on the ground that Form 10B was not filed within the due date (i.e. 07 October 2022) without appreciating the fact that the Appellant has duly filed the said Form 10B before the due date of filing of return of income as specified in section 139(l) and was also available with the Ld. AO while passing the impugned assessment order.
Ground 2.1 That on the facts and circumstances of the case and in law, the Ld. AO/ Hon'ble CIT(A) has grossly erred in not appreciating that it has been held by number of courts and tribunal that the compliance(including furnishing of audit report or certificate) made before the completion of assessment should be considered as sufficient compliance of the provisions of the Act and benefit to the taxpayer.
Ground 2.2 That on the facts and circumstances of the case and in law, the Hon'ble CIT(A) has grossly erred in not considering and differentiating the judgement of Hon'ble Supreme Court in case of CIT v. G.M. Knitting Industries (P.) Ltd. [2016] 71 taxmann.com 35 (SC) as relied upon by the assessee.”
Brief facts of the case are, the assessee was incorporated as a non-profit organisation under section 25 of the Companies Act 1956. Its primary object is to promote charitable activities in the field of water sustainability, climate change, waste management, energy management, development, empowerment, heading living and education and to promote the cultural and heritage of India. During the year under consideration against donation receipt of Rs.7,40,00,000, the expenditure stood at Rs.7,58,46,000 with the donation given for projects executed at Rs.6,19,76,000/-. Original due date of furnishing of audit report was extended to 07.10.2022 by the Circular No.19/2022 dated 30.09.2022 issued by the CBDT. Audit Report in Form 10B filed and there was a delay of 12 days. The assessee filed return of income u/s 139(1) of the Income-tax Act, 1961 (for short ‘the Act’) claiming exemption u/s 11. The AO passed the assessment order u/s 143(3) read with section 144B of the Act denying its claim of exemption on the ground that audit report had not been filed in time. The CIT(A) upheld this finding of the AO relying upon judgment of Hon’ble Apex Court in PCIT vs. Wipro Ltd. (2022) 446 ITR 1. Aggrieved assessee is in appeal before us.
Considered the rival submissions and material place on record. We observed that the only basis for denial of legitimate claim of the assessee is that the audit report in Form 10B has not been filed in time. We observed that the assessee was claiming the benefit u/s 10B(8) of the Act and as per the provisions of section 10B, the assessee has to comply certain conditions failing which the assessee will loose the benefit. In the present case, the assessee has to file the audit report in Form 10B before the due date as per Rule 12A(1)(b) of the Rules. We observed that the above conditions of filing the Form 10B was relaxed by the CBDT in the earlier assessment years, therefore, it clearly shows that it is only directory in nature and not mandatory, since, it is in compliance with Rules framed for availing the benefit under the provisions of Section 11 and it is held that to be directory in nature. We further observed that this issue is squarely covered by the decision of Hon’ble Madras High Court in the case of Shri Chandraprabhuji Maharaj Jain Juna Mandir Trust Tax case Appeal No.517 of 2019, wherein it is held as under:
“8.As noted by us earlier, the assessee filed the return of income for the assessment year under consideration on 02.04.2009, which was processed and intimation under Section 143(1) of the Act was issued on 21.01.2011. Thus, there was no assessment under Section 143(3) of the Act. The assessee, while filing the petition under Section 154 of the Act, on 22.03.2011, pointed out that the assessee filed the Form No.10 along with the Board Resolution along with the covering letter dated 01.04.2019. However, the mistake done by the assessee was to file hard copies before the Assessing Officer, and not filing the same along with the return of income, which they filed on 02.04.2019. Thus, on the date when the return was taken up for assessment, there was record to show that the assessee had intimated the department about the resolution passed by the Board of the assessee Trust and the statutory Form No. 10. Admittedly, the assessment was not completed under Section 143(3) of the Act and therefore, there would have been no error had the assessing officer taken up the copy of the Board Resolution and Form No.10. Thus, on the date when the return was filed, the assessee had separately filed Form No. 10 along with the Board Resolution along with a covering letter dated 01.04.2009. Thus, in our considered opinion, when the assessee was entitled to a statutory benefit, it would be incumbent upon the concerned authority to examine the admissibility of the benefit than to foreclose the assessee on technicalities.”
Further we observed that Hon’ble Gujrat High Court in the case of CIT-IV vs. Xavier Kelavani Mandal (P.) Ltd. 221 taxman 43 (Guj-HC)held as under:
“4.The question whether it is permissible to the assessee to produce the audit report at the appellate stage, has already been answered by this court in CIT v. Gujarat Oil & Allied Industries Ltd. [1993] 201 ITR 325 (Guj.), wherein it is held that the provision regarding furnishing of audit report along with the return has to be treated as a procedural provision, It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income, but produced before completion of the assessment. The Punjab and Haryana High Court in CIT v. Shahzadanand Charity Trust [1997] 228 ITR 292 has reiterated the same principle holding that the benefit of exemption should not be denied merely on account of delay in furnishing the same, and it is permissible for the assessee to produce the audit report at a later stage either before the Income Tax Officer or before the appellate authority by showing a sufficient cause. This decision of Punjab & Haryana High Court has been relied on by the Tribunal.
5.In the above view, the Tribunal is eminently justified both in law and on facts in observing and holding as under.-
"In this case, it is not in dispute that the audit report in prescribed form was obtained prior to filling of the return on 20/12/2006; therefore, there was no reason for the assessee to keep the audit report with it in order to lose the exemption. The assessee in the earlier as well as in the subsequent assessment years filed the audit report and got the exemption. The conduct of the assessee in earlier year and subsequent years would prove that due to the facts stated above there was delay in filing the audit report and the contention of the assessee was supported by the affidavit of Mohmad Iqbal Vohra (PB-4). The learned CIT(A) on proper appreciation of the facts and material on record in the light of the decisions of the Hon'ble Punjab & Haryana High Court and the Hon'ble Calcutta High Court rightly directed the AO to accept the audit report of the assessee and grant exemption u/s. 11 of the IT Act."
The facts in the case of Wipro Ltd. (supra) relied upon by the ld. CIT (A) is distinguishable as there was a change in the assessee's claim which is not so in the case relied upon by the ld. CIT (A), hence not applicable to the present case.
Respectfully following the aforesaid decisions, we are inclined to allow the claim made by the assessee and, accordingly, we direct the Assessing Officer to allow the claim of the assessee u/s 11 and 12 of the Act.
In the result, the appeal filed by the assessee is allowed.