Failure To file Audit Report along with return of income by Auditor: ITAT directs to allow exemption u/s 11 of the Income Tax Act [Read Order]

The Ahmedabad bench Income Tax Appellate Tribunal ( ITAT ) while directing to allow exemption under section 11 of the Income Tax Act, 1961 held that the auditor failed to file the audit report along with the return of income.

In this case the assessee, Karma Falya Trust filed return of income for Assessment Year 2018-19 by  declaring total income at Rs. Nil after claiming exemption of Rs.15,37,255/- under section 11 of the Income Tax Act, 1961.

Subsequently the return of income was processed under Section 143(1) of the Income Tax Act hereby disallowing the claimed exemption of Rs.15,37,255/- under Section 11 of the Income Tax Act. The disallowance is initiated because the Audit Report is not filed by the assessee alongwith return of income.

Aggrieved by the Assessment Order, the assessee filed an appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

Before the tribunal the Assesee representative (AR) Divyang Shah, argued that  when Form No.10B (R) w for trust is not filed alongwith return of income for any trust, but the same is filed during the assessment proceedings or appellate proceedings then exemption under Section 11 of the Income Tax Act should not be denied on the ground that the Audit Report under Section 12A of the Act is not filed with Income Tax Return.

Therefore the non-compliance as per the Audit Report under Section 12A of the Act is a procedural lacuna and thus when the Audit Report was filed, the same should have been taken on record.

Santosh Kumar, the Department representative (DR) argued that the assessee has filed the Audit Report beyond the mandatory date as given in the Income Tax Statute and, therefore, the CIT(A) has rightly rejected the same.

It was observed by the tribunal that  In the present case also, the assessee obtained the Audit Report dated 31.10.2018 from the Auditor but could not file the same on Income Tax Portal. Thus, the audit report was prepared well within the time.

Thus, the CIT(A) should have taken cognisance of the same and the Assessing Officer should have also taken into account Audit Report for allowing the exemption under Section 11 of the Income Tax Act to the assessee. Therefore  the single member bench Suchitra Kamble (Judicial Member) allowed the appeal filed by the assessee.

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