Section 11 Exemption Cannot Be Denied for Belated Form 10B Once Delay is Condoned: ITAT [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) ruled that where the delay in filing the audit report in Form 10B has been duly condoned by the competent authority, exemption under Section 11 of the Income Tax Act, 1961 cannot be rejected at the threshold and must be examined on merits by the Assessing Officer (AO).

Cosmopolitan Education Society, Mumbai, the appellant in the case filed its return of income for the Assessment Year 2019-20 as Nil income after claiming exemption of ₹19.19 crore under Section 11 of the Income Tax Act, 1961. The return was processed by the Centralised Processing Centre (CPC), which denied the exemption on the ground that the audit report in Form 10B had not been electronically filed on or before the due date of filing the return.

The denial of exemption resulted in an adjustment under Section 143(1)(a) of the Income Tax Act, 1961. The assessee challenged this adjustment before the National Faceless Appeal Centre [CIT(A)]. Parallelly, an application seeking condonation of a delay of 133 days in filing Form 10B was filed before the Commissioner of Income Tax (Exemptions) [CIT(E)].

Also Read:[Breaking] ITR Refund of Rs. 5.37cr not Paid to Microsoft Corp India for 8 Years: Delhi HC orders Refund with Interest [Read Order]

The CIT(E) rejected the condonation application, and relying on this rejection, the appellate authority dismissed the assessee’s appeal. The rejection of the condonation application was subsequently challenged before the jurisdictional High Court, which resulted in the favour of the appellant.

Kumar Kale representing the appellant contended that the requirement of filing Form 10B along with the return of income is directory in nature and not mandatory. Additionally, since the audit report was available before completion of the assessment proceedings, exemption under Section 11 of the Income Tax Act, 1961 could not be denied merely on procedural grounds. Further, the rejection of the condonation application by the CIT(E) had no bearing on the appellate proceedings, especially when the matter was sub judice before the High Court.

Narender Kumar Choudhry, Judicial Member, and Bijyananda Pruseth, Accountant Member constituting the bench noted that the jurisdictional High Court had subsequently quashed the order passed by the CIT(E) and had condoned the delay of 133 days in filing Form 10B.

Also Read:[Breaking] ITR Refund of Rs. 5.37cr not Paid to Microsoft Corp India for 8 Years: Delhi HC orders Refund with Interest [Read Order]

In view of this order, the Tribunal held that the sole basis on which the exemption was denied, no longer survived. The Tribunal ruled that once the delay in filing the audit report stood condoned by the High Court, the assessee’s claim under Section 11 of the Income Tax Act, 1961 was required to be examined on merits.

Accordingly, the Tribunal directed the AO to verify the claim of exemption under Section 11 and allow the same in accordance with law. The appeal was allowed for statistical purposes.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates