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November 30, 2022

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Non-filing of the audit report with Form 10B

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Charitable Trust: Non-filing of audit report in Form 10B along with the return of income is only a procedural defect that can be rectified- Mumbai ITAT

There are many cases in which the benefit of deduction under section 11 has been denied to a charitable trust on the ground that the audit report in Form No. 10B has not been filed by the assessee. It may be noted that section 11 is also mandatory for filing an audit report for claiming exemption under section 10B. Rather, submission of audit reports along with the return of income is a pre-condition for claiming deduction under section 11 of the Act.

Even CPC, Bengaluru while processing the return is not giving the benefit of deduction processing the return if Form No. 10B is not filed by the assessee before filing the return.

This issue is highly controversial and results in a huge tax liability on charitable trusts.

Here is a landmark judgment delivered by ITAT Mumbai in the matter of Savitri Foundation, B-601 Prasad Apartment, Janta Market, Bhandup (West) Mumbai 400 078. PAN: AAFAS-9569-J Vs ITO in which it is held that the benefit of exemption under section 11 cannot be denied if otherwise, the assessee is eligible to claim the same. In the first appeal before CIT (A), the case was dismissed only on the ground that the audit report in the prescribed form was not filed along with the return.

On appeal before ITAT Mumbai, the active part of paras 5, 6 and 7 was observed as under:

  1. In my view, the non-filing of the audit report in Form 10B along with the return of income is only a procedural defect which can be rectified. If the audit report was available with the assessee at the time of filing the return of income and was not filed for genuine reasons, the benefit of exemption under section 11 cannot be denied if otherwise, the assessee is eligible to claim the same. Is.
  1. The Hon’ble Bombay High Court in CIT Vs Mumbai Metropolitan Regional Iron and Steel Market Committee (Supra) has held that late filing of required documents will not debar the assessee from availing the benefit of section 11 of the Act. Thus, in the facts of the case and in the light of the judgment of the Hon’ble Bombay High Court, I consider it appropriate to restore the file back to the Assessing Officer for Denovo assessment, after considering the audit report filed by the assessee. law.
  1. In consequence, the impugned order is set aside and the appeal is allowed by the assessee for statistical purposes.

The order was pronounced in open court on Monday, the first day of August 2022.

Though the ITAT has decided the issue in favour of the assessee, in every case the issue will continue to be prosecuted. It would be better if the CBDT gives a human touch to the provision relating to charitable trusts in case of late filing of Form No. By issuing 10B exemption guidelines.

The copy of the ITAT Mumbai order is as follows:

Charitable Trust: Non-filing of audit report in Form 10B along with the return of income is only a procedural defect that can be rectified- Mumbai ITAT

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