2025 (5) TMI 1480 - AT - Income Tax

Denial of exemption u/s 11 - assessee s failed to ensure compliance of filing of tax audit report in Form 10B within the prescribed due date of filing of return under section 139(1) - mandatory or directory compliance - HELD THAT -We find no merit in the Revenue s foregoing argument in principle in light of Sarvodaya Charitable Trust Vs. 2021 (1) TMI 214 - GUJARAT HIGH COURT having settled the issue in assessee s favour and against the department that the above compliance to filing of Form 10B tax audit report is directory than a mandatory provision which could even be uploaded during appellate proceedings as well. We thus accept the assessee s instant substantive grounds in both these appeals in principle and leave it open for the AO to framed his consequential computation as per law after verifying all the relevant facts. Assessee appeal allowed.

Summary

The Appellate Tribunal (ITAT Dehradun) addressed twin appeals for AY 2020-21 and 2021-22 against orders of the CIT(A)/NFAC under section 154 of the Income-tax Act, 1961. The issue concerned denial of section 11 exemption due to the assessee's failure to file the prescribed tax audit report in Form 10B by the due date of the section 139(1) return filing. The Revenue contended that filing Form 10B timely was mandatory and barred exemption under a principle of stricter interpretation.The Tribunal rejected the Revenue's argument, relying on the precedent in *Sarvodaya Charitable Trust Vs. ITO* (2021) 125 taxmann.com 75 (Guj.), which held that the requirement to file Form 10B is directory, not mandatory, and may be complied with even during appellate proceedings. Consequently, the Tribunal allowed the appeals in principle, directing the Assessing Officer to recompute the exemption after verifying relevant facts.The appeals (ITA Nos. 208 & 209/DDN/2024) were allowed for statistical purposes, with no other grounds pressed. The order was pronounced on 23rd April 2025.