The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the benefit of accumulation of income under Section 11(2) of the Income Tax Act, 1961 shall be allowed when the audit report in form 10 is filed along with the Income Tax Return (ITR).
The assessee trust is registered under Section 12A of the Income Tax Act and with the Charity Commissioner of Bombay filed its return of income with income and expenditure account, balance sheet, and audit report in form No.10B declaring total income at Nil, which was subjected to scrutiny.
The Assessing Officer (AO) proceeded to assess the income at Rs.31,84,320/- on the ground that the assessee is not entitled to benefit of the accumulation of income under Section 11(2) of the Income Tax Act to the tune of Rs.31,84,320/- because form No.10 was furnished by the assessee beyond the due date of filing of income tax return as per Section 139(1) of the Income Tax Act.
The Two-member bench comprising of Kuldip Singh (Judicial member) and Amarjit Singh (Accountant member) held that filing of audit report in form No.10 by the assessee during the assessment proceedings was a valid compliance and as such seeking benefit of Section 11 of Income Tax Act based on audit report was admissible under the law. The bench directed the AO to extend the benefit claimed by the assessee under Section 11(2) of the Income Tax Act based on the audit report in form 10 filed during the assessment proceedings subject to verification. Thus, the appeal of the assessee was allowed.