The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) restored matter to allow exemption under Section 11 of the Income Tax Act, 1961 and held that non-filing audit report along with income tax returns ( ITR ) is procedural omission.

The only grievance raised by the assessee is that the CIT(A) erred in not granting exemption under Section 11 of the Income Tax Act on the reasoning that there was a delay in filing Form 10B i.e. audit report. The counsel for the assessee submitted that the CBDT Circular No. 16/2020 dated  19thJuly, 2022 has delegated the power to the Principal Commissioner/Commissioner of Income Tax to admit the application for the condonation of delay under Section 119(2) of the Income Tax Act with respect to the delay infilingForm10B for assessment year 2018-19 and subsequent assessment years on merit .

Accordingly, it was contended that the delay should be condoned, and assessee should be granted the exemption under Section 11 of the Income Tax Act. The DR contended that the assessee for condoning the delay in filing Form 10B of the Act was to move an application before the concerned Income Tax Authorities in pursuance to the CBDT Circular who were authorized to condone the delay after considering the merit of the case. As such, the AR cannot take shelter of CBDT Circular discussed above in the appeal pending before the ITAT.

The Coram comprising Waseem Ahmed ( Accountant Member ) observed that “Non filing of Audit Report along with return of income is a procedural omission and cannot be an impediment in law in claiming the exemption, we allow this appeal condoning the delay in filing the Audit Report in Form No. 10B. However, we also upon condoning the delay, restore the matter to the file of the CIT(A) to pass order in regard to the exemption claimed by the assessee strictly in accordance with law.”