Income Tax Appellate Tribunal - Indore
Smt. Chouthi Bai Agrawal Dharmik Avm ... vs Office Of Income Tax, Exemption, ... on 8 May, 2026
आयकर अपीलीय अिधकरण, इंदौर ायपीठ, इंदौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI B.M. BIYANI, ACCOUNTANT MEMBER
AND
SHRI PARESH M. JOSHI, JUDICIAL MEMBER
ITA Nos.17 & 18/Ind/2026
Assessment Years:2014-15 & 2015-16
Smt. Chouthi Bai Agrawal ITO(Exemption) Ward
Dharmik AVM Parmarthik Indore
Trust,
12, Shri Ram Nagar, बनाम/
Keshar Bagh, Vs.
Indore
(Assessee/Appellant) (Revenue/Respondent)
PAN: AACTS9574P
Assessee by Shri Pranay Goyal, AR
Revenue by Shri Ashish Porwal, Sr. DR
Date of Hearing 04.05.2026
Date of Pronouncement 08.05.2026
आदेश / O R D E R
Per B.M. Biyani, A.M.:
The captioned two (2) appeals for Assessment-Year ["AY"] 2014-15 & 2015- 16 are preferred by same assessee against two (2) separate orders of first-
appeal, both dated 31.10.2025 and passed by learned Commissioner of Income-Tax (Appeals)-Addl/JCIT(A)-1, Chandigarh ["Ld. CIT(A)"], which in turn arise out of respective orders of rectification dated 18.05.2023 passed u/s 154 by ITO, Exemption Ward, Indore ["Ld. AO"].
Page 1 of 15Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16
2. Since the underlying facts and controversy between assessee and revenue authorities are identical in these matters, they were heard together and are being disposed by this single order.
3. At first, we re-produce the relevant portion of impugned order passed by Ld. CIT(A) [identical order has been passed by Ld. CIT(A) in both matters]:
"4.3 The appellant's submission has been carefully perused. The appellant had stated that it was registered u/s 12AA of the Act and it did not file Form10B while filing the return of income. The core issue in the instant appeal is delay in filing Form 10B and the appellant had pleaded before the undersigned to give relief and argued that mere delay in submission of Form 10B cannot result in denial of exemptions claimed u/s 11 of the Act. The Hon'ble ITAT Ahmedabad Bench 'SMC' in the case of Association of Indian Panelboard Manufacturer vs. Deputy Commissioner of Income-tax [2022] 143 taxmann.com 418 (Ahmedabad - ITAT)[22-07-2022) had delivered its observation that here there was delay in filing Form No.10B, assessee was required to approach jurisdictional Commissioner/Director of Income-tax to condone delay in filing Form 10B; Commissioner (Appeals) had no power to condone such delay as per section 119(2)(b). The excerpts of the decision is reproduced hereunder: -
"Section 119 of the Income-tax Act, 1961 Central Board of Direct Taxes - Instructions to subordinate authorities (Condonation of delay in filing Form No. 10B) Assessment year 2018-19 Assessee, a charitable institution registered under section 12AA, claimed exemption under section 11 - On filing original retum of income, assessee was communicated by Assessing Officer that assessee had not filed Audit Report - Immediately thereafter, assessee filed Audit Report in Form 10B by uploading same in electronic mode - Central Processing Centre denied exemption under section 11 for want of submission of Form No. 10B-On appeal, Commissioner (Appeals) held that Form 10B shall be submitted electronically with effect from 1-4-2016 applicable for assessment year 2016-17 and as per CBDT Circular No. 273, dated 3- 6-1980, CBDT had authorized jurisdictional Commissioner/Director of Income-tax to condone delay in filing Form 10B, and Commissioner (Appeals) did not have any power under section 119(2)(b) to condone delay in filing Form 10B Thus, Commissioner (Appeals) dismissed assessee's appeal holding that assessee had remedy before jurisdictional Commissioner/Pr. Commissioner/Director of Income-tax for condoning delay in filing Form 108 and claiming benefit of section 11-It was noted that assessee was well aware that there was a delay in filing Form 10B, however assessee seemed to have not made any Page 2 of 15 Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 application for condonation of delay in filing Form 10B before concerned Pr. Commissioner/Commissioner/Director of Income-tax as provided under section 119(2)(b)"
5. In light of the above Hon'ble ITAT Ahmedabad Tribunal's decision, the CIT(Appeals) don't have jurisdiction to decide the admittance of form 10B. Therefore, specified authorities would be Pr. CCIT/CCIT/CIT (Exemptions) of the appellant's jurisdiction on the basis of the number of delay in filing the Form 10B. In view of the above facts, the grounds raised by the appellant is dismissed.
6. In the result, the grounds raised by the appellant is dismissed."
4. Thus, the Ld. CIT(A) has at first noted in Para 4.3 of above order that the core issue in present matter is the delayed filing of Audit Report [Form No. 10B] by assessee. This observation of Ld. CIT(A) is correct as the facts on record show that for AY 2014-15, the assessee filed Audit Report [Form No. 10B] on 29.06.2015 whereas the specified date for filing the same was 30.11.2014 and the AO passed intimation u/s 143(1) on 19.02.2016. And for AY 2015-16, the assessee filed Audit Report [Form No. 10B] on 29.09.2015 whereas the specified date for filing the same was 31.08.2015 and the AO passed intimation u/s 143(1) on 25.03.2017. The Ld. CIT(A) has thereafter quoted an excerpt from the decision of ITAT, Ahmedabad in case of Association of Indian Panel board Manufacturer Vs. Deputy Commissioner of Income-tax (2022) 143 taxmann.com 418 (Ahmedabad - ITAT), order dated 22.07.2022 and relying upon same, given his conclusion, against assessee, in Para 5 of above order.
5. We, however, find that against the above decision of ITAT, Ahmedabad relied by Ld. CIT(A), the assessee went in Tax Appeal No. 655 of 2022 Page 3 of 15 Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 before Hon'ble Gujrat High Court whereupon the Hon'ble Gujrat High Court, vide their Judgement & Order dated 21.03.2023, reversed ITAT's order. We re-produce below the order of Hon'ble High Court:
"2. The present Tax Appeal under Section 260A of the Income Tax Act, 1961 is directed against judgment and order dated 22.7.2022 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in Income Tax Appeal No.24 of 2022 for the assessment year 2018-19. The appeal filed by the assessee came to be dismissed.
3. The facts are that the appellant which is a charitable trust registered under Section 12AA of the Income Tax Act, 1961 (hereinafter referred to as 'the Act), filed return of income on 31.12.2018, in respect of the assessment year 2018- 19 declaring total income to be nil, after claiming exemption of Rs. 1,37,628/- under Section 11(1) of the Act, and also exemption to the extent of Rs. 46,62,372/- under Section 11(2) of the Act.
3.1 It is the case of the petitioner that by inadvertance it did not file alongwith the return of the income, the audit report in Form 10B. The Form 10B was admittedly filed however electronically on 7.12.2019. On the same date intimation was given by the income tax authority denying exemptions claims under Section 11(1) and 11(2) of the Act on the ground that the appellant assessee had not filed audit report in Form 10B alongwith return of income.
3.2 The appellant preferred appeal against the said decision of denial of exemption reflected in communicated by intimation dated 7.12.2019. The Commissioner of Income Tax (Appeals) - the appellate authority dismissed the appeal on 24.12.2021. Thereafter the assessee preferred the appeal before the Tribunal which was dismissed on 22.7.2022, to become order impugned herein.
3.3 This court issued notice for final disposal on 6.12.2022 observing inter alia that the following substantial questions of law arise for consideration.
"1. We have heard learned Senior Advocate Mr.Tushar Hemani assisted by Ms.Vaibhavi Parikh for the appellant. He has relied upon judgement delivered by this Court in the case of Commissioner of Income-tax v. Mayur Foundation reported in [2005] 274 ITR 562 (Gujarat) and in the case of Commissioner of Income-tax- IV v. Xavier Kelavani Mandal (P.) Ltd. reported in [2014] 41 taxmann.com 184 (Gujarat) and submitted that there is no change in law from 1/04/1996, which would unsettle the position settled by this Court in both the aforesaid decisions.
2. The following substantial questions of law arise before this Court:Page 4 of 15
Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 "(i) Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in confirming the order of the respondent in denying the claim of exemptions under section 11(1) and 11(2) of the Act merely on the ground of belated filing of Audit Report in Form 10B, more so when such audit report was admittedly filed electronically well before the order denying such exemptions came to be passed ?
(ii) Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in not following the binding judgements of Hon'ble the jurisdictional High Court?
(iii) Whether the order passed by the Income Tax Appellate Tribunal is perverse inasmuch as the same is contrary to law laid down by the Hon'ble the jurisdictional High Court?"
Notice for final disposal, returnable on 13/12/2022."
4. Assailing the impugned judgment and order of Tribunal, following submissions were made on behalf of the appellant.
(i) Though Form 10B has been filed belatedly, the same was very much available on record when return on income was being processed under Section 143(1); hence, exemptions under Section 11(1) and 11(2) could not have been denied by the authorities.
(ii) Though the requirement of furnishing of audit report may be a mandatory requirement, the same to be filed along with return of income is held to be a procedural and therefore directory in nature.
(iii) Under the circumstances, even if Form 10B is filed at the later stage, the exemptions under Section 11(1) and 11(2) could not have been denied on that ground.
(iv) The tribunal failed to consider facts of the case and also the legal position in relation to requirement of filing audit report in Form 10B.
(v) The tribunal has erred in not appreciating that filing of application under Section 119 of the Act for condonation of delay in filing Form 10B is an additional remedy which does not affect the powers of appellate authority in dealing with issue of pertaining to delay in filing Form 10B.
(vi) The tribunal erred in referring to and relying upon amendments by Finance Act, 2015 which do not change the settled legal position in so far as the issue on hand is concerned.
(vii) The tribunal committed error in not following binding decision of the jurisdictional High Court and has further erred in distinguishing the same on erroneous grounds.Page 5 of 15
Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 4.1 In support of the above submissions, reliance was placed on the decisions of this court in CIT Vs. Mayur Foundation [(2005) 274 ITR 562], in CIT Vs. Xavier Kelavani Mandal P. Ltd [(2014) 41 taxmann.com 184], in CIT Vs. Andra Pradesh State Road Transport Corporation [(2006) 285 ITR 147] and CIT Vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust [(1992) 65 taxmann 273].
5. The decision of the Division Bench of this court in Xaviers Kelavni Mandal P. Limited (supra) leaves the issue no longer res integra. In that case Form 10B was not filed by the assessee alongwith the return of income, however the appellate authority permitted the assessee to file Form 10B audit report at the appellate stage and accepted the same to allow the exemption under Section
11. The department filed appeal which came to be dismissed.
5.1 The Division Bench of this court dismissed the appeal before it confirming the view taken observing that the provisions regarding filing of audit report was procedural in nature, "4. The question whether it is permissible to the assessee to produce the audit report at the appellate stage, has already been answered by this court in CIT Vs. Gujarat Oil & Allied Industries Ltd. [(1993) 201 ITR 325 (Guj.)], wherein it is held that the provision regarding furnishing of audit report along with the return has to be treated as a procedural provision. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income, but produced before completion of the assessment. The Punjab and Haryana High Court in CIT Vs. Shahzadanand Charity Trust [(1997) 228 ITR 292] has reiterated the same principle holding that the benefit of exemption should not be denied merely in account of delay in furnishing the same, and it is permissible for the assessee to produce the audit report at a later stage either before the Income Tax Officer or before the appellate authority by showing a sufficient cause. This decision of Punjab & Haryana High Court has been relied on by the Tribunal."
5.2 The decision of this court in Mayur Foundation (supra) stands to support the submission of the appellant. The decision in Rai Bahadur Trust (supra) of Culcutta High Court takes a same view as was taken as by this court in Xaviers Kelavni Mandal (supra). It that case the assessee- charitable trust filed the return of income but was not accompanied by audit report in Form 10B as required under Section 12A. The Culcutta High Court held that the provisions of Section 12A are directory in the sense that Assessing Officer are not powerless to allow an assessee to file audit report, if not filed alongwith return, anytime before completion of assessment.
5.3 Learned advocate for the respondent was not in position to dispute the law emanating from the decision of Xaviers Kelavani Mandal (supra) and the other decisions on the issue.
5.4 Recollecting the relevant dates, the income was filed on 31.8.2018. On 15.3.2019 Form 10B was filed electronically. On 7.12.2019 intimation under Page 6 of 15 Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 Section 143(1) of the Act was given to the appellant that the exemptions were denied, while processing the return of income on the ground that alongwith the return of income Form 10B was not filed.
5.5 It is to be observed in the present case that the Form 10B - the audit report, though was not filed with the return of income, the same was available with the Assessing Officer when he processed the return of income under Section 143(1) of the Act. The conditions for claiming exemption under Section 11 was satisfied. Although the requirement of furnishing report was mandatory, filing thereof is a procedural aspect. Even though the Form 10B was filed at a later stage, when it was part of the record of the Assessing Officer in course of the processing of the return of income, the Assessing Officer could not have denied the exemption claimed by the assessee under Sections 11(1) and 11(2) on the ground that the audit report was not filed.
5.6 The tribunal further committed an error in appreciating the import of Section 119(2)(b) of the Act in as much as the application contemplated thereunder is only additional remedy for the assessee which could not be said to be compulsorily resorted to by the assessee. The circular No. 7/18 dated 20.12.2018 issued under Section 119 of the Act could not be, therefore said to have taken away the appellate remedy.
5.7 The tribunal misdirected itself in yet another way when it observed that The Finance Act, 2015 with effect from 1.4.2016, that is from assessment year 2016-17 changed the legal position. There is no such change which could be said to have altered the legal position. The only change is with regard to compulsory filing of audit report in Form 10B in electronically form which is made mandatory under Rule 12(2) of the Income Tax Rules, 1962 but there is no change with regard to the substantive law about filing of audit report as stated above.
6. The moot aspect thus centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. Once the audit report in Form 12B is filed to be available with the Assessing Officer, before assessment proceedings take place, the requirement of law is satisfied. In that view, the Income Tax Tribunal was not justified in dismissing the appeal of the assessee.
6.1 The appellant assessee has to be held to be eligible and entitled to exemptions under Section 11(1) and 11(2) of the Act and the alleged ground of non-filing of audit report alongwith return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption.
6.2 Accordingly the substantial questions of law have to be decided in favor of the appellant.
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7. They are accordingly decided. The appeal is allowed."
[emphasis supplied]
6. Thus, in Para 5.6 of order, their Lordship have clearly held that the application contemplated u/s 119 is only an additional remedy for the assessee which could not be said to be compulsorily resorted to by the assessee. Further held that the circular No. 7/18 dated 20.12.2018 issued u/s 119 of the Act could not, therefore, be said to have taken away the appellate remedy. Therefore, the conclusion made by Ld. CIT(A) in Para 5 of impugned order (re-produced above) does not hold good and we reject the same.
7. In so far as the moot question of delayed filing of Audit Report [Form No. 10B] by assessee is concerned, the Hon'ble Gujrat High Court, in Para 6 & 6.1 of above order, clearly held that the filing of Audit Report [Form No. 10B] is a substantive requirement for claiming exemption u/s 11/12 but the mode and stage of filing is procedural. It was further held that once the Audit Report [Form No. 10B] is filed to be available with the AO before assessment proceedings take place, the requirement of law is satisfied.
Accordingly, the assessee was held to be eligible and entitled to exemption u/s 11 of the Act.
8. The ITAT, Indore has consistently accepted in numerous decisions that the requirement of filing Audit Report [Form No. 10B] in time is one of the conditions for claiming the benefit of exemption u/s 11/12 but it is a Page 8 of 15 Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 procedural-cum-directory requirement and even if the report is not filed in time but subsequently filed to AO, the exemption u/s 11/12 can't be denied.
A few decisions of ITAT, Indore are cited below:
(a) ITAT, Indore - Indore Contract Bridge Association Vs. CPC, Bangalore in ITA No. 403/Ind/2022 order dated 18.04.2023
(b) ITAT, Indore - Navratna Sukrat Foundation Vs. CPC, Bangalore, ITA No. 390/Ind/2022 dated 21.04.2023
(c) ITAT, Indore - DCIT Vs. Shri Vaishnav Polytechnic College, Indore ITA No. 469/Ind/2018 order dated 06.11.2020
9. The relevant paras of Indore Contract Bridge Association Vs. CPC, Bangalore in ITA No. 403/Ind/2022 order dated 18.04.2023, are also re-produced below:
"8. The exact controversy involved in these grounds is whether or not the assessee was entitled for exemption u/s 11/12 as claimed in the return of income, when the audit-report (Form No. 10B) was filed belatedly after processing of return u/s 143(1)?
9. Apropos to this issue, the precise facts are: The assessee is a charitable society registered u/s 12A of the Income-tax Act, 1961 and entitled for exemption u/s 11/12; accordingly it claimed exemption u/s 11/12 in the return of income. But when the AO processed return u/s 143(1) vide intimation dated 09.03.2019, he did not allow exemption u/s 11/12 for the reason that the audit report (Form No. 10B) was not filed by assessee with return of income. Subsequently after processing of return, the Form No. 10B was e-filed/uploaded on 03.04.2019 / 04.05.2019 before filing of first- appeal.
10. Ld. AR submitted that the assessee was engaged in charitable activities; that the registration granted to it by tax authorities u/s 12A was in force; that the assessee had been granted benefit of section 11/12 in preceding assessment-years as well as subsequent assessment-years. He further submitted that the assessee filed return of income on 03.08.2017 and prior to such filing, the accounts of assessee were duly audited on 08.06.2017, a copy of the audited-accounts is placed in the Paper-Book. However, the Page 9 of 15 Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 auditors of assessee failed to upload the audit-report alongwith the return of income. But, post-processing of return u/s 143(1) and before filing of first- appeal, the assessee arranged to get the audit-report e-filed/uploaded on 03.04.2019 / 04.05.2019. Ld. AR submitted that the CIT(A) has, without appreciating these facts, dismissed the appeal of assessee merely on a technical defect that the audit-report was not filed alongwith the return of income. Ld. AR submitted that except such technical defect, there is no other reason to deny the benefit of section 11/12 to assessee. Ld. AR submitted that the e-filing/uploading of audit-report is done by auditors and not by assessee; therefore the defect is not per se attributable to assessee. Ld. AR submitted that in any case, the defect is due to an inadvertent human error and the assessee should not be denied the legitimate exemption, when the assessee is genuinely doing charitable activities for the welfare of public and satisfying all conditions prescribed in income-tax law for being entitled to exemption. Ld. AR submitted that if the audit-report obtained by assessee on 08.06.2017 but filed on 03.04.2019 / 04.05.2019 is accepted, the assessee would be entitled to the benefit of exemption. Ld. AR placed a heavy reliance on the latest decision of ITAT in Savitri Foundation Vs. ITO, ITA No. 1925/Mum/2021 (AY 2018-19) order dated 01.08.2022 wherein the AO made processing of return u/s 143(1) denying exemption u/s 11 to assessee for the very same reason of non-uploading of audit report before filing of return but subsequently the assessee uploaded audit-report during the course of first-appeal; when the matter reached ITAT, the Mumbai Bench has allowed exemption to assessee. Ld. AR submitted that the decision taken by ITAT is directly applicable to assessee. Ld. AR also submitted that the decision of Hon'ble Supreme Court in Wipro Ltd. 446 ITR 1 relied upon by Ld. CIT(A) is quite distinguishable for the reasons that (i) the said decision involved deduction u/s section 10B whereas the present-appeal is concerned with exemption u/s 11/12; and (ii) the said decision involved interpretation of sub-section (8) of section 10B which is a negative provision i.e. it provides that if the assessee did not want to apply section 10B, then the assessee had to file a declaration but this is not a case in section 11/12.
11. Per contra, Ld. DR vehemently defended the orders of lower-authorities and submitted that furnishing of audit-report alongwith return of income is a pre-condition for allowability of exemption u/s 11. Since the assessee has not fulfilled such condition, the lower-authorities have rightly denied the assessee's claim of exemption u/s 11 and there is no infirmity in the action of lower-authorities.
12. We have heard rival contentions of both sides and examined the present controversy in the light of judicial decisions. At first, we are convinced that the controversy is directly settled in favour of assessee by decision in Savitri Foundation (supra) where the Hon'ble Mumbai ITAT, following the decision of Hon'ble Mumbai High Court in CIT vs. Mumbai Metropolitan Regional Iron & Steel Market Committee 378 ITR 103 has observed and held thus:
"4. Submissions made by rival sides heard, orders of authorities below examined and the case law on which the ld. Authorized Representative Page 10 of 15 Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 of the assessee placed reliance considered. The assessee is a charitable trust registered under section 12AA of the Act and has been purportedly enjoying the benefits of section 11 since 2011. In the impugned assessment year, the benefit of exemption under section 11 of the Act has been denied to the assessee for the reason that assessee has failed to furnish audit report along with return of income. The contention of the ld. Authorized Representative of the assessee is that the audit report was available with the assessee at the time of filing of return of income however due to inadvertent error the assessee failed to upload Audit Report in Form 10B along with e-filing of return of income. Non-filing of Audit Report is a bonafide error. The assessee has placed on record Audit Report dated 19/10/2018 in the prescribed Form 10B at page 15 of the Paper Book. The assessee after receiving the intimation under section 143(1) of the Act uploaded the Audit Report on 18/04/2020 in First Appellate proceedings.
5. In my considered view non-filing of Audit Report in Form 10B along with Return of Income is merely a procedural defect which is rectifiable. If the Audit Report was available with the assessee at the time of filing of Return of Income and was not filed due to bonafide reasons the benefit of exemption under section 11 cannot be denied if otherwise assessee is eligible to claim the same.
6. The Hon'ble Bombay High Court in the case of CIT vs. Mumbai Metropolitan Regional Iron & Steel Market Committee (supra) has held that late filing of required documents would not disentitle the assessee from availing benefit of section 11 of the Act. Thus, in the facts of the case and in the light of decision of Hon'ble Bombay High Court, I deem it appropriate to restore the file back to Assessing Officer for de novo assessment after considering the audit report field by the assessee, in accordance with law.
7. In the result, impugned order is set aside and appeal by assessee is allowed for statistical purposes."
13. We also gainfully refer another recent decision of ITAT, Ahmedabad Bench in the case of M/s Shardaben Education Trust, Gandhinagar Vs. ITO, Ahmedabad, ITA No. 2312/Ahd/2018, order dated 16.11.2022 where a similar controversy has been decided in favour of assessee, after following the decisions of Hon'ble Gujrat High Court in CIT vs. Gujarat Oil & Allied Industries reported in 201 ITR 325 and CIT vs. Mayur Foundation reported in 274 ITR 562. The relevant paragraphs of the order of ITAT are as under:
"12. We have heard the rival contentions of both the parties and perused the materials available on record. As per the provisions of section 12A(1)(b) of the Act, it is necessary for the assessee in order to claim exemption under section 11 of the Act to get the accounts audited as well as obtain the audit report in the prescribed form from the qualified chartered accountant which is to be filed along with the return Page 11 of 15 Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 of income. Admittedly, in the case on hand the assessee has not filed form 10B being the audit report along with the return of income and the same was also not filed till the completion of the assessment order as well as appellate order by the learned CIT-A. As such the order of the learned CIT(A) was passed dated 30th November 2017 whereas the Form 10B of the audit report was filed/uploaded dated 25th December 2017 which evidences that the audit report in Form 10B was filed subsequent to the appellate order by the learned CIT-A. At this juncture it is also pertinent to note that the audit report in the prescribed form was prepared and signed by the qualified chartered accountant dated 5th September 2014 much before the date of filing the return of income by the assessee. Thus, it appears that report for the audit in the prescribed form was prepared well in time but it was filed belatedly.
12.1 Now the controversy arises whether the assessee can claim the benefit of exemption under section 11 of the Act in a situation where the audit report in the prescribed form was not filed along with return of income. In this context we note that act of the assessee to file the audit report duly signed by the qualified chartered accountant is a procedural requirement and the courts have held that the assessee cannot be denied the benefit for which it is entitled in the event of any procedural contravention specified under the provisions of the Act. In holding so we draw support and guidance from the judgment of Hon'ble Gujarat High Court in case of CIT vs. Gujarat Oil & Allied Industries reported in 201 ITR 325, the relevant extract of the judgment is reproduced as under:
"In our view, the aforesaid reasoning of the Allahabad High Court and the Patna High Court would squarely apply to the facts of the present case. The provision about furnishing of the auditors' report along with the return has to be treated as a procedural provision, directory in nature, and its substantial compliance should suffice, meaning thereby that such report should be made available by the assessee to the Assessing Officer latest when the question of framing of assessment is taken up by the Income-tax Officer and when he applies his mind to the claim of the assessee and if by that time, the assessee has put his house in order and has furnished the report of the auditor for supporting the return, he can be said to have satisfied the requirement of section 80J(6A) of the Act."
12.2 In view of the above we hold that the assessee cannot be denied the benefit of exemption for which it is entitled merely on the lapse of procedural requirement i.e. delay in filing the audit report in the prescribed form. In the judgment cited above, it was provided that the audit report was filed by the assessee before the completion of the assessment. In other words, the compliance of the law was made by the assessee when the assessment proceedings was pending before the AO whereas in the case on hand the assessee complied the Page 12 of 15 Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 requirement at the stage of appellate proceeding before tribunal. Thus, a question arises before us whether the principles laid down in the judgment cited above can be applied in the given facts and circumstances. In this context we note that, in the judgment cited above it was observed that procedural requirement for filing the audit report was fulfilled by the assessee before the completion of the assessment. But the facts of the case on hand are different in so far the audit report was filed by the assessee after the completion of the assessment framed under section 143(3) of the Act. In this regard we note that the assessment remains pending if any appeal is pending before the higher forum. In other words, if any appeal is pending either before the ld. CIT- A or before the ITAT which transpires the fact that the assessment is pending. In holding so we draw support and guidance from the judgment of Hon'ble Gujarat High Court in case of CIT vs. Mayur Foundation reported in 274 ITR 562, wherein it was held as under:
"Thus, the proceedings before the Tribunal are meant to correctly assess the tax liability of an assessee: If this be so, it follows that the assessment proceeding cannot be said to be complete and is pending till the appeal is heard and disposed of by the Tribunal and the order of the Tribunal is given effect to by the assessing authority by computing the correct tax liability of an assessee. In other words, whether an assessee is required to pay tax or becomes entitled to a refund, would be ascertained by the assessing authority after giving effect to the order of the Tribunal."
12.3 Admittedly, the appeal was pending before the ITAT at the time when the audit report in form 10B was filed which transpires that the assessment has not reached to the finality and therefore principle laid down by the Hon'ble High Court of Gujarat in the case of CIT vs. Gujarat Oil & Allied Industries (Supra), that the requirement for filing the audit report is a procedural requirement, can be applied in the given facts and circumstances. Therefore, the benefit for which the assessee is entitled cannot be denied."
14. Respectfully following these decisions, we are of the view that in the present case, the assessee can't be denied the benefit of exemption u/s 11 as claimed in the return of income for mere delay in filing of audit-report. We, therefore, deem it fit to remand this matter back to the file of AO for a fresh assessment after considering the audit-report filed by assessee, in accordance with law. These grounds are accordingly allowed."
10. Therefore, in the light of decision of Hon'ble Gujrat High Court re-
produced above as well as the pre-existing decisions of ITAT, Indore narrated above, we find that the assessee can't be denied the benefit of Page 13 of 15 Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 exemption u/s 11/12 as claimed in return of income for mere delay in filing of Audit Report [Form No. 10B], when the assessee has in fact filed such report, though belatedly but before processing of assessee's return u/s 143(1). Respectfully following these precedents, we too hold that the assessee cannot be denied exemption u/s 11/12 as claimed. However, the claim of exemption u/s 11/12 involves a different type of working based on application and accumulation of income. Therefore, we restore this issue to the file of the AO for the limited purpose of recomputing the income and allowing exemption in accordance with law, after accepting the Audit Report [Form No. 10B] filed by assessee. The assessee succeeds accordingly in both of these appeals.
11. Resultantly, these appeals are allowed for statistical purpose in terms indicated above.
Order pronounced in open court on 08/05/2026
Sd/- Sd/-
(PARESH M. JOSHI) (B.M. BIYANI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore
िदनांक /Dated : 08/05/2026
Patel/Sr. PS
Page 14 of 15
Smt. Chouthi Bai Agrawal Dharmik Avm Parmarthik Trust ITA No. 17 & 18/Ind/2026 - AYs: 2014-15 & 2015-16 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order E COPYSr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore Page 15 of 15