Audit report u/s 12A (to be filed by trust or charitable institution) is directory not mandatory

The Income Tax Appellate Tribunal (ITAT) in the case of Ram Sharan Khajani Devi Memorial Charitable Society Vs. Income Tax Officer (ITO) held that the Audit Report in Form 10BB is not required to be filed along with the return but can be filed upto completion of the assessment. Provision of filing of audit report in form 10BB is a directory in nature and not mandatory.

In this matter, the assessee is a registered charitable society that filed its return of income claiming exemption u/s 11 of the Income Tax Act (Act).  While processing the return, the Assessing Officer (AO) disallowed the exemption on the ground of not furnishing the audit report in form 10BB along with the return of income. The assessee in its appeal before the CIT (A) submitted that the audit report was filed belatedly but the AO did not act upon it so as to allow exemption u/s 11. The CIT (A) sustained the addition made by the AO. Aggrieved by the decision passed by the CIT (A), the assessee filed appeal before ITAT.

The learned counsel for the assessee submitted before the ITAT that the assessee had filed an audit report within the prescribed time along with a return of income. Further the ld. Counsel submitted that the Hon’ble High Court in the case of CIT Vs. Web Commerce (India)(P)Ltd. held that the provision of section 10B are directory and not mandatory. Once the audit report is filed before the framing of the assessment, the requirement of the provisions stands complied. Ld.counsel also submitted that the Hon’ble High Court in the case of CIT Vs. Hardeodas Agarwalla Trust 198 ITR 511, held that filing of audit report u/s 12A(b) along with the return is only directory and not mandatory and it is sufficient if the assessee filed the audit report before completion of the assessment. Accordingly, ld. Counsel submitted that the learned CIT(Appeals) was not justified in holding that form No. 10B had not been filed in time even though the assessee had made the desired compliance.

ITAT Order

The ITAT in its order said that a perusal of the return of income filed by the assessee shows that the assessee had got its accounts audited and the same was furnished along with the return. The ITAT by relying on other judgments held that since the assessee had got its accounts audited before the due date and had undisputedly filed the same before the completion of the assessment, therefore, ITAT is of the considered opinion that the learned CIT(Appeals) is not justified in denying the claim of exemption u/s 11 on the allegation that form No. 10B has not been filed in time. Accordingly, the order of the learned CIT(A) is set aside and the grounds raised by the assessee on this issue are allowed.