Can i use air filter that is one inch smaller
Filters only work if the air has to go through them. The filter has air resistance and a gap doesn't, so if you leave a 1" gap, a disproportionate amount of air will flow through the hole, effectively making the situation even worse. 

If it is a choice of a smaller filter or nothing, at least do something like glue or tape a cardboard filler piece to the filter to make up the right size. The smaller filter area will behave like a filter that is already partially dirty, but you could use it temporarily.