Case Law Details
Saraswati Bal Kalyan Nyas Vs ITO (Exemption) (ITAT Indore)
The appeal before the Income Tax Appellate Tribunal (ITAT), Indore, arose from an order of the CIT(A)-II, Indore dated 15 February 2018 for Assessment Year 2014-15. The assessee, a society registered under Section 12AA of the Income Tax Act, challenged the rejection of its rectification application and the denial of exemption benefits under Sections 11 and 12.
The assessee had filed its e-return on 13 November 2014 declaring nil income. The return was processed under Section 143(1) by the Central Processing Centre (CPC) on 28 February 2016, resulting in a demand of ₹11,54,915 on a total income of ₹59,07,380. Subsequently, the assessee filed an application under Section 154 seeking rectification of the intimation. It contended that it had filed Form No. 10 for accumulation or setting apart of income amounting to ₹1,25,00,000, but the same had not been considered by the CPC. The assessee also furnished Form No. 10B, Form No. 10, and other supporting documents before the Assessing Officer. However, the rectification application was rejected, and the CIT(A) also upheld the rejection.
Before the Tribunal, the assessee argued that the authorities had failed to properly appreciate the facts and had ignored Form No. 10 and other documents. It was submitted that judicial precedents permitted consideration of audit reports and prescribed forms even when filed subsequently, provided they were available before completion of assessment. Reliance was placed on decisions of the Calcutta High Court, Punjab & Haryana High Court, and Delhi High Court. The assessee also referred to CBDT Instruction dated 9 February 1978, which states that exemption under Sections 11 and 12 should not be denied merely because of delay in furnishing the auditor’s report.
The Revenue supported the orders of the lower authorities.
The Tribunal noted that the Revenue had not disputed the assessee’s contention that Form No. 10 had been sent to the office of the Commissioner of Income Tax, Bhopal. According to the Tribunal, if the document had been submitted to an office lacking jurisdiction, it should either have been returned with proper guidance or transmitted to the appropriate authority. The Tribunal further observed that the CBDT’s instructions specifically provide that exemption available under Sections 11 and 12 should not be denied solely on account of delay in furnishing the auditor’s report where reasonable circumstances exist.
Relying on the judicial precedents cited and the CBDT instructions, the Tribunal held that denial of exemption on such technical grounds was not justified. It observed that procedural requirements relating to filing of audit reports and prescribed forms should not defeat a claim where substantive conditions for exemption were otherwise satisfied. Accordingly, the Tribunal set aside the orders of the Assessing Officer and the CIT(A) and directed the Assessing Officer to allow the assessee’s claim in accordance with law. The appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT INDORE
This appeal by the assessee is directed against order of the CIT(A)-II, Indore dated 15.02.2018 pertaining to the assessment year 2014-15. The assessee has raised following grounds of appeal:-
1. The Ld. CIT(A) has erred in confirming the order of the Ld. A.O. and not rectifying the mistakes as pointed out by the assessee.
2. The Ld. CIT(A) has failed to appreciate that the assessee has sent Form number 10 along with the copy of resolution to the Ld. CIT, Bhopal and the said form was filed online on 4.2.2017.
3. The Ld. CIT(A) has failed to appreciate the fact that the accumulation column was filed in and depicted in the subsequent column by mistake which could be rectified by considering Form No.10 filed subsequently online and also sent through post.
4. The demand raised by intimation u/s 143(1) may please be cancelled and the order may please be rectified.
5. The assessee prays to alter, amend, add or delete any of the grounds of appeal.
2. The briefly stated facts are that the assessee filed E-return on 13.11.2014 declaring total income at Nil. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) by Central Processing Centre on 28.2.2016, raising demand of Rs.11,54,915/- on total income of Rs.59,07,380/-. The assessee filed an application for rectification u/s 154 of the Act on 20.1.2017 praying therein for rectification of mistake on the ground that the assessee is a society duly registered u/s 12AA(1)(b)(i) of the Act vide order dated 9.1.2008. It was stated that it had filed Form No.10 for accumulation or set apart of income at Rs.1,25,00,000/-, which was not taken into account and demand was raised by the CPC. The assessee also filed a copy of audit report in ‘Form No.10B’ and ‘Form No.10’ along with other documents before the A.O. However, the A.O. rejected this application. Against this, the assessee preferred an appeal before the Ld. CIT(A), who also dismissed the appeal and sustained the finding of the A.O. Now the assessee is in appeal before this Tribunal.
3. Ld. Counsel for the assessee submitted that both the authorities have failed to appreciate the fact in right perspective and failed to take note of the fact that the assessee had filed Form No.10 and other documents. Ld. Counsel for the assessee submitted that the law is well settled that if audit report is submitted subsequently, even then, the authorities should consider such audit reports and the form, which was submitted later on. Ld. Counsel for the assessee submitted that under the identical facts, Hon’ble High Court of Calcutta in the case of CIT Vs. Hardeodas Agarwalla Trust (1992)198 ITR 511 has held that the assessee could file the audit report at any time before the completion of assessment report. Ld. Counsel for the assessee relied on the Judgement of Hon’ble Punjab & Haryana High Court rendered in the case of National Horticulture Board Vs. CCIT (2009) 319 ITR 0074. Further reliance is also placed on the Judgement of the Hon’ble Delhi High Court rendered in the case of Association of Corporation & Apex Societies of Handlooms Vs. Assistant Director of Income Tax in ITA Nos.523 to 526 of 2012 dated 10.1.2013.Further, Ld. Counsel for the assessee submitted that the CBDT in it’s instruction F. No.267/482/77-IT(Part) dated 9.2.1978, wherein it has been instructed that the exemption as available to such Trust u/s 11 & 12 of the Act may not be denied merely on account of delay in furnishing the auditor’s report.
4. Ld. D.R. opposed these submissions and supported the orders of the authorities below.
5. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. We find the both the authorities have rejected the claim of the assessee on the basis that there is no mistake apparent from the records. The revenue has not rebutted the submissions of the assessee that it had sent Form No.10 to the office of the CIT, Bhopal on 2.12.2016. This fact shows that form No.10 was sent before the processing of return. It is not that the Ld. CIT Bhopal has no jurisdiction, even otherwise, it was expected said document either ought to have been returned advising the assessee to submit before appropriate office through the mode prescribed or otherwise, suo-moto transmitted to such office giving consideration of the fact that form No.10 was sent through registered post and coupled with the fact that CBDT itself had issued instruction vide F.No. 267/482/77-IT(Part) dated 9.2.1978. In this respect the A.O. ought to have given the benefit as available u/s 11 & 12 of the Act to the assessee as per law. This view is reinforced by the case laws relied by the Ld. Counsel for the assessee. The Hon’ble Calcutta High Court in the case of CIT Vs. Hardeodas Agarwalla Trust (supra) has categorically held in para-16 & 17 of the Judgement as under:
“16. In our view, the result of ignoring such return or the audit report will be denial of exemption to the trust although the income has been spent for charitable or religious purposes. This was not intended by the legislators. If an assessee fails to obtain the audit report in the prescribed form before the assessment is completed, he may not, ordinarily, be entitled to get the benefit of exemption. In this case, however, as we have indicated, the assessee was not given an opportunity to file the audit report in the prescribed form which was available with the assessee before the assessment was completed. In such a case, the appeal being a continuation of the original proceedings, the appellate authority has the power to accept the audit report and direct the Assessing Officer to redo the assessment. The appellate authority has plenary powers in disposing of an appeal and the scope of his power is coterminous and co-extensive with that of the Assessing Officer. He may, therefore, consider and decide any matter arising out of the proceedings in which the order appealed against is passed. He can do what the Assessing Officer can do and direct him to do what he has failed to do. Such powers are, however, subject to the limitation that what an Assessing Officer could not do validly, the first appellate authority also cannot do in appeal. This question, however, does not arise in this case as the assessee was entitled to file the audit report before the completion of the assessment with or without a revised return for the purpose of curing the defect in the original return filed without the audit report.
17. For the reasons aforesaid, we are of the view that, on the facts of this case, the Tribunal came to a correct conclusion”.
6. Further, the Hon’ble High Court of Punjab & Haryana in the case of National Horticulture Board Vs. CCIT (supra) after considering the fact that the audit report was not filed along with the return and the exemption u/s 10(23C) of the Act was rejected. The Hon’ble Court has held as under:
“The view taken in the impugned order is highly technical. The provision having been substantially complied with, the audit report should have been taken into account even if, strictly speaking, it was not filed with the return and not in Form 10BB but in Form 10B as stated in the impugned order. This made no difference to the spirit of the requirement laid down.”
7. The CBDT has issued instructions in this regard, which reads as under:
“171. Requirement of filing audit report along with return, whether mandatory
1. The Board have considered whether the requirement under section 12A(b) of filing audit report ‘along with the return of income’ is mandatory so as to disentitle the trust from claiming exemption under sections 11 and 12 in case of omission to furnish such report in the prescribed form along with the return.
2. Normally, it should be possible for a charitable or religious or institution to file the auditor’s report along with the return of total income, where such trust or institution claims exemption under sections 11 and 12. However, in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report the exemption as available to such trust under sections 11 and 12 may not be denied merely on account of delay in furnishing the auditor’s report and the Income-tax Officer should record reasons for accepting a belated audit report.”
8. In the light of the above, we hereby set aside the orders of the authorities below and direct the A.O. to allow the claim of the assessee in accordance with law. The grounds of the assessee are allowed in the terms indicated herein above. The appeal filed by the assessee is allowed.
9. In the result, the appeal filed by the assessee in ITA No.296/Ind/2018 for the A.Y. 2014-15 is allowed.
Order was pronounced in the open court on 30.07.2019.
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