Section 11 exemption cannot be denied to trust if Audit Report filed before completion of assessment

DCIT (Exemptions) Vs Nabajuga Educational And Charitable Trust (ITAT Cuttack)

At the outset, if the return filed on 31.10.2018 was not accompanied by the audit report, then it was incumbent upon the revenue to issue notice u/s.139(9) of the Act to treat the return filed by the assessee as defective. Admittedly, this has not been done. This could be because when intimation was issued the audit report was available on the records. Thus, the delay in filing of the audit report has already been condoned by the revenue and it no more lies in the mouth of the revenue to state that the assessee should be denied the benefit of Section 11 of the Act because the audit report has been filed delayed by one day. This being so, as it is noticed that the assessee has filed its audit report before the completion of the assessment, we are of the view that the finding of the ld. CIT(A) in deleting the disallowance and directing the AO to grant the assessee the benefit of Section 11 of the Act is on right footing and does not call for any interference.

FULL TEXT OF THE ORDER OF ITAT CUTTACK

The revenue has filed an appeal being ITA No.127/CTK/2012 against the order passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 17.12.2021 for the assessment year 2018-2019, in DIN & Order No.ITBA/NFAC/S/250/2021-22/1037882010(1). The assessee has also filed cross objection to the above appeal of the revenue.

2. On perusal of the appeal record, it is found that the appeal of the revenue is barred by 147 days. In this regard, a petition for condonation of delay has been filed by the revenue stating sufficient reasons for delay in filing the present appeal, to which the ld. AR did not object. In view of the above, we condone the delay of 147 days in filing the present appeal and appeal of the revenue is heard finally.

3. At the time of hearing, ld. AR submitted that he did not want to press the cross objection and has withdrawn the same. In this regard, ld. AR has also endorsed in the file to that effect. Consequently, the cross objection filed by the assessee is dismissed as withdrawn.

4. In the revenue’s appeal, it was submitted by the ld. CIT-DR that the assessee claims to be a charitable trust. The due date of filing of the return was 30.09.2018 for the impugned assessment year. The assessee filed its return of income on 31.10.2018 but the said return did not accompany with the audit report under Form 10B of the Act. It was submitted that the said Form 10B had been filed only on 01.11.2018. Consequently, while passing the intimation u/s.143(1) of the Act, the assessee was not given the benefit of exemption u/s.11 of the Act in respect of excess income over expenditure. It was the submission that the ld. CIT(A) condoned the delay of one day in filing of the audit report on the ground that the audit report was filed before the completion of the assessment and, therefore, the AO was to take into consideration the Form 10B and grant the assessee the benefit of exemption u/s.11 of the Act. It was the submission that the CBDT has issued Circular No.2/2020, dated 03.01.2020, wherein for the assessment year 2018-2019, the power to condone the delay upto 365 days has been granted only to the Commissioner of Income Tax u/s.119(2) of the Act and not to the CIT(A). It was the submission that the order of the ld. CIT(A) is liable to be reversed.

5. In reply, ld. AR vehemently supported the order of the ld. CIT(A).

6. We have considered the rival submissions. At the outset, if the return filed on 31.10.2018 was not accompanied by the audit report, then it was incumbent upon the revenue to issue notice u/s.139(9) of the Act to treat the return filed by the assessee as defective. Admittedly, this has not been done. This could be because when intimation was issued the audit report was available on the records. Thus, the delay in filing of the audit report has already been condoned by the revenue and it no more lies in the mouth of the revenue to state that the assessee should be denied the benefit of Section 11 of the Act because the audit report has been filed delayed by one day. This being so, as it is noticed that the assessee has filed its audit report before the completion of the assessment, we are of the view that the finding of the ld. CIT(A) in deleting the disallowance and directing the AO to grant the assessee the benefit of Section 11 of the Act is on right footing and does not call for any interference.

7. In the result, appeal of the revenue and cross objection of the assessee are dismissed.

Order dictated and pronounced in the open court on 27/12/2022.