Karma Falya Trust Vs DCIT (ITAT Ahmedabad)
Introduction: The recent ruling by the Income Tax Appellate Tribunal (ITAT) Ahmedabad in the case of Karma Falya Trust vs. DCIT sheds light on the implications of failure to file an audit report along with the return of income. This article delves into the details of the case, analyzing the grounds of appeal, arguments presented, and the tribunal’s decision.
Detailed Analysis: The appeal filed by Karma Falya Trust contested the order passed by the Commissioner of Income Tax (Appeals) for the Assessment Year 2018-19. The primary issue revolved around the denial of exemption under Section 11 of the Income Tax Act due to the non-filing of an audit report along with the income tax return.
Despite the trust obtaining the audit report well before the return filing date, it was not submitted on the Income Tax Portal until a later date. Consequently, the exemption claimed by the trust was disallowed during the assessment proceedings.
During the appellate process, the trust argued that the delay in filing the audit report should not result in the denial of exemption under Section 11. Citing precedents and legal provisions, the trust contended that the filing of the audit report should be considered a procedural requirement rather than a substantive condition for claiming exemption.
The ITAT Ahmedabad, in its ruling, sided with the trust, emphasizing that the filing of the audit report is essential but not a nodal stage for compliance. As long as the audit report is available to the assessing officer before the assessment proceedings, the statutory requirement is fulfilled. Therefore, the tribunal directed the assessing officer to consider the audit report and grant the exemption under Section 11 to the trust.
Conclusion: The verdict by ITAT Ahmedabad in the Karma Falya Trust case serves as a significant precedent, clarifying the treatment of audit report filing in income tax proceedings. It underscores the importance of substantive compliance over procedural technicalities and highlights the need for a pragmatic approach in interpreting tax laws. Moving forward, taxpayers and professionals can draw upon this ruling to navigate similar situations, ensuring compliance with statutory requirements while safeguarding their entitlement to exemptions under the Income Tax Act.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against order dated 23.12.2022, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2018-19.
2. The assessee has raised the following grounds of appeal :-
“1. Whether on facts and in circumstances of the case and in law, Ld. Assessing Officer has erred in not allowing exemption of Rs. 15,37,255/- under Section 11 of the Act ?
2. Whether, on facts and in circumstances of the case and in law, Ld. Assessing Officer has erred in making adjustment of Rs. 15,37,255/- under Section 143(1) of the act ?
3. The assessee filed return of income for Assessment Year 2018-19 on 12.2018 declaring total income at Rs. Nil after claiming exemption of Rs.15,37,255/- under section 11 of the Income Tax Act, 1961. The return of income was processed under Section 143(1) of the Income Tax Act, 1961 on 30.09.2019 thereby disallowing the claimed exemption of Rs.15,37,255/- under Section 11 of the Act. The reason for the aforesaid disallowance was recorded by the CPC as under :-
“Assessee approved under Section 10(23C)(iv) or 10(23C)(v) or 10(23C)(vi) or 10(23C) (via) and claiming exemptions under sr. no.4i to 4viii in Part B-TI, but the Audit report in Form 10BB is not e-filed along with the return of income.”
4. Thus, the said claim of exemption was not allowed as application of income because the audit report applicable for trust was not filed on or before filing the income tax return. Thus, the disallowance is initiated because the Audit Report is not filed by the assessee alongwith return of income.
5. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. The Ld. AR submitted that when Form No.10B (R) w for trust is not filed alongwith return of income for any trust, but the same is filed during the assessment proceedings or appellate proceedings then exemption under Section 11 of the Act should not be denied on the ground that the Audit Report under Section 12A of the Act is not filed with Income Tax Return. In this regard, the assessee has given the details of filing of the return of income and the audit report alongwith the remark which is as follows :
