Case Law Details
Shardaben Education Trust Vs ITO (ITAT Ahmedabad)
ITAT held that the assessee cannot be denied the benefit of exemption for which it is entitled merely on the lapse of procedural requirement i.e. delay in filing the audit report in the prescribed form. In the judgment cited above, it was provided that the audit report was filed by the assessee before the completion of the assessment. In other words, the compliance of the law was made by the assessee when the assessment proceedings was pending before the AO whereas in the case on hand the assessee complied the requirement at the stage of appellate proceeding before tribunal. Thus, a question arises before us whether the principles laid down in the judgment cited above can be applied in the given facts and circumstances. In this context we note that, in the judgment cited above it was observed that procedural requirement for filing the audit report was fulfilled by the assessee before the completion of the assessment. But the facts of the case on hand are different insofar the audit report was filed by the assessee after the completion of the assessment framed under section 143(3) of the Act. In this regard we note that the assessment remains pending if any appeal is pending before the higher forum. In other words, if any appeal is pending either before the ld. CIT-A or before the ITAT which transpires the fact that the assessment is pending. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of CIT vs. Mayur Foundation reported in 274 ITR 562, wherein it was held as under:
Thus, the proceedings before the Tribunal are meant to correctly assess the tax liability o f an assessee: If this be so, it follows that the assessment proceeding cannot be said to be complete and is pending till the appeal is heard and disposed of by the Tribunal and the order of the Tribunal is given effect to by the assessing authority by computing the correct tax liability of an assessee. In other words, whether an assessee is required to pay tax or becomes entitled to a refund, would be ascertained by the assessing authority after giving effect to the order of the Tribunal.
Admittedly, the appeal was pending before the ITAT at the time when the audit report in form 10B was filed which transpires that the assessment has not reached to the finality and therefore principle laid down by the Hon’ble High Court of Gujarat in the case of CIT vs. Gujarat Oil & Allied Industries (Supra), that the requirement for filing the audit report is a procedural requirement, can be applied in the given facts and circumstances. Therefore, the benefit for which the assessee is entitled cannot be denied.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-9, Ahmedabad, dated 30/11/2017 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2014-15.
2. The assessee has raised following grounds of appeal:
1. The learned CIT( A) has erred both in law and on the facts of the case in confirming the action of AO of holding that the appellant is not eligible for exemption u/s.11 of the Act despite holding a valid registration u/s 12AA of the Act.
2. The learned C1T(A) has erred both in law and on the facts of the case in holding that appellant is eligible for deduction u/s. 11 r.w.s.!2A(l)(b) of the Act only if audited accounts and Form 10B are filed along with Return of Income. Such conditional grant of benefit of S.l l claim is against the true spirit and intent of granting such benefits under the scheme of the Act.
3. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
3. At the outset, we note that there was a delay in filing the appeal by the assessee for 252 days. It was explained by the assessee that it was very hopeful of getting the relief by the AO in pursuance to the directions provided by the learned CIT-A. Therefore, the assessee was waiting for the consequential/ appeal giving effect order of the AO after the order of the learned CIT-A. Therefore, the assessee chose not to file any appeal against the order of the learned CIT-A. However, upon receiving the appeal effect order dated 11 September 2018 wherein the benefit of exemption under section 11 of the Act was denied, the assessee immediately preferred an appeal to the ITAT with the delay of 252 days, upon the advice of the tax consultants. However, in this process the delay has occurred. The learned AR in support has also drawn our attention on the affidavit filed by the assessee which is available on record.
4. On the contrary, the learned DR opposed to condone the delay in filing the appeal by the assessee.
5. Heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, it seems that the assessee under the bona-fides believe did not file the appeal against the order of the learned CIT-A. Thus, we are of the view that on this count alone, the appeal of the assessee should not be dismissed on account of limitation particularly in a situation where there is meritorious case of the assessee on merit. We also note that the Hon’ble Gujarat High Court in the case of S.R. Koshti Vs. CIT reported in 276 ITR 165 has held as under:
18. The position is, therefore, that, regardless of whether the revised return was filed or not, once an assessee is in a position to show that the assessee has been over-assessed under the provisions of the Act, regardless of whether the over-assessment is as a result of assessee’s own mistake or otherwise, the CIT has the power to correct such an assessment under section 264(1) of the Act. If the CIT refuses to give relief to the assessee, in such circumstances, he would be acting de hors the powers under the Act and the provisions of the Act and, therefore is duty-bound to give relief to an assessee, where due, in accordance with the provisions of the Act.
19. In the present case, the respondent-CIT has nowhere stated that the petitioner is not entitled to the relief under section 10(10C) of the Act. In fact, the said position is undisputed. The Assessing Officer himself had passed an order under section 154 of the Act, granting such relief. In the circumstances, even the order under section 264 of the Act made on 293-2004, cannot be sustained.
20. A word of caution. The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. This Court, in an unreported decision in case of Vinay Chandulal Satia v. N.O. Parekh, CIT [Spl. Civil Application No. 622 of 1981 dated 20-8-1981], has laid down the approach that the authorities must adopt in such matters in the following terms:
“The Supreme Court has observed in numerous decisions, including Ramlal v. Rewa Coalfields Ltd. AIR 1962 SC 361, State of West Bengal v. Administrator, Howrah Municipality AIR 1972 SC 749 and Babutmal Raichand Oswal v. Laxmibai R. Tarte AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt. “
5.1 From the above it is revealed that the income of the assessee should not be over assessed even there is a mistake on the part of the assessee. As such the legitimate deduction for which the assessee is entitled should be allowed while determining the taxable income.
5.2 We also note that the Hon’ble Gujarat High Court in the case of Vareli textile industry versus CIT reported in 154 Taxman 33 wherein it was held as under:
It is equally well-settled that where a cause is consciously abandoned (as in the present case) the party seeking condonation has to show by cogent evidence sufficient cause in support of its claim of condonation. The onus is greater. One of the propositions of settled legal position is to ensure that a meritorious case is not thrown out on the ground of limitation. Therefore, it is necessary to examine, at least prima facie, whether the assessee has or has not a case on merits.
5.3 In view of the above and after considering the facts in totality, we are of the view that it is a fit case where the delay in filing the appeal by the assessee deserves to be condoned. Accordingly, we condone the delay in filing the appeal by the assessee before us and proceed to adjudicate the issue raised by the assessee on merit.
6. The only effective issue raised by the assessee is that the learned CIT(A) erred in holding that the assessee is not eligible for exemption under section 11 of the Act if audit report in form 10B was not furnished along with the return of income. The brief facts are that the assessee is a charitable trust registered with charity commissioner Mehsana since 11th October 2006 and also registered under section 12AA of the Act vide registration dated 12th November 2009. The assessee, for the year under consideration filed belated return dated 2nd June 2015 declaring an income of Rs. 15,26,210/- and the same was processed under section 143(1) of the Act.
7. The assessee before the AO filed a letter dated 22nd September 2016 wherein it was submitted that despite being eligible for deduction under section 11 of the Act, but it was omitted to claim the exemption under section 11 of the Act in the return of income due to error and lack of proper guidance from consultant. The assessee further submitted that it is unable to revise the return of income and correct the error for the reason that the original return was filed belated. Therefore, it should be provided with the benefit of section 11 of the Act and wrong tax paid for Rs. 3,79,020/- by way of TDS credit and self-assessment tax should be refunded. However, the AO vide order dated 09th November 2016 under section 143(3) of the Act rejected the claim of the assessee by holding that the claim of exemption under section 11 of the Act was not made in the return of income. Therefore, as per the provision of the Act and ratio laid down by the Hon’ble Supreme court in the case of Goetze (India) Ltd vs. CIT, the office of AO is not empowered to admit any claim which is not made in return of income.
8. On appeal by the assessee, the learned CIT(A) allowed the appeal of the assessee for statistical purpose with the following direction:
A. O is directed to verify whether appellant has its audited and has filed Form 10B alongwith return of income as per the details mentioned in section 12A(1)(b) of the Act. In cash the said condition has not been fulfilled by the appellant, then appellant would not be eligible to claim benefit of section 11 & 12 of the Act even though it is registered entity u/s.12AA of the Act. Subject to these remark and directions, if appellant has filed Audit Report alongwith Return of income, then it would be treated as exempt entity otherwise the income assessed by the A.O at Rs.15,26,210/- would be valid assessed income. The ground of appeal is allowed for statistical purpose subject to verification by A.O the above remarks.
9. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
10. The learned AR before us has filed a paper book running from pages 1 to 28 and contended that all the conditions specified under the provisions of section 11 of the Act have been duly complied with by the assessee except the procedural requirement of filing the audit report along with the return of income despite such audit report was obtained from the qualified chartered accountant much before the date of filing of return of income. Accordingly the learned AR it will cause genuine hardship to the assessee if it is denied the lawful benefit available to it under the provisions of the Act.
11. On the other hand, the learned DR before us vehemently supported the order of the authorities below.
12. We have heard the rival contentions of both the parties and perused the materials available on record. As per the provisions of section 12A(1)(b) of the Act, it is necessary for the assessee in order to claim exemption under section 11 of the Act to get the accounts audited as well as obtain the audit report in the prescribed form from the qualified chartered accountant which is to be filed along with the return of income. Admittedly, in the case on hand the assessee has not filed form 10B being the audit report along with the return of income and the same was also not filed till the completion of the assessment order as well as appellate order by the learned CIT-A. As such the order of the learned CIT(A) was passed dated 30th November 2017 whereas the Form 10B of the audit report was filed/ uploaded dated 25th December 2017 which evidences that the audit report in Form 10B was filed subsequent to the appellate order by the learned CIT-A. At this juncture it is also pertinent to note that the audit report in the prescribed form was prepared and signed by the qualified chartered accountant dated 5th September 2014 much before the date of filing the return of income by the assessee. Thus, it appears that report for the audit in the prescribed form was prepared well in time but it was filed belatedly.
12.1 Now the controversy arises whether the assessee can claim the benefit of exemption under section 11 of the Act in a situation where the audit report in the prescribed form was not filed along with return of income. In this context we note that act of the assessee to file the audit report duly signed by the qualified chartered accountant is a procedural requirement and the courts have held that the assessee cannot be denied the benefit for which it is entitled in the event of any procedural contravention specified under the provisions of the Act. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of CIT vs. Gujarat Oil & Allied Industries reported in 201 ITR 325, the relevant extract of the judgment is reproduced as under:
In our view, the aforesaid reasoning of the Allahabad High Court and the Patna High Court would squarely apply to the facts of the present case. The provision about furnishing of the auditors’ report along with the return has to be treated as a procedural provision, directory in nature, and its substantial compliance should suffice, meaning thereby that such report should be made available by the assessee to the Assessing Officer latest when the question of framing of assessment is taken up by the Income-tax Officer and when he applies his mind to the claim of the assessee and if by that time, the assessee has put his house in order and has furnished the report of the auditor for supporting the return, he can be said to have satisfied the requirement of section 80J(6A) of the Act.
12.2 In view of the above we hold that the assessee cannot be denied the benefit of exemption for which it is entitled merely on the lapse of procedural requirement i.e. delay in filing the audit report in the prescribed form. In the judgment cited above, it was provided that the audit report was filed by the assessee before the completion of the assessment. In other words, the compliance of the law was made by the assessee when the assessment proceedings was pending before the AO whereas in the case on hand the assessee complied the requirement at the stage of appellate proceeding before tribunal. Thus, a question arises before us whether the principles laid down in the judgment cited above can be applied in the given facts and circumstances. In this context we note that, in the judgment cited above it was observed that procedural requirement for filing the audit report was fulfilled by the assessee before the completion of the assessment. But the facts of the case on hand are different insofar the audit report was filed by the assessee after the completion of the assessment framed under section 143(3) of the Act. In this regard we note that the assessment remains pending if any appeal is pending before the higher forum. In other words, if any appeal is pending either before the ld. CIT-A or before the ITAT which transpires the fact that the assessment is pending. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of CIT vs. Mayur Foundation reported in 274 ITR 562, wherein it was held as under:
Thus, the proceedings before the Tribunal are meant to correctly assess the tax liability o f an assessee: If this be so, it follows that the assessment proceeding cannot be said to be complete and is pending till the appeal is heard and disposed of by the Tribunal and the order of the Tribunal is given effect to by the assessing authority by computing the correct tax liability of an assessee. In other words, whether an assessee is required to pay tax or becomes entitled to a refund, would be ascertained by the assessing authority after giving effect to the order of the Tribunal.
12.3 Admittedly, the appeal was pending before the ITAT at the time when the audit report in form 10B was filed which transpires that the assessment has not reached to the finality and therefore principle laid down by the Hon’ble High Court of Gujarat in the case of CIT vs. Gujarat Oil & Allied Industries (Supra), that the requirement for filing the audit report is a procedural requirement, can be applied in the given facts and circumstances. Therefore, the benefit for which the assessee is entitled cannot be denied.
12.4 Before parting, the above finding given by us is dehors that there was some reasonable cause which prevented the assessee in filing the prescribed audit report within the time permitted under the provisions of law. The onus lies upon the assessee to justify the reasonable cause for delayed filing the audit report. In this regard, we note that the assessee despite being eligible for the exemption under section 11 of the Act, has paid the taxes of ₹ 3,79,027.00 only. Thus, from the fact of making the payment of tax, it is transpired that the assessee was not properly guided by the tax consultant and this contention was duly raised by the assessee before the learned CIT-A. The relevant extract of the contention of the assessee before the learned CIT-A is reproduced as under:
Assessee has filed income tax return with full reliance put on professional person and further such professional person has also not guided properly while filing income tax return hence due to this assessee has paid tax which otherwise not required to pay by them as per provision of income tax Act, 1961.
After that assessee is received notice under section 143(2) for scrutiny assessment and on receipt of such notice they have contacted to different professional person and on verification of records by new professional person has guided them that they are entitled to exemption under section 11 of Income Tax Act, 1961. Hence this claim has been put first time while replying to AO during scrutiny assessment proceeding.
But actually AO has informed that he has not power to allow fresh claim otherwise than revised return hence he has not allow claim of exemption under section 11 of Income Tax Act, 1961.
12.5 The above contention raised by the assessee before the learned CIT-A has nowhere been doubted by the authorities below. Thus, the cumulative effect from the reading of the above facts reveals that there was lack of guidance on the part of the assessee by the tax professionals. Thus, in the event of any disallowance of the benefits available to the assessee, it will cause undue hardship to it in the given facts and circumstances. Thus after considering the facts in totality, we set aside the finding of the learned CIT-A, and direct the AO to allow the exemption under section 11 of the Act. Hence the ground of appeal of the assessee is allowed.
13. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Court on 16/11/2022 at Ahmedabad.
