Case Law Details
The assessee, a charitable trust, filed a return claiming exemption u/s 11 in respect inter alia of a receipt of Rs. 35.70 crores on sale of property. The audit report in Form 10B was not filed with the return. During the assessment proceedings, the assessee’s trustee gave a statement u/s 131 to the AO in which he stated that no audit report u/s 10B was obtained.
Subsequently, the said statement was retracted on the ground that the trustee was not a tax expert and had no knowledge of the audit report. It was claimed that the audit report had been obtained but was omitted to be filed with the return. The audit report was thereafter filed during the assessment proceedings. The AO took the view that u/s 12A(1)(b) the requirement of the accounts being audited and the audit report being filed with the return was mandatory and the failure to do so dis-entitled the assessee to exemption u/s 11. The AO also rejected the retraction as an after-thought. However, the CIT (A) allowed the claim on the ground that the filing of the report during assessment proceedings was sufficient compliance with s. 12A(1)(b). On appeal by the department, HELD dismissing the appeal:
(i) Though s. 12A (1)(b) provides that the exemption u/s 11 will be available only if the accounts are audited and audit report “furnished along with the return”, the same is not mandatory but is directory. The audit report in Form 10B affirms the statements contained in the balance sheet and income-expenditure statement and is intended to enable the AO to allow the exemption by relying on the audit report and without having to ask the assessee to furnish supporting documents in support of the claim. Such a procedural provision cannot be construed as mandatory because the defect can be cured at a subsequent stage. It is not the intention of the Legislature that the exemption u/s 11 should be denied merely because the audit report was not filed with the return. CIT Vs. Hardeodas Agarwalla Trust 198 ITR 511 (Cal) followed;
(ii) On facts, as the trust had filed, with the return, the audit report required to be given under the Bombay Public Trust Act, the claim that the audit report in Form 10B had also been obtained but had been omitted to be filed with the return was acceptable. Also, the AO was not justified in rejecting the retraction of the trustee. The AO did not controvert the averments in the retraction affidavit nor did he cross-examine the trustee. Accordingly, the claim for s. 11 exemption was upheld.
ITA NO. 5308/MUM/09 (A.Y. 2006- 07)
The I.T.O (E) 11(1) Vs M/s. Sir Kikabhai Premchand Trust Settlement No. 6,
THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “E”, MUMBAI
ORDER
PER N.V. VASUDEVAN, J.M,
This is an appeal by the revenue against the order dated 18/6/2009 of CIT(A) XXX, Mumbai relating to assessment year 2006-07. The assessee has also filed cross objection. The grounds of appeal raised by the revenue read as follows:-
“1.On the facts and in the circumstances of the case, and in law, the ld. CIT(A), Mumbai, erred in directing the AO to allow the benefit of exemption u/s. 11 of the Act, 1961, no appreciating the fact that the trustee Shri Madhav V. Shah during the course of statement u/s. 131 recorded in this office on 13/10/2008 had categorically stated that the audit was never conducted and no audit report in form No. 10B was ever prepared and further not appreciating the fact that the conduct of audit U/s 12A(1)(b) being the mandatory condition for allowance of exemption u/s.1 1 of the I.T. Act, the assessee was not eligible for exemption U/s. 11 of the I.T. Act.
2. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A), Mumbai erred in ignoring the fact that the statement U/s. 131 of the Trustee Shri Madhav V. shah recorded on 13/10/2008 was a voluntary statement without any threat, coercion or undue influence and is admissible as evidence against the truest in the assessment proceedings.”
3. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A), Mumbai , eared in ignoring the fact that the affidavit of the retraction filed by the trustee Shri Madhav V. Shah dated 10/12/2008 is not admissible evidence in favour of the assessee in view of the detailed discussion in Para 3.9 of the assessment order and in view of the judgment in the case of Dr. S.C.Gupta vs. CIT (2001) 248 ITR 782 (All) and V. Kunhambu and sons vs. CIT(Kerala) 219 ITR 235.”
4. On the facts and in the circumstances of the case, and in law, the ld. CIT(A), Mumbai, erred in ignoring the fact that the mandatory Audit Report u/s. 10B was not annexed with the return of income which disentitle exemption u/s. 11 of theI.T. Act, 1961.
5. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A), Mumbai, erred in directing the AO to allow the benefits of exemption to capital gains of Rs. 37,33,40,030/- on sale of investments, long term capital gain on sale of property and dividend from mutual fund, which was taxed as income from other sources.”
2. The assessee is a Trust which came into existence by a deed of trust dated 9/2/1940. The assessee is registered as charitable institution u/s. 12A of the Income Tax Act, 1961 (the Act) vide registration certificate date 12/8/1974. The object of the Trust are to establish and maintain sanatorium or convalescent home at Pune or any other part of Bombay presidency for the benefit of deserving and needy persons belonging to the Gujarati Jain community and Gujarati Banias and high caste vegetarian Hindus and jains and provide facilities and convenience for medical relief recreation and/or for such other purposes conducive to their confort and welfare and/or to carry out such other charitable (scholarship & Medicals) and useful object and purpose as the Trustees may think fit.
3. The assessee filed a return of income for A.Y 2006— 07 declaring total income at Nil and claiming a refund of TDS. Along with return of income the assessee had filed income and expenditure account, balance sheet and auditors report required under the Bombay Public Trust Act, 1950, besides several other documents. During the previous year the assessee had sold an immovable property at Pune which was held under the Trust for a consideration of Rs. 35.70 crores after getting necessary permission from the Charity Commissioner. The aforesaid receipt was taken to the corpus as per directions of the Charity Commissioner ( order dated 31/5/2005) and the same was claimed as exempt u/s.1 1(1A) of the Income Tax Act, 1961, hereinafter referred to as “the Act”. Besides the above the Assessee was also in receipt of income in the form of capital gain, interest income received by the assessee, donation received by the assessee, sundry income and dividend income. The entire income was claimed exempt u/s. 11 of the Act.
4. The A.O noticed that in the form of return of income, the assessee has not filed Audit Report in Form No.10B with the return of income. In para 39 i.e. “ LIST OF DOCUMENTS/STATEMENTS ATTACHED” of the first page of the return of income, in front of Para 39 (b) i.e. Audit Report in No.10B, it was stated as ‘-‘ According to the Assessing Officer in the absence of audit report in Form No.1 0B the assessee was not eligible for exemption u/s. 11 of the Act. Sec. 1 2A( 1 )(b) of the Act, provides as follows:
“Where the total income of the trust or institution as computed under this Act without giving effect to the provisions of Section 11 and Section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the explanation below sub-section (2) of Section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.”
Rule 1 7B of the Income-tax Rules, 1962, lays down that the report of audit of the trust or the institution should be in Form No. 10B.
5. The Assessing Officer issued a notice u/s. 143(2) and another notice u/s. 142(1), both dated 3/10/2008. In a common annexure to both the aforesaid notices apart from other details, the Assessing Officer had called for the following details.
“8. Details of Accumulation made U/s. 11(2), if any, since incorporation and the details of utilization as below:
A.Y
of accumulation
Amount accumulated
Amount Utilized
till end
of Yr.
under assessment
Purpose
of Accumulation
Purpose
of
Utilization
Balance Amount Unutilized.
Also furnish copies of application in Form 10B & resolution of Trustees in this regard. Produce bills & vouchers/documents in support of utilization for verification & test check.
On the very same day Assessing Officer also issued a notice u/s. 131 of the Act to Shri Madhav V. Shah one of the trustees of the Trust to appear before the Assessing Officer on 13/10/2008 in connection with proceedings under the Act. On 13/10/2008 Shri Madhav V. Shah appeared before the Assessing Officer and his statement was recorded u/s. 131 of the Act. For the present case answer to Question No.4 to 8 are important and they read as follows.
“Q.No.4 I am showing you par 39 i.e. “LIST OF DOCUMENTS/STATEMENTS ATTACHED”. As per your knowledte, has it been certified correctly.
Ans. Yes it has been certified correctly.
Q.No.5. I am showing you Para 39(b) i.e. “Audit Report in Form No.10 B” which has been certified as “-“ What does ”_” mean. Has it been certified correctly.
Ans: It means “Not Applicable”. Since the Report in form No.10B was not applicable, the same was certified as “-“ It has been correctly certified.
Q.No.6 Does that mean that no Audit Report in Form 10B was filed with the return of income as the same was not applicable.
Ans. Yes. That is why no Audit Report in Form No.10B was filed with the return of Income.
Q.No.7. Was any Audit Report prepared in Form No.10B which could not be filed for any reason.
Ans: No. since the same was not applicable, no audit report in Form No.10B was ever prepared.
Q.No.8 Do you wish to say anything else.? Ans. : No.”
6. We have already seen that on 3/10/2008 the Assessing Officer had issued two notices, one under section 143(2) and the other u/s. 142(1) along with common annexure to the said notices. We have also seen that the Assessing Officer had made inquiries regarding the absence for Form 10B in the said annexure. In response to the same the assessee had on 24/10/2008 filed a reply. Along with the said reply audit report in Form 10B dated 11/10/2006 was also filed.
7. On 3/12/2008 the Assessing Officer issued a notice u/s. 142(1) of the Act. In the annexure to the aforesaid notice the Assessing Officer called upon the assessee to show case as to why exemption claimed u/s. 11 should not be denied to the assessee because of the failure of the Assessee to file the Audit report in Form No.10-B along with the return of income and the admission of the Madhav V.Shah that no audit of the accounts of the Trust had been done. In the said notice, the Assessing Officer has referred to the fact that in Column No.39(b) of the return of income there was no mention about the audit report in Form 10B having been filed along with return of income. The Assessing Officer also referred to the statement of Shri Madhav V. Shah recorded on 13/10/2008, wherein he had confirmed that no audit report in Form No. 10B was filed with the return of income that no audit as required u/s. 12A(i)(b) of the Act was ever conducted.
8. In reply to the aforesaid show cause notice the assessee sent a letter dated 5/12/2008 asking for a copy of the statement of Shri Madhav V.Shah. In the said letter the assessee also submitted that the averments made in the letter dated 3/12/2008 regarding the statement of Shri Madhav V.Shah recorded on 13/10/2008 did not match with the actual answers given by Shri Madhav V. Shah. On 8/12/2008 the Assessing Officer gave a copy of the statement of Shri Madhav V. Shah to the authorized representative of the assessee.
9. On 13/12/2008 the assessee in a letter addressed to the Assessing Officer refuted the allegation of the Assessing Officer about the statement of Shri Madhav V. Shah. The assessee pointed out that in reply to Question No.5 regarding para 39(b) of the form of return of income regarding the audit in Form 10B the reply given was that Shri Madhav V. Shah was a Computer Software Consultant and not an expert in the field of accountancy and income tax and, therefore, he does not know about the audit report in Form No.10B of the Act. The assessee further pointed out that in reply to Question No. 6, Shri Madhav V. Shah had replied that he does not know anything about audit report in Form No.1 0B and whether the same is applicable to the assessee Trust. It was also clarified that Shri Madhav V. Shah had asserted that audit of accounts of the Trust was done. Even in reply to Question No. 7, Shri Madhav V. Shah had pleaded that he was not aware about the audit report in Form No.1 0B of the Act. The assessee, therefore, took a stand that the statement of Shri Madhav V. Shah has not been correctly recorded by the Assessing Officer. The facts were affirmed by Shri Madhav V. Shah in an affidavit filed before the Assessing Officer. In the affidavit Shri Madhav V. Shah also affirmed that he had gone to attend the hearing before the Assessing Officer on 13/10/2008 along with Authorised Representative (A.R) of the Trust, Mr. Kirit P. Mehta ,C.A. The A.O asked Shri Kirit Mehta to leave Shri Madhav V. Shah alone in his office and started recording his statement. It has further been affirmed that question and answers were entered in a Laptop (kept on the table of the Assessing Officer) personally by the Assessing Officer. Since the screen of the Laptop was facing the Assessing Officer Shri Madhav V. Shah could not see what was being entered in the form of question and answers. It was further been affirmed that after completing the statements the Assessing Officer obtained the print out of the statement and asked for Shri Madhav V. Shah’s signature at two places and without reading the contents the same was signed by Mr.Madhav V.Shah.
10. The assessee also filed affidavit of Shri K.P.Mehta, C.A and A.R. of the assessee. In his affidavit he had affirmed that he had conducted audit of account for the financial year 2005-06 of the assessee as required by the provisions of section 12A(1)(b) of the Act and issued audit report dated 11/10/2006 in the prescribed Form No.10B on the same day i.e. 11/10/2006 for A.Y 2006-07. He has also further affirmed that while preparing and filing the return of income of the assessee, through oversight omitted to attach audit report in Form No.10-B along with return of income.
11. Both the aforesaid affidavits were filed before the Assessing Officer. The Assessing Officer however did not accept the stand of the asses see in this regard:
(a) As far as the stand of Shri Madhav V. Shah is concerned, the Assessing Officer was of the view that the audit report dated 11/10/2006 was filed only 24/10/2008 for the first time in the assessment proceedings. He was of the view that the audit report surfaced for the first time only after 11 days of the recording of the statement of Shri Madhav V. Shah on 13/10/2008 The Assessing Officer was of the view that first statement of Shri Madhav V. Shah dated 13/10/2008 had evidentiary value as it was given out of his free will without coercion or duress. The Assessing Officer was also of the view that the claim of Shri Madhav V. Shah that he signed the statement without reading it cannot be believed.
(b) As far as affidavit of Shri K.P.Mehta , C.A A.R. of the assessee is concerned the Assessing Officer was of the view that there was no explanation as to why the audit report was omitted to be field along with the return of income and as to why in the return of income in para 39(b) regarding audit report in Form No.10B the same was left blank.
Thereafter the Assessing Officer held that the statement recorded u/s. 131 of the Act had evidentiary value. The Assessing Officer thereafter referred to the provisions of section 1 2A( 1) (b) of the Act and concluded that the requirement of the accounts of the Truest being audited and the requirement of the same to be furnished along with return of income was mandatory. The Assessing Officer held that since the assessee failed to fulfill the above requirement the exemption under section 11 had to be denied. For the aforesaid reasons the Assessing Officer brought to tax the income in the form of capital gain declared in the return of income and claimed exempt, the sale process of property at Pune, the interest income received by the assessee, donation received by the assessee, sundry income and dividend income to tax after allowing expenses debited in the P&L Account.
12. Aggrieved by the order of the Assessing Officer the assessee preferred an appeal before CIT(A). Before CIT(A) the assessee reiterated the stand as taken before the AO. The assessee further contended that in the event of Form No.10B not having been field along with return of income, the return of income ought to have been considered as defective and a notice u/s. 139(9) of the Act ought to have been issued to the assessee to rectify the defect. The asses see further relied on certain judicial pronouncements and submitted that the requirement of filing Form No.1 0B along with return of income is not a mandatory requirement and that the said form even if filed in the course of assessment proceedings should be treated as sufficient compliance. Further reliance was also placed on the decision of Hon’ble Supreme Court in the case of CIT vs. Nagpur Hotel Owners Association, 247 ITR 201, wherein the Hon’ble Supreme Court held that filing of Form No.10 as required under section 11(2) r.w.r. 17 is mandatory and the same can be filed during the course of assessment proceedings. Specific reference was made to decision of the Hon’ble Calcutta High Court in the case of CIT vs. Rajbahadur Bishwesharlal Motilal Malwasie Trust, 195 ITR 825(Cal) and CIT vs. Hardeodas Agarwalla Trust ( 1992) 198 ITR 511 (Cal), wherein it was held that audit report field in Form No.10B in the course of assessment proceedings is sufficient to claim exemption u/s. 11 of the Act.
13. On due consideration of the above submissions the CIT(A) was of the view that the assessee had complied with the provisions of section 12A(1)(b) of the Act and exemption cannot be denied to the assessee. He also held that affidavits of Shri Madhav V. Shah and Shri K.P.Mehta could not have been rejected by the AO. He also held that even assuming that the audit of the accounts of the Trust were conducted only after 13/10/2008 i.e. after the recording of statement of Shri. Madhav v. Shah, still the assessee should be held to have complied with the provisions of section 12A of the Act because the audit has been conducted, report of such audit signed and submitted before the completion of the assessment. For all the above reasons the CIT(A) directed the AO to allow the claim of the assessee for exemption u/s. 11 of the Act.
14. Aggrieved by the order of the CIT(A) the revenue has preferred this appeal before the Tribunal.
15. The assessee has also field a cross objection raising the following grounds.
“1. The Commissioner of Income Tax (Appeals) XXX, Mumbai, erred in not giving any decision on ground No.2 taken by the Respondents in its grounds of appeal before the said CIT(A).
2. The Respondents submit that if the ground taken by the appellant is allowed, the income of the Respondents should be computed under the normal provisions of the Income Tax Act. It is submitted that the AO has computed the total income at Rs. 37,33,40,030/- as income from other sources although there was income from (i) capital gains on sale of investment Rs. 13,00,856/-, (ii) long term capital gain on sale of property Rs. 35,44,68,066/-, (iii) dividend from mutual fund (exempt) Rs.60,34,808/- and (iv) donation of Rs. 3,00,000/-.”
16. The Assessee has filed a cross objection because, the AO after refusing exemption to the Assessee u/s. 11 of the Act, treated all the items of income as Income from other sources. It is the plea of the Assessee that even assuming the exemption u/s. 11 is denied to an Assessee, total income has to be computed by the AO in accordance with the provisions of the Act and not in the manner as was done by the AO.
17. Before us the ld. D.R relied on the order of the AO. He reiterated the stand of the AO on the affidavits of Shri Madhav V. Shah and Shri K.P.Mehta. He also highlighted the fact that only after 11 days after recording of statement of Shri Madhav v. Shah, the audit report in Form No.1 0B was field before the AO. According to him the above circumstances throw doubts on the claim of the assessee that its books of accounts were duly audited as required by the Act.
18. The ld. counsel for the assessee reiterated the stand of the assessee as put forth before the revenue authorities.
19. We have considered the rival submissions. Under section 12A of the Income-tax Act, 1961, exemption from income-tax in respect of income derived from property held under trust or by way of voluntary contribution received from other charitable or religious trusts or institutions will be available only if the conditions mentioned in clauses (a) and (b) of that section are satisfied. Sub-clause (b) provides that, where the total income of the trust or institution (without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income tax in any previous year, “the accounts of the trust or institution for that year have to be audited by the accountant” and “the person in receipt of the income should furnish along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars” as may be prescribed. The question as to whether the requirement of filing the audit report alongwith the return of income is mandatory or directory and as to whether such report filed even in the course of assessment proceedings would be sufficient compliance of the law or not was considered by the Hon’ble Calcutta High Court in the case of Commissioner of Income-tax Vs. Hardeodas Agarwalla Trust 198 ITR 511 (Cal). The facts before the Hon’ble Calcutta High Court were that the assessee which was a trust filed a return for the relevant assessment year without the auditor’s certificate in Form No. 10B on December 16, 1983. The assessee, however, filed the balance-sheet as at March 31, 1982, and the income and expenditure account along with the return. The auditor’s certificate was not furnished even at the time of hearing. The accounts of the trust were audited on February 20, 1985, and the report of such audit in the statutory Form No. 10B was signed by the chartered accountant on February 20, 1985. The Income-tax Officer completed the assessment denying exemption under section 11 of the Income-tax Act, on March 5, 1985, on the ground that the certificate in Form No. 10B had not been filed as required by the law. The assessee, being aggrieved, preferred an appeal before the Commissioner of Income-tax (Appeals). At the hearing of the appeal before the Commissioner of Income-tax (Appeals), the assessee submitted two copies of the audited accounts and the report of the auditor in Form No. 10B. The Commissioner of Income-tax (Appeals) held that the trust had not fulfilled the conditions laid down in section 12A(b) and, consequently, its income was not entitled to exemption provided under sections 11 and 12 for the assessment year under consideration. Against this finding of the Commissioner of Income-tax (Appeals), the assessee took the matter to the Tribunal. In the appeal before the Tribunal, it was argued by the assessee that the filing of the auditor’s report in Form No. 1 0B along with the return was not mandatory but it was only directory. Reliance was placed on certain decisions of the High Courts and the Tribunal. The Tribunal set aside the orders of the lower authorities and restored the matter to the file of the Income-tax Officer with a direction to accept the auditor’s report in Form No. 1 0B and process the assessee’s claim for exemption under section 11 of the Act, and frame a fresh assessment as per law after giving the assessee a reasonable opportunity of being heard. On further appeal by the Revenue, the Question of law considered by the Hon’ble High Court was as follows:
“Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 1 2A(b) of the Income-tax Act, the Tribunal is justified in law in setting aside the orders of the Commissioner of Income-tax (Appeals) and the Income-tax Officer and in directing the Income-tax Officer to accept the auditor’s report in Form No. 10B and to process the assessee’s claim for exemption under section 11 of the Income-tax Act afresh?”
The Hon’ble Court held as follows:
“The question whether a statute is mandatory or directory depends upon the intent of the Legislature and upon the language in which the intent is clothed. The meaning and intention of the Legislature must govern and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the consequences which would follow from construing it in one way or the other.
Under section 12A of the Income-tax Act, 1961, exemption from income-tax in respect of income derived from property held under trust or by way of voluntary contribution received from other charitable or religious trusts or institutions will be available only if the conditions mentioned in clauses (a) and (b) of that section are satisfied. Sub-clause (b) provides that, where the total income of the trust or institution (without giving effect to the provisions of sections 11 and 12) exceeds Rs. 25,000 in any previous year, “the accounts of the trust or institution for that year have been audited by the accountant” and “the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars” as may be prescribed.
For very many reasons, the audit report may not be available before the return is filed. Rule 1 7B of the Income-tax Rules, 1962, lays down that the report of audit of the trust or the institution should be in Form No. 10B. The annexure to Form No. 10B requires the auditor to certify as to the application of income for charitable or religious purposes and the non-application or non-user of income or property for the benefit of persons referred to in section 13(3). The certificate is, ordinarily, based on the statement of the managing trustees. The balance-sheet and income and expenditure statement would necessarily contain the particulars of the application of income and non-user of income or property. The certificate of the auditor only affirms the statements contained in the balance-sheet and income and expenditure statement. The Assessing Officer can rely on the certificate for allowing the benefit of exemption. This is a procedural matter for the purpose of enabling the Assessing Officer to complete the assessment on the basis of the certificate of the auditor without even asking the assessee to furnish supporting documents in support of the claims and contentions made in the return based on the balance-sheet and the income and expenditure statement.
It is now well-settled that a procedural provision, ordinarily, should not be construed as mandatory, if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage. Having regard to the object of section 1 2A, it cannot be said that the Legislature intended that, even where the trust has got its accounts audited and the certificate obtained in Form No. 10B before the assessment is completed, merely because such report could not be filed in the course of the assessment proceedings, it would deprive a trust from getting the exemption if it is otherwise entitled to it in law. The direction that the audit report should accompany the return is not mandatory as the omission to do it may be rectified by filing the report at a later stage before the assessment is completed.
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.”
The Hon’ble Court finally held, that, 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 had the power to accept the audit report and direct the Assessing Officer to redo the assessment.
20. It can be seen from the aforesaid decision that the audit report was obtained in the course of assessment proceedings. Even in such circumstances the Hon’ble Court directed the AO to treat it as sufficient compliance of the provisions of section 12A and consider the claim of exemption. In the present case, we find that Shri Madhav V. Shah has claimed in his affidavit that he had never said that the books of accounts of the trust had not been audited. We find this claim of Shri Madhav V. Shah to be acceptable. In this regard we find that along with return of income the assessee had filed report of auditor which was required to be given under the Bombay Public Trust Act, 1950. The said report of the auditor clearly mentions that the assessee maintains profit and loss accounts and also disclosed receipts and disbursement correctly. This report is dated 11/10/2006 and had been filed along with return of income. In these circumstances we are of the view that the report in Form No.1 0B, which is similar to the report under the Bombay Public Trust Act, 1950 would not have been obtained by the assessee. The plea of bonafide omission to file form No.1 0B along with return of income in our view deserves to be accepted. There is no reason why the affidavit of Shri K.P.Mehta, C.A filed in this regard should be rejected. We also notice that the AO even after the affidavit was filed as above, did not choose to controvert the allegations in the affidavit of Madhav V. Shah regarding the correct answer given by him. He has also not chosen to cross examine Madhav V.Shah. The reason assigned by the AO for not accepting the affidavit of K.P. Mehta by the AO is that there is no explanation why the report was not filed along with the return of income. The plea that it was omitted to be filed due to oversight was totally ignored by the AO. We, therefore, accept the plea of the assessee in this regard and hold that the assessee had complied with the provisions of section 12A(1)(b) of the Act.
21. In the given facts and circumstances of the case we are of the view that the CIT(A) was justified in holding that the assessee was entitled to exemption under section 11 of the Act. We do not find any ground to interfere with the order of the CIT(A) and consequently the same is upheld. The appeal of the revenue is dismissed.
22. In view of the dismissal of the revenue’s appeal we are of the view that the Cross Objection filed by the assessee has no legs to stand and therefore, the same is also dismissed.
23. In the result, the appeal of the revenue as well cross objection of the assessee are dismissed.
Order pronounced in the open court on the 22nd day of Sept.2010
