SOCIETY FOR ADVANCEMENT OF VILLAGERS EMPOWERMENT AND REHABILITATION FOR ALL,KOLKATA vs. ITO (EXEMP) WARD-2(2), NEW DELHI

The appeal is barred by limitation in support of which an application for condonation of delay has been filed by the assessee before us by which it has been explained by the assessee that the order impugned dated 26.06.2023 passed by the NFAC, Delhi was received by the assessee on 30.06.2023 and in turn the matter was forwarded to the tax consultant by the trustee. Subsequently, the tax consultant became sick and could only attain office on the 3rd week of September and thereafter, the appeal could be filed by the assessee before us.

It appears that the reason for filing the appeal late is beyond the control of the assessee and despite genuine effort the appeal could not be filed in time. As the same has been filed late due to reasonable cause and the explanation so rendered seems to be genuine the delay is condoned and the appeal is admitted for consideration on merit.

The assessee is a trust came into existence on 22.09.2000 by execution of trust deed. The assessee is registered as charitable institution under Section 12A of the Act, filed its return for Assessment Year 2015-16 declaring total income at nil. The audit of accounts have been conducted and the audit report whereof in Form 10B was also obtained which, however was advertently missed to be filed along with return of income. The CPC Bangalore while processing the return of income under Section 143(1)(a) of the Act has not given the benefit of exemption under Section 11 & 12 of the Act and processed the return of income at Rs.157,45,460/- as against the returned income of Rs.nil. The assessee filed a rectification application on 08.10.2018 with the CPC Bangalore and relevant to mention that the assessee duly filed Form 10B along with the same. The said rectification application was thereafter transferred from CPC Bangalore to Income Tax Officer (Exemption) Ward- 2(2), New Delhi and finally the rectification application under Section 154 of the Act stood rejected on 12.11.2018 on the ground that assessee failed to furnish the audit report in Form 10B along with the return of income filed on 12.01.2016 and the same was filed on 25.08.2018 i.e. after the intimation of the processing under Section 143(1) received by the assessee.

It is the case of the assessee that while rejecting the application for rectification the ITO (Exemption) ignored the fact of compliance made by the assessee under the provision of Section 12A(1)(b) of the Act, therefore, the denial of exemption is bad law and liable to be quashed. The order passed by the Ld. ITO rejecting the application for rectification of the order dated 08.10.2018 passed by CPC Bangalore under Section 154 of the Act was further confirmed by the First Appellate Authority. Hence, the instant appeal before us.

At the time of hearing of the instant appeal the Ld. Counsel Shri Siddharth Jhajharia appearing for the assessee submitted before us that the AO was not justified in rejecting the application under Section 154 of the Act as the default in filing Form No. 10B along with return of income was merely procedural formality. In this regard, he has relied upon the judgment passed by the Chennai Bench in the case Swajan Pariwar Trust Vs. ADIT, on 11.03.1996.

We have heard rival submissions made by the respective parties and we have further perused the material available on record and considered the judgment relied upon by the Ld. AR in the case of Swajan Pariwar Trust (supra) wherein the judgment passed by the Hon’ble Kolkata High Court in the case of CIT Vs. Hardeodas Agarwalla Trust, reported in (1992) 198 ITR 511 (Cal) and the judgment in the matter of CIT Vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust, reported in (1992) 195 ITR 825 (Cal) were relied, wherein it has been held that if the audit report was not filed along with return of income the return became defective and the AO was required to give an opportunity to the assessee to submit the audit report and to rectify the defect before completion of the assessment. Finally, the AO was directed to rectify the assessee accordingly by the Tribunal.

Having heard the Ld. Counsels appearing for the respective parties and having regard to the facts and circumstances of the matter, we are of the considered opinion that though non-filing of audit report along with return of income renders the return defective the same is a procedural formality to be complied by the assessee which could have been cured by the assessee itself provided he is given an opportunity to file the same by the Ld. AO before the assessment is finalized. We note that along with the application for rectification of the order dated 08.10.2018 framed by CPC Bangalore the assessee duly filed the Form 10B which was further not considered by the authorities below. Thus, neither before completion of the assessment by CPC Bangalore granted any opportunity to the assessee to file the Form 10B nor the filing of the same was considered during the consideration of the rectification application made by the assessee. Such inaction was further confirmed by the First Appellate Authority which is found to be not acceptable and liable to be set aside as the AO is bound to give a chance to the assessee to rectify the defect as cropped up as narrated hereinbefore by the assessee in order to grant the benefit of exemption entitled. This procedural defect only makes the return defective but rectifiable which in the case in hand should be awarded in favour of the assessee.

Under this facts and circumstances of the matter, we thus, dispose of this appeal by directing the Ld. AO to rectify the defect as discussed hereinabove and to grant relief to the assessee accordingly.

The appeal of the assessee is allowed.