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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 28.03.2022 passed by learned Commissioner of Income-Tax, National Faceless Appeal Centre, Delhi [“Ld. CIT(A)”], which in turn arises out of intimation dated 04.03.2020 passed by learned ADIT(CPC), Bangalore [“Ld. AO”] u/s 143(1) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2018-19, the assessee has Welfare Association for Disabled, Indore Vs. ADIT, CPC, Bangaluru Assessment year 2018-19 filed this appeal on various grounds as mentioned in Appeal Memo (Form No. 36).
Heard the learned Representatives of both sides at length and case- records perused.
The exact controversy involved in various grounds of appeal is:
Whether or not the assessee was entitled for exemption u/s 11/12 as claimed in the return of income when the audit-report (Form No. 10B) was filed after filing of return of income but before processing u/s 143(1)?
Apropos to this issue, the precise facts are: The assessee is a charitable trust for the welfare of disabled persons. It is registered u/s 12A of the Income-tax Act, 1961 and entitled for exemption u/s 11/12; accordingly it claimed exemption u/s 11/12 in the return of income filed for AY 2018-19 on 04.08.2018. When the AO processed return u/s 143(1) on 04.03.2020, he did not allow exemption u/s 11/12 for the reason that the audit report (Form No. 10B) was not filed by assessee with return of income.
Getting no success at the level of AO, the assessee went in first-appeal to CIT(A). But even at that stage, the assessee did not get any relief. Now, the assessee has come in this appeal before us.
Ld. AR submitted that the assessee is engaged in charitable activities and the registration granted to it by tax authorities u/s 12A is in force. He further submitted that the assessee filed return of income on 04.08.2018 and prior to filing of return, the accounts were duly audited on 20.07.2018, Welfare Association for Disabled, Indore Vs. ADIT, CPC, Bangaluru Assessment year 2018-19 a copy of the audited-accounts alongwith audit-report (Form No. 10B) is placed at Page No. 11-12 and 39 to 44 in Paper-Book. However, the auditors of assessee failed to e-file/upload audit-report (Form No. 10B) alongwith return of income. But subsequently, before processing of return by AO u/s 143(1) on 04.03.2020, the assessee arranged to get the audit-report e-filed/ uploaded on 12.02.2020 which is evident from acknowledgement down- loaded from webportal of Income-tax Department, filed at Page No. 12 of Paper-Book. Ld. AR submitted that the CIT(A) has, without appreciating these facts, dismissed first-appeal of assessee precisely for a technical defect that the audit-report (Form No. 10B) was not filed alongwith return of income. Ld. AR submitted that except such technical defect, there is no other reason to deny the benefit of section 11/12 to assessee. Ld. AR submitted that the e-filing/uploading of audit-report is done by auditors and not by assessee; therefore the defect is not per se attributable to assessee.
Ld. AR submitted that in any case the defect is due to an inadvertent human error and the assessee should not be denied the legitimate exemption, when the assessee is genuinely doing charitable activities for the welfare of public and satisfying all conditions prescribed in income-tax law for being entitled to exemption. Ld. AR submitted that if the audit-report obtained by assessee on 20.07.2018 but filed belatedly on 12.02.2020 is accepted, the assessee would be entitled to the benefit of exemption. Ld. AR submitted that it is now well-settled by numerous decisions of High Courts and ITAT Benches that the requirement of filing audit-report alongwith Welfare Association for Disabled, Indore Vs. ADIT, CPC, Bangaluru Assessment year 2018-19 return is one of the conditions for claiming benefit of exemption u/s 11/12 but it is a procedural-cum-directory requirement and even if the report is subsequently filed to AO, the exemption u/s 11/12 can’t be denied. Ld. AR relied upon a few decisions holding such proposition:
(i) ITAT, Indore Bench in Navratna Sukrat Foundation Vs. CPC, Bangalore, dated 21.04.2023 and in Indore Contract Bridge Association Vs. CPC, Bangalore in ITA No. 403/Ind/2022 order dated 18.04.2023.
(ii) ITAT, Jodhpur Bench in ITO, Exemption Ward Vs. Society for Education Conscietisation Awareness & Training, dated 06.05.2019.
(iii) ITAT, Ahmedabad Bench in Puravanchal Lokhit Mandal Vs. ITO, Exemption Ward, Vadodara, dated 30.11.2022 and in Hari Gyan Pracharak Trust Vs. DCIT, CPC, Bangalore in ITA No. 245/Ahd/2021 order dated 16.06.2023.
(iv) Hon’ble Gujrat High Court in Sarvodaya Charitable Trust Vs. ITO, Exemption (2021) 125 taxmann.com 75 (Gujrat) and in Indian Panel Board Manufacturer Vs. DCIT Tax Appeal No. 655 of 2022 dated 21.03.2023.
Per contra, Ld. DR vehemently defended the orders of lower- authorities and submitted that furnishing of audit-report alongwith return of income is a pre-condition for allowability of exemption u/s 11. Since the assessee has not fulfilled such condition, the lower-authorities have rightly denied assessee’s claim of exemption u/s 11 and there is no infirmity in the action of lower-authorities. Ld. DR also pointed out an additional fact that Welfare Association for Disabled, Indore Vs. ADIT, CPC, Bangaluru Assessment year 2018-19 the assessee has filed an application to higher authorities in terms of CBDT Circular issued u/s 119 of the act for condoning the delay in filing of audit report and such application is still pending with authorities.
In rejoinder, Ld. AR submitted that though the assessee has filed application to authorities in terms of CBDT Circular u/s 119 for condonation of delay, pursued the same and made all sincere efforts but the same is pending with authorities. Ld. AR submitted that the assessee has taken several adjournments in this appeal from ITAT itself on the ground of pendency of application before authorities. But, no outcome is forthcoming from authorities. Ld. AR submitted that in any case, the application u/s 119 is only an additional remedy which cannot take away appellate remedy. To fortify this submission, Ld. AR relied upon Para 5.6 of the judgement of Hon’ble Gujrat High Court in Indian Panel Board Manufacturer Vs. DCIT Tax Appeal No. 655 of 2022 dated 21.03.2023 where it has been held thus:
“5.6 The tribunal further committed an error in appreciating the import of Section 119 2(b) of the Act inasmuch as the application contemplated thereunder is only additional remedy for the assessee which could not be said to be compulsorily resorted to, by the assessee. The circular No. 7/18 dated 20.12.2018 issued u/s 119 of the Act could not be, therefore, said to have taken away the appellate remedy.” 8. We have heard rival contentions of both sides and examined the present controversy in the light of judicial decisions. In view of settled judicial rulings noted in foregoing paragraphs, we find that the assessee can’t be denied the benefit of exemption u/s 11/12 as claimed in return of Welfare Association for Disabled, Indore Vs. ADIT, CPC, Bangaluru Assessment year 2018-19 income for mere delay in filing of audit-report (Form No. 10B), when the assessee has in fact filed such report though after filing of return. We, therefore, deem it fit to remand this matter back to the file of AO for a fresh assessment after considering audit-report (Form No. 10B) filed by assessee.
The assessee succeeds in this appeal.
Resultantly, this appeal of assessee is allowed for statistical purpose in terms indicated above.
Order pronounced in the open court on 21.12.2023