KARMA FALYA TRUST,GANDHINAGAR vs. THE DCIT, CIRCLE-1,EXMP., AHMEDABAD

The assessee has raised the following grounds of appeal :-

The assessee filed return of income for Assessment Year 2018-19 on 31.12.2018 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 Assessment Year: 2018-19 Page 2 of 5 Section 11 of the Act. The reason for the aforesaid disallowance was recorded by the CPC as under :-

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.

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 :

The Ld. AR relied upon the decision of Hon’ble Gujarat High Court in case of Association of Indian Panelboard Manufacturer vs. DCIT (2023) E10L-900-HC- Ahm-IT. The Ld. AR relied upon the following decisions:

The Ld. AR submitted that non-compliance as per the Audit Report under Section 12A of the Act is a procedural lacuna and thus when the Audit Report was filed, the same should have been taken on record. The Ld. AR further submitted that the Audit Report in case of the assessee for A.Y. 2018-19 was very well obtained by the assessee on or before the return filing i.e. 31.12.2019 but the same is filed late by the auditor i.e. 30.09.2020. The Audit Report is very well obtained by the assessee but not filed by the Auditor and as the same was referred in Form No.10B i.e. Audit Report for Trust and acknowledgement receipt for each which already attached by the assessee and the details were given before the CIT(A). The Ld. AR further submitted that the Hon’ble Gujarat High Court in the case of Sarvodaya Charitable Trust (supra) clearly pronounced that the Audit Report is not filed with Income Tax Return but produced later on in front of the ITO or before the appellate authority then the same should be considered as proper compliance of the same under Section 11 of the Act should be granted.

The Ld. DR submitted that the assessee has filed the Audit Report beyond the mandatory date as given in the Income Tax Statute and, therefore, the CIT(A) has rightly rejected the same. The Ld. DR relied upon the Assessment Order and the order of the CIT(A).

Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the observation of the CIT(A) that there was an additional ground appears to be not tenable. Besides this, the assessee after obtaining the Audit Report during the course of assessment proceedings has filed the Audit Report and non filing of the Audit Report by the Auditor cannot be termed as assessee’s lacuna. The Hon’ble Gujarat High Court in the case of Association of Indian Panelboard Manufacturer (supra) has categorically mentioned that filing of Audit Report is held to be substantive requirement but not Assessment Year: 2018-19 Page 5 of 5 the nodal stage of filing which is procedure once the Audit Report in Form 12B is filed to be available with the Assessing Officer before assessment proceedings take place, the requirement of law is satisfied. In the present case also, the assessee obtained the Audit Report dated 31.10.2018 from the Auditor but could not file the same on Income Tax Portal. Thus, the audit report was prepared well within the time. Thus, the CIT(A) should have taken cognisance of the same and the Assessing Officer should have also taken into account Audit Report for allowing the exemption under Section 11 of the Act to the assessee. Thus, appeal of the assessee is allowed.

In the result, appeal filed by the assessee is allowed.