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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER
I.T.A. No. 619/Asr/2019 Assessment Year: 2016-17
M/s Gram Sewa and Viklang Vs. CPC Banglore Shayta Sanstha Regd., Dy. CIT, Cir-1, Factory Road, Maur Mandi, (Exemptions) Bathinda Chandigarh [PAN: AAATG 8978R] (Appellant) (Respondent)
Appellant by : Sh. K. R. Jain, Adv. Respondent by: Sh. Satbir Singh, Sr. DR
Date of Hearing: 21.02.2022 Date of Pronouncement: 02.03.2022
ORDER Per Dr. M. L. Meena, AM: This appeal has been filed by the Assessee against the impugned order dated 25.07.2019, passed by Ld. Commissioner of Income Tax (Appeals)-1, Amritsar, in respect of the Assessment Year 2016-17.
The assessee has raised the following grounds of appeal: -
“1. That the order of the Ld. CIT(A) is wrong, illegal and against facts.
2 ITA No.619/ASR/2019 Assessment Year: 2016-17 2. That the learned CIT(A) has not appreciated the submission made, explanation offered and proceeded to confirm the addition arbitrarily. 3. That the Ld. CIT(A) has wrongly interpreted the provisions of the section 11 and 12 of the Income Tax Act and therefore erred in not allowing the exemption as per section 11 and 12.
That the Ld. CIT(A) erred in law and on facts while holding that the tax audit report was uploaded after the income tax return. Reliance is placed on the judgment of Calcutta High Court in the case of CIT vs. Rai Bahadur Bissesswarlal reported at 195 ITR 825 (Cal).
That the appellant craves leave to add or alter any of the grounds on or before the date of final hearing.”
The sole grievance of the assessee is that the Ld. CIT(A) erred in law and on facts in confirming addition by rejecting assessee’s claim u/s 11 and 12 by holding that the tax audit report in Form No. 10B was not filed with the income tax return, a highly technical matter in contravention to the judgment of hon’ble Calcutta High Court in the case of CIT vs. Rai Bahadur Bissesswarlal reported at 195 ITR 825 (Cal). 4. Briefly, the facts as per record are that in compliance to online notice u/s 139(9) of the act, the assessee filed the audit report in Form No. 10B dated 02.06.16 on 20.03.17 as required under Section 12A of the Act, to remove the defect as mentioned in the said notice. The said return was processed under section 143(1) wherein the assessee was denied exemption under section 11 and 12 and demand of � 1 97098 was created. Assessee filed online application under section question the CPC to accept the audit report and allow the exemption under section 11 and 12 but the CPC rejected the same for the reason that he has not furnished
3 ITA No.619/ASR/2019 Assessment Year: 2016-17 details of audit in the schedule audit information and form 10 B report was filed after the date of filing of return.
Being aggrieved, the assessee challenged the above order before the Commissioner of Income tax (Appeals) contending that, the assessee has corrected the mistake while uploading the audit report and income tax return against the defect in notice under section 139(9) of the act. The AO had neither accepted the audit report while processing the income tax return filed against defective notice nor the request for rectification under section 154. As the audit report was filed in compliance to defective notice, there was sufficient compliance with the requirement of Section 12A(b) of the Act. The Commissioner of Income-tax (Appeals) has not been satisfied with the contentions raised by the assessee, and held that the assessee has violated the mandatory provisions of Section 12A(b) of the Act and, therefore, was not entitled to exemption under Section 11 of the Act. He ordered accordingly.
The assessee, ultimately, brought the issue before us and contended that the authorities below refused to grant exemption to the assessee on highly technical grounds. It was contended that the original return filed on – 29.08.2006, had a defect inasmuch as the audit report in Form No. 10B was not filed. The above defect was rectified by filing the audit report in the prescribed form in compliance to defective notice u/s 139(9) before passing order u/s 154 of the Act. Therefore, the AR argued that in the light of the provisions of Sections 139(5) and 139(9) of the Act, to remove defects in the return and so the assessee was entitled to exemption under Section
4 ITA No.619/ASR/2019 Assessment Year: 2016-17 11 of the Act. Even otherwise, the AO had powers to condone the delay. He further argued that the impugned order is passed in violation to the principle laid down in the judgment of hon’ble Calcutta High Court in the case of CIT vs. Rai Bahadur Bissesswarlal reported at 195 ITR 825 (Cal).
The Ld. DR for the Revenue, on the other hand, contended that the provisions of Section 12A were mandatory and as the assessee had not submitted the audit report along with the return, it was not entitled to the exemption. The DR also submitted that filing of the audit report on 20/03/2017, did not tantamount to revising the original return in terms of Section 139(5) of the Act and that the defect in not filing the audit report "along with the return" was not covered under the provisions of Section 139(9) of the Act. We have heard rival contentions and perused the record. Admittedly, 8. the assessee is a charitable trust and is registered with the Commissioner of Income-tax. It was not disputed that the assessee, for the past several years, was treated as a charitable institution and granted exemption under Section 11 of the Act. The assessee has been denied the benefit of exemption under Section 11 as the audit report in Form No. 10B was not filed along with the return and the filing of the said report later on 20/03/2017 did not satisfy the condition stated in Section 12A. The AR submitted that although the assessee had filed original return for assessment year 2016-17 on 29/08/2017 without accompanying the audit report in form 10 B. But he had obtained audit report in form 10B on 02/09/ 2016 which was much before the issue of date of notice of defective return i.e. 03/02/2017. Thus, on the receipt of defective notice assessee filed
5 ITA No.619/ASR/2019 Assessment Year: 2016-17 return on audit report in form 10B, a full compliance of the sad notice, and therefore, the AO and the CIT appeal were not justified by in rejecting exemption under section 11 and section 12 of the act. 9. It is evident that the lower authorities took a highly technical view of the matter. The assessee, by filing the audit report on 20/03/2017, purporting to act under Section 139(9) of the Act, removed the omission or defect which existed in the original return for assessment year 2016-17 furnished on 29/08/2017. No mala fides were alleged and no case was made out by the department to show that the delay in getting the accounts audited and in filing the report in Form No. 10B defeated the object of the Act. Under the circumstances of the case, we are of the view that the authorities below were not correct in denying exemption under section 11 and section 12 of the Act to the assessee. 10. On similar facts, the hon’ble Calcutta High Court in the case of CIT vs. Rai Bahadur Bissesswarlal (Supra) has decided the issue in favour of the assessee. The relevant paras of the judgement are reproduced as under: “…………14. It was contended that the provisions of Sub-section (5) were not applicable as the assessee did not furnish the report in Form No. 10B on March 6, 1987, with a revised return and non-filing of the above audit report was not a defect covered under the categories specified in the Explanation to Section 139(9). This approach again disregarded the intent and purpose of the provisions and the scheme of the enactment as a whole. In our opinion, the defects specified in Section 139(9) are only illustrative and not exhaustive. This fact will be apparent from the amendment made by the Finance Act, 1988, with effect from April 1, 1989, whereby Clause (bb) was inserted which reads as follows : "the return is accompanied by the report of the audit obtained under Section 44AB."
6 ITA No.619/ASR/2019 Assessment Year: 2016-17 Of course, the Assessing Officer cannot ignore the specified defects and must get them rectified but to contend that only the defects specified can be got rectified and no other defects would be putting unnecessary restrictions on the power of the Assessing Officer leading to inconvenient consequences and absurd results not intended by the Legislature. We do not see any such fetters on the powers of the Assessing Officer under Section 143. The Assessing Officer has power to ask the assessee to remove all defects in the return other than the defects making the retu'rn invalid. 15. The view of the lower authorities that the audit report submitted on March 6, 1987, not being filed with the revised return did not satisfy the condition in Section 12A and that the provisions of Sub-sections (5) and (9) of Section 139 were not applicable cannot be sustained. The object of both the sub- sections, in our view, is to get removed and rectified all defects and omissions in the return filed, whether discovered by the assessee or by the Assessing Officer. Both the provisions are enabling provisions inserted to facilitate reflection of correct income in the return and assessment thereof. These provisions can be simultaneously applied. Take for illustration the case of an assessee submitting a valid return but without proof of tax deducted at source which, for several reasons, was not available at the time of submission of the return. The said proof is later given to the Assessing Officer and is placed on record. It would be absurd to contend, that credit for tax deducted would be given if the proof was asked for by the Assessing Officer in terms of Section 139(9) but not in a case where the assessee had placed the proof without filing a revised return under Section 139(9). This would defeat the intent and purpose of the enactment. If the object of Sub-section (5) of Section 139 is to rectify a wrong or omission in the return, then any act through which such rectification is carried can be treated as revising the return if, in substance and in effect, the purpose of the Act is achieved and is not defeated. Thus, documents placed on record with or without covering letters with the intention to remove any omission or wrong in the return or record cannot be ignored simply because the revised return was not furnished unless it is shown that the purpose of the Act is not satisfied.
7 ITA No.619/ASR/2019 Assessment Year: 2016-17 16. In our view, therefore, the Assessing Officer ought to have given the assessee an opportunity to submit the audit report as the return was defective inasmuch as the audit report was not filed along with the return. In this case, as we have already noticed, the said defect was rectified by the assessee by filing an audit report in the prescribed form before the completion of the assessment. The income-tax authorities took a hyper-technical view of this matter. Where the assessee has complied with the provisions of the Act in the course of the assessment proceedings by curing the defect in the return by filing an audit report, the Income-tax Officer cannot ignore such audit report or the return in completing the assessment. 17. In our judgment, both the Income-tax Officer and the Commissioner of Income-tax (Appeals) misconstrued the provisions of the Act in holding that the assessee could not file the audit report after the return had been filed before the completion of the assessment. In this connection, our attention has been drawn to a circular of the Board dated February 9, 1978, which provides as follows : "Charitable trust-Requirement of filing audit report in Form 10B--Section 12A(b)-- Instructions regarding.--The Board have considered whether the requirement under Section 12A(b) of filing audit report 'along with the return of income' is mandatory so as to disentitle the trust from claiming exemption under Sections 11 and 12 in case of omission to furnish such report in the prescribed form along with the return. Normally, it should be possible for a charitable or religious trust or institution to file the auditor's report along with the return of total income, where such trust or institution claims exemption under Sections 11 and 12. However, in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report the exemption as available to such trust under Sections 11 and 12 may not be denied merely on account of delay in furnishing the auditor's report and the Income-tax Officer should record reasons for accepting a belated audit report. (1/1148-CBDT F. No. 267/482/77-IT (Part) dated February 9, 1978--CBDT Bulletin Tech. XXIII/582.)".
8 ITA No.619/ASR/2019 Assessment Year: 2016-17 18. We may also take note of the fact which has been recorded by the Tribunal that the Gujarat High Court, in a similar case, declined to call for a reference under Section 256(2) of the Income-tax Act, 1961, against the decision of the Tribunal. The Department moved the Supreme Court by a special leave petition which was dismissed on August 18, 1989.” 11. We understand that, the Assessing Officer while passing the order u/s 154 of the act, ought to have accepted the assessee’s audit report obtained in form 10B on 02/09/ 2016 which was much before the issue of date of notice of defective return i.e. 03/02/2017, inasmuch as the audit report was not filed along with the return . In our view, on the receipt of defective notice, if the assessee filed return and audit report in form 10B, would tantamount to a full compliance of the said notice, and therefore, the AO and the CIT appeal were not justified in denying exemption to the assessee under section 11 and section 12 of the act.
In the instant case, as we have already noticed, the said defect was rectified by the assessee by filing an audit report in the prescribed form before passing the order u/s 154 of the act. The observation of ld CIT appeal that the appellant had not filed any evidence of having complied with the terms of the notice under section 139(9) of the act and did not submit any evidence of filing the audit report in form 10 B in the prescribed form with the AO CPC Bangalore is factually wrong and without basis. The income-tax authorities took a highly technical view of this matter. Where the assessee has complied with the provisions of the Act in the course of the rectification proceedings by curing the defect in the return by filing an audit report, the Assessing Officer cannot ignore such audit report or the return in rectifying the defect in the return.
9 ITA No.619/ASR/2019 Assessment Year: 2016-17 12. In the above view, we hold that the income-tax authorities were not justified in denying the claim of exemption under Section 11 of the Act. We accept the grievance of the assessee as genuine and accordingly direct the AO, to rectify the defect in the original order and pass rectification order under section 154 as per law. 13. In the backdrop of the above discussion, the appeal of the assessee is allowed in the terms indicated as above.
Order pronounced in the open court on 02.03.2022.
Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member Date: 02.03.2022 Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T