The ACIT, Circle-8, Ahmedabad V. The Xavier Kelvani Mandal Pvt.Ltd., Ahmedabad

ITA 2050/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6391 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: A C SHAH
• Keywords: Charitable institution; Difference of opinion
• Section: 143(3); 11A; 12A; 10B; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. K. GARODIA , AM) ITA NO.2050/AHD/2009 A. Y.: 2006-07 THE A. C. I. T, CIRCLE-8, 4 TH FLOOR, AJANTA COMMERCIAL CENTRE, A WING, ASHRAM ROAD, AHMEDABAD VS THE XAVIER KELAVANI MANDAL PVT. LTD., PREMAL JYOT, P.B. NO.4002, OPP. ST. XAVIER COLLEGE, NAVRANGPURA, AHMEDABAD PA NO. AACCT 1067 D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. K. GUPTA, DR RESPONDENT BY SHRI A. C. SHAH, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XI V, AHMEDABAD DATED 16-04-2009 FOR ASSESSMENT YEAR 2006-07, CHALL ENGING THE ORDER OF THE LEARNED CIT(A) IN DIRECTING TO ACCEPT THE AUDIT REPORT FROM THE ASSESSEE AND GRANT EXEMPTION U/S 11 OF THE IT A CT TO THE ASSESSEE COMPANY. 2. THE AO DENIED EXEMPTION U/S 11 OF THE IT ACT AND TAXED THE GROSS RECEIPT OF RS.7,68,43,040/- WITHOUT GRANTING DEDUCTION OF THE EXPENDITURE OF RS.8,41,77,633/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD FI LED RETURN OF INCOME IN FORM NO.1 ALTHOUGH AS PER IT RULES, IT WA S SUPPOSED TO FILE ITS RETURN OF INCOME IN FORM NO.3A AND THE ASSESSEE HAD ALSO FAILED TO FURNISH THE AUDIT REPORT IN FORM NO.10B, WHICH W AS A COMPULSORY ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 2 REQUIREMENT FOR ELIGIBILITY OF EXEMPTION U/S 11A AS CLEARLY STATED IN SECTION 12A (B) OF THE IT ACT READ WITH RULE 17B OF THE IT RULES. THE ASSESSEE WAS, THEREFORE, ASKED TO SHOW CAUSE WHY EX EMPTION CLAIMED U/S 11 OF THE IT ACT SHOULD NOT BE DISALLOW ED VIDE SHOW- CAUSE NOTICE DATED 5-12-2008, WHICH HAS BEEN REPROD UCED IN THE ASSESSMENT ORDER. IN THE SHOW CAUSE NOTICE, THE AO POINTED OUT TO THE ASSESSEE THAT SINCE THE COMPANY IS REGISTERED U /S 25 OF COMPANIES ACT, HAVING CHARITABLE AND RELIGIOUS OBJE CT, RULE NO. 12(1) (C) APPLIES TO IT AND ACCORDINGLY THE ASSESSEE SHOU LD HAVE FILED RETURN OF INCOME IN FORM NO. 3 A AS PER IT RULES, 1962. FU RTHER THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY ITS RETU RN OF INCOME SHOULD NOT BE CONSIDERED AS ONE FOR A COMPANY OTHER THAN THAT INCORPORATED FOR CHARITABLE PURPOSES AND ACCORDINGL Y, THE EXEMPTION CLAIMED BY IT U/S 11 OF THE IT ACT SHOULD NOT BE DI SALLOWED AND ITS TOTAL INCOME OF RS. 7,68,43,040/- SHOULD NOT BE CONSIDERE D AS TAXABLE INCOME. THE AO FURTHER STATED THAT THE ASSESSEE HAD NOT FULFILLED BOTH THE CONDITIONS OF SEC. 12A OF THE IT ACT REQUIRED F OR CLAIMING EXEMPTION U/S 11 AND 12 OF THE I.T. ACT AND THE ASS ESSEE HAS FULFILLED ONLY THE FIRST CONDITION I.E. SECTION 12A (A), BUT HAS FAILED TO FULFILL THE SECOND CONDITION I.E. SECTION 12A (B), AS THE ASSES SEE HAD NOT FURNISHED AUDITED REPORT OF A CHARTERED ACCOUNTANT IN FORM NO. 10B READ WITH RULE 17 B OF I.T. RULES. IN RESPONSE TO T HE SHOW CAUSE NOTICE, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT IT HAD SUBMITTED THE COPY OF THE 'E' RETURN OF INCOME IN F ORM NO. 1 FOR ASSESSMENT YEAR 2006-07 AND BEING THE CHARITABLE IN STITUTION, IT HAD TO FILE FORM NO. 3A, BUT THE COMPUTER PROGRAMME HAS NOT ACCEPTED THE STATUS COMPANY, THEREFORE, THE COMPUTER PROGRAM ME HAS SENT ON ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 3 LINE 'E' RETURN IN FORM NO. 1 TO THE I.T. DEPARTMEN T. THE ASSESSEE FILED THE RETURN OF INCOME IN FORM NO. 3A ON 29-12- 2006 BY HAND DELIVERY AND PERSONALLY TO ACIT ALONG WITH THE AUDI TOR'S REPORT IN FORM NO. 10B ALONG WITH COPY OF AUDITED ACCOUNTS. T HE AO AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE HAS OBS ERVED THAT THE CONTENTION OF THE ASSESSEE OF FILING E-RETURN IN FO RM NO. L AND HAND DELIVERY OF RETURN IN FORM NO. 3 A WAS NOT FOUND CO RRECT. FURTHER THE RETURN FILED BY THE ASSESSEE ON 29-12-2006 WAS IN F ORM NO. 1, WHICH WAS ACCOMPANIED BY ONLY FORM 16 FOR TDS, BUT THERE WAS NO FORM NO. 3 A ALONG WITH AUDIT REPORT IN FORM 10B ON RECO RD AND HENCE THE ASSESSEE WAS ASKED TO PRODUCE EVIDENCE THAT IT HAD INDEED FILED FORM NO. 10B ALONG WITH RETURN OF INCOME IN FORM NO. 3A, BUT IT FAILED TO PRODUCE ANY EVIDENCE. FURTHER, THE AO STATED THAT T HERE WAS NOTHING ON RECORD (INWARD REGISTER) TO THE EFFECT THAT THE ASSESSEE FILED RETURN IN FORM NO. 3A, WHEREAS IT WAS ALLEGED THAT THE RET URN WAS PERSONALLY HANDED OVER TO THE ACIT WITHOUT TAKING ANY ACKNOWLE DGMENT. THE AO FURTHER STATED THAT THE CLAIM OF FILING BOTH RET URNS ON THE SAME DATE WAS HIGHLY UNLIKELY, AS ON A PERUSAL OF ASSESS MENT RECORDS OF ASSESSMENT YEARS 2003-04, 2007-08 AND 2008-09, IT W AS SEEN THAT THE ASSESSEE WAS FOLLOWING THE CORRECT PROCEDURE IN FILING THE RETURN OF INCOME AND FOR THE ASSESSMENT YEAR 2006-07 IT WA S A LAPSE ON THE PART OF THE ASSESSEE. IN VIEW OF THE DETAILED DISCU SSION MADE IN THE ASSESSMENT ORDER AT PAGES 7 TO 10, THE AO OBSERVED THAT THE ASSESSEE HAS MISERABLY FAILED TO DISCHARGE ITS ONUS OF FULFILLING THE PRE-REQUISITE CONDITIONS SPECIFICALLY MENTIONED IN SEC. 12A AND SUCH ACT IS A SINE-QUA-NON TO ENABLE ONE TO GET THE BENE FIT OF EXEMPTION U/S 11 OF THE ACT AND THAT IN SPITE OF GIVING AMPLE OPPORTUNITY TO ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 4 EXPLAIN ITS FAILURE, THE ASSESSEE UTILIZED THE OPPO RTUNITY TO FURNISH AN UNSUBSTANTIATED CLAIM WITHOUT AN IOTA OF EVIDENCE A ND IT FURNISHED A PLAIN HANDWRITTEN LETTER WITHOUT ANY PROOF WHATSOEV ER WHICH SHOWED CASUAL APPROACH OF THE ASSESSEE. THE AO, THEREFORE, DENIED THE CLAIM OF ASSESSEE MADE U/S 11 OF THE I.T. ACT. 3. THE ASSESSMENT ORDER WAS CHALLENGED BEFORE THE L EARNED CIT(A) AND THE ASSESSEE SUBMITTED THAT THAT E-FILIN G FOR COMPANIES, FOR ASSESSMENT YEAR 2006-07 WAS FIRST YEAR AND THER EFORE, NOBODY WAS CLEAR ABOUT THE CORRECT PROCEDURE AND FURTHER S TATED THAT WHEN THE LEARNED COUNSEL FOR THE ASSESSEE APPROACHED THE DISPATCH CLERK OF CIRCLE-8, HE REFUSED TO ACCEPT THE FORM NO. 3 A ON THE GROUND THAT THE SAME WAS FOR CHARITABLE TRUST AND THAT CIRCLE 8 ACCEPTS THE RETURNS FOR COMPANIES AND E-FILING IN THE CASE OF COMPANIES IS MANDATORY FROM ASSESSMENT YEAR 2006-07. FURTHER ON APPROACHIN G THE DISPATCH CLERK OF ADIT (E), HE ALSO REFUSED TO ACCEPT THE RE TURN ON THE GROUND THAT THOUGH THE RETURN IS IN FORM NO. 3 A, THE PAN IS OF A COMPANY AND HENCE THE ASSESSEE FILED FORM NO. 1 OUT OF HELP LESSNESS AND THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PRESENTED FOR M NO. 3 A AND 10B TO THE ITO, CIRCLE -8 IN PERSON WITH A REQUEST TO KEEP IT ON RECORD BY EXPLAINING THE CIRCUMSTANCES BY WHICH HE WAS HAN DING OVER THE DOCUMENTS AND THE AO DULY ACCEPTED BY SAYING THAT T HE SAME WOULD BE KEPT ON RECORD. IN THIS CONNECTION, THE ASSESSEE ALSO FILED THE AFFIDAVIT OF MOHMAD IQBAL VOHRA OF M.A. SHAH & CO. CHARTERED ACCOUNTANTS AND STATED THAT WHEN THE DOCUMENT WAS H ANDED OVER IN PERSON, THERE COULD NOT BE ANY EVIDENCE AND THE AO INSTEAD OF APPRECIATING THE REASONABLE CIRCUMSTANCES, HELD THA T THE ASSESSEE ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 5 DID NOT FOLLOW THE CORRECT PROCEDURE DELIBERATELY. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THERE COULD NOT BE A NY INTENTION TO FOLLOW INCORRECT PROCEDURE FOR ASSESSMENT YEAR 2006 -07, WHEN THE ASSESSEE FOLLOWED THE CORRECT PROCEDURE IN EARLIER YEARS AND IN THE SUBSEQUENT YEARS. THE LEARNED COUNSEL FOR THE ASSES SEE PLACED RELIANCE ON THE DECISION OF HON'BLE MADRAS HIGH COU RT IN THE CASE OF CIT VS. VALLI COTTON TRADERS P. LTD., 288 ITR 400 ( MAD), WHEREIN IT WAS HELD THAT 'SEC. 139(9) OF THE ACT PROVIDES THAT WHERE THE A. O. CONSIDERED THE RETURN OF INCOME FURNISHED BY ASSESS EE AS DEFECTIVE, HE MAY INTIMATE THE DEFECT TO THE ASSESSEE AND GIVE HIM AN OPPORTUNITY TO RECTIFY THE DEFECT WITHIN A PERIOD O F 15 DAYS FROM THE DATE OF SUCH INTIMATION'. FURTHER THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE DECISION OF HON'BLE HIG H COURT IN THE CASE OF MURALI EXPORT HOUSE & OTHERS VS. CIT, 238 ITR 25 7. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO CONTENDED THAT IT IS NOW SETTLED THAT THE REQUIREMENT OF FURNISHING AUDIT REPORT ALONG WI TH INCOME TAX RETURN IS NOT MANDATORY AND IF IT IS SUBMITTED BEFORE THE ASSESSMENT IS OVER, IT IS SUFFICIENT COMPLIANCE. THE ASSESSEE ALSO RELIED UPON VARIOUS OTHER DECISIONS - CIT VS. RAI BAHADUR BISSESSWARLAL MOTILAL MALWAISE TRUST, 195 ITR 825 (CAL); CIT VS. DEVRADHAN MADHAVL AL GENDA TRUST, 230 ITR 714(MP); CIT VS. PUNJAB FINANCIAL CORP., 25 4 ITR 6 (FB) AND ALSO DREW THE ATTENTION TO THE CBDT INSTRUCTION NO. 1/1148 (F NO. 267/482/77-IT (PART) DATED 9-2-1978, WHEREIN IT WAS STATED THAT IF THE AUDIT REPORT IN FORM NO. 10B IS FURNISHED BEFOR E THE ASSESSMENT IS OVER, THE EXEMPTION U/S. SEC. 11 SHOULD NOT BE D ENIED. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THA T HONBLE GUJARAT HIGH COURT HAS HELD IN ZENITH PROCESSING MILLS VS. CIT 219 ITR 719 ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 6 (GUJ) AND CIT VS. GUJARAT OIL AND ALLIED INDUSTRIES 201 ITR 325(GUJ) THAT IF THE AUDIT REPORT IN THE PRESCRIBED FORM IS FURNISHED BEFORE THE ASSESSMENT IS OVER, IT IS SUFFICIENT COMPLIANCE . I T WAS SUBMITTED THAT DECISION OF ZENITH PROCESSING MILLS HAS BEEN RELIED BY THE GUJARAT HIGH COURT IN A RECENT DECISION IN THE CASE OF ITO VS. VXL INDIA LTD. 219 CTR 242 (GUJ). THE ASSESSEE ALSO RELIED UPON VA RIOUS OTHER DECISIONS IN SUPPORT OF ITS CONTENTIONS AND STATED THAT THE INCOME OF THE XAVIER KELAVANI MANDAL P. LTD. IS EXEMPT UNDER SEC. 10(23C)(V) AS PER NOTIFICATION NO. SO-2591 DATED 25-7-1978. TH E LEARNED COUNSEL FOR THE ASSESSEE FURTHER PLACED RELIANCE ON THE DECISIONS OF CIT VS. SHAHZEDANAND CHARITY TRUST, 228 ITR 292 (P& H); CIT VS. JAYANT PATEL, 248 ITR 199 (MAD) AND CIT VS. MAGNUM EXPORTS PVT. LTD., 262 ITR 10 (KOL) AND SUBMITTED THAT THE FORM NO. 10B CAN BE SUBMITTED BEFORE THE APPELLATE AUTHORITY AND IT IS SUFFICIENT COMPLIANCE SINCE THE REQUIREMENT IS DIRECTORY AND NOT MANDATOR Y. IN THIS CONNECTION, THE ASSESSEE ALSO RELIED UPON THE DECIS ION IN THE CASE OF CIT VS. HARDEODAS AGRAWAL TRUST, 198 ITR 511 (CAL). DURING THE APPELLATE PROCEEDINGS, THE AO WAS ASKED VIDE LETTER DATED 17-03-2009 TO SEND HIS COMMENTS ON THE SUBMISSIONS MADE BY THE ASSESSEE AND THE VARIOUS DECISIONS RELIED UPON BY T HE ASSESSEE VIDE LETTER DATED 9-03-2009. IT WAS STATED BY THE AO VID E LETTER DATED 31-03-2009 THAT WHEN THE ASSESSEE HAS CATEGORICALLY FAILED TO FILE THE PRESCRIBED AUDIT REPORT ALONG WITH THE RETURN OF IN COME AND LATER AT THE ASSESSMENT STAGE, IT COULD NOT ALLEGE THAT IT H AD ALREADY FILED THE SAID AUDIT REPORT AND ITS PLEA DESERVES TO BE DISMI SSED AS THE ASSESSEE HAS FAILED TO PROVE THAT THERE WAS SUFFICI ENT CAUSE TO PREVENT IT FROM FILING THE AUDIT REPORT WITHIN STIP ULATED TIME AND ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 7 FOLLOWING THE CORRECT PROCEDURE. FURTHER, THE AO AL SO COMMENTED THAT VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE DO NO T SUPPORT THE ASSESSEE DIRECTLY AS IT DID NOT SUBMIT THE AUDIT RE PORT BEFORE COMPLETION OF ASSESSMENT PROCEEDINGS. THE AO FURTHE R STATED THAT AS PER THE RECENT JUDGMENT OF THE HONBLE RAJASTHAN HI GH COURT IN THE CASE OF CIT VS. JYOTI JAIN (2009) 17 DTR (RAJ) 286, FILING OF AUDIT REPORT FOR DEDUCTION U/S 80IA OF THE IT ACT IS MAND ATORY AND NOT DIRECTORY AND IN CASE OF FAILURE TO FILE THE AUDIT REPORT ALONG WITH THE RETURN OF INCOME THE ASSESSEE IS NOT ENTITLED TO DE DUCTION. THE AO FURTHER PLACED HIS RELIANCE ON THE DECISION IN THE CASE OF CIT VS. KOTHARI IMPEX 3 DTR (RAJ) 295. IN RESPONSE TO THE R EMAND REPORT OF THE AO, THE LEARNED COUNSEL FOR THE ASSESSEE AGAIN PLACED RELIANCE ON THE SAME DECISIONS AS RELIED UPON EARLIER. IT WA S FURTHER SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT IN THE CASE OF CIT VS. JYOTI JAIN, AS RELIED UPON BY THE AO, THE HONBLE H IGH COURT HAS SIMPLY FOLLOWED ITS EARLIER DECISION IN THE CASE OF CIT VS. KOTHARI IMPEX, 3 DTR 295 (RAJ) AND HAS NOT REFERRED TO ANY OF THE CASES RELIED UPON BY THE ASSESSEE AND THE QUESTION WAS AB OUT LEVY OF ADDITIONAL TAX ON PRIMA FACIE ADJUSTMENT AND WAS NO T REGARDING FILING OF AUDIT REPORT BEFORE THE PROCEEDINGS ARE OVER. FU RTHER THE ASSESSEE ALSO STATED THAT THE DISTINCTION DRAWN BY THE AO RE GARDING THE CASES RELIED UPON BY IT IS NOT PROPER AND THE DECISION OF THE JURISDICTIONAL HIGH COURT, REPORTED IN 219 CTR 242 (GUJ) IS BINDIN G. IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE T HAT THE POWERS OF CIT(A) ARE COTERMINOUS WITH THOSE OF THE AO AND IT IS SUFFICIENT COMPLIANCE IF THE AUDIT REPORT IN THE PRESCRIBED FO RM IS SUBMITTED BEFORE THE CIT(A). ALTERNATIVELY, IT WAS SUBMITTED THAT INCOME OF ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 8 XAVIER KELAVANI MANDAL PVT. LTD. IS EXEMPT UNDER SE CTION 10(23C) (V). THE AUDIT REPORT IN FORM 10 BB WAS SUBMITTED B EFORE ME AS PART OF THE PAPER BOOK. THE LEARNED COUNSEL FOR THE ASSE SSEE VIDE HIS LETTER DATED 9-4-2009 HAS RAISED AN ADDITIONAL GROU ND AND HAS SUBMITTED THAT THE ASSESSMENT ORDER DATED 15-12-200 8 PASSED UNDER SEC. 143(3) BASED ON ITR 1 WHICH IS E-FILED AS ADMI TTED BY THE AO IN THE SHOW CAUSE NOTICE DATED 5-12-2008 IS INVALID AN D BAD IN LAW IN AS MUCH AS THE ASSESSEE IS A CHARITABLE TRUST AND THE CORRECT INCOME TAX RETURN IS FORM NO. 3A AND, THEREFORE, THE AO SHOULD HAVE CALLED FOR THE I.T. RETURN IN FORM NO. 3A AND IN THE ABSENCE OF RETURN IN FORM NO. 3 A, THE ENTIRE ASSESSMENT IS BAD IN LAW. THE LEARN ED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGMENT IN THE CASE OF CIT VS. HARJINDER KAUR, 310 ITR 71 (P&H) AND RECENT GUJ ARAT HIGH COURT JUDGMENT, WHEREIN IT WAS HELD THAT THE RETURN WHICH WAS NEITHER SIGNED BY THE ASSESSEE NOR VERIFIED IN TERMS OF MAN DATE OF SEC. 140 WAS AN ABSOLUTELY INVALID RET URN AS THE INHERENT D EFECT COULD NOT BE CURED IN SPITE OF THE DEEMING EFFECT OF SEC. 292B A ND, THEREFORE, NO ASSESSMENT COULD BE MADE ON AN INVALID RETURN. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ABOV E REFERRED CASES, THERE WAS A RETURN, BUT IT WAS NOT SIGNED, YET IT I S HELD TO BE INVALID AND IN THE PRESENT CASE, THERE IS NO RETURN WHATSOE VER AS REQUIRED BY LAW AND THEREFORE, THE ASSESSMENT IS BAD IN LAW AND SEC. 292 B DOES NOT SAVE INVALIDITY. ACCORDING TO SEC. 292B, IF THE RETURN IS FURNISHED AND IF THERE IS DEFECT AND IF IT IS IN CONFORMITY W ITH THE INTENT AND PURPOSE OF THE ACT, THEN ONLY IT IS SAVED BY SEC. 2 92B. IN THE PRESENT CASE, THERE IS NO RETURN IN FORM NO. 3 A AND THEREF ORE QUESTION OF APPLICABILITY OF SEC. 292B DOES NOT ARISE. ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 9 4. THE LEARNED CIT(A) CONSIDERING THE SUBMISSION OF THE ASSESSEE IN THE LIGHT OF THE DECISIONS CITED ABOVE, DIRECTED THE AO TO ACCEPT THE AUDIT REPORT FROM THE ASSESSEE AND TO GRANT EXEMPTI ON. HIS FINDINGS IN PARA 3 AND 4 ARE REPRODUCED AS UNDER: 3. I HAVE CAREFULLY CONSIDERED THE FACTS OF TH E CASE AND THE SUBMISSIONS AS ADVANCED BY THE A.R. OF THE APPELLANT. THE APPELLANT HAS STRONGLY CONTENDED THA T IT HAS FILED THE AUDIT REPORT PERSONALLY BEFORE THE AC IT ON 29-12-2006. IT WAS THE FIRST YEAR OF E FILING OF RE TURN OF INCOME. AN AFFIDAVIT TO THAT EFFECT HAS BEEN FILED BEFORE ME. IF ACCORDING TO THE A.O. THE AUDIT REPORT WAS N OT THERE, HE SHOULD HAVE ISSUED SHOWCAUSE NOTICE OR GI VEN AN OPPORTUNITY TO RECTIFY THE DEFECT OR TO SUBMIT T HE AUDIT REPORT. ANY WAY THE APPELLANT HAS FILED THE AUDIT R EPORT BEFORE ME AND AS THE COURTS HAVE HELD THAT AUDIT RE PORT CAN BE ADMITTED EVEN AT THE APPELLATE STAGE, THE SA ME IS ADMITTED BY ME .AS THE AUDIT REPORT HAS BEEN FILED AT THE APPELLATE STAGE , IN MY VIEW EXEMPTION SHOULD BE GR ANTED TO THE APPELLANT . THIS VIEW IS FOUND SUPPORT FROM THE DECISION OF CIT VS. SHAHZEDANAND CHARITY TRUST (P& H) CITED SUPRA WHEREIN IT WAS HELD THAT EXEMPTION UNDE R SECTION 11 MAY NOT BE DENIED MERELY ON ACCOUNT OF DELAY IN FURNISHING THE AUDITOR'S REPORT BY SHOWING SUFFI CIENT CAUSE THE AUDITOR'S REPORT CAN BE FILED AT ANY STAG E EITHER BEFORE THE A.O. OR BEFORE THE APPELLATE AUTHORITY. THE SAME VIEW HAS BEEN TAKEN IN MAGNUM EXPORT (P) LTD. (CAL) AND JAYANT PATEL (MAD) CITED SUPRA. IN HARDEO DAS AGARWALLA TRUST (CAL) IT HAS BEEN HELD THAT TRUST C AN FILE AUDITOR'S REPORT BEFORE THE APPELLATE AUTHORITY AND THE APPEAL BEING A CONTINUATION OF ASSESSMENT PROCEEDIN GS THE APPELLATE AUTHORITY HAS THE POWER TO ACCEPT THE AUDIT REPORT AND THE APPELLATE AUTHORITY CAN DO WHAT THE A.O. CAN DO AND DIRECT HIM TO DO WHAT HE HAS FAILED TO D O. IN THESE DECISIONS IT HAS BEEN HELD THAT REQUIREMENT O F FILING AUDIT REPORT IS DIRECTORY AND NOT MANDATORY. THE A. O. IN HIS REMAND REPORT HAS STRONGLY CONTENDED THAT THE APPELLANT HAS FAILED TO FILE THE AUDIT REPORT AND I T HAS NOT ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 10 PROVED THAT THERE WAS SUFFICIENT CAUSE WHICH PREVEN TED IT FROM FILING THE SAME WITHIN THE DUE DATE. AS AGAINS T THE SAID OBSERVATION THE APPELLANT HAS STRONGLY CONTEND ED THAT IT HAS FILED THE AUDIT REPORT BY PHYSICALLY HA NDING OVER BEFORE THE A.O. AT THE TIME OF FILING THE RETURN OF INCOME AND WHEN THERE WAS DIFFERENCE OF OPINION ABOUT FILI NG OF AUDIT REPORT THE A.O. SHOULD HAVE GIVEN OPPORTUNITY TO THE APPELLANT TO FILE THE SAME AT THE TIME OF ASSESSMEN T PROCEEDINGS. THE FACTS AS THEY STAND NOW THE AUDIT REPORT IS NOT AVAILABLE IN THE RECORDS. CONSIDERING THE FA CT THAT THE APPELLANT HAS FILED THE AUDIT REPORT IN ALL THE SE YEARS IN THE PAST ALONG WITH RETURN OF INCOME AND ALSO IN SUBSEQUENT YEARS ALONG WITH RETURN OF INCOME AND ON LY FOR THE YEAR IN APPEAL THE DISPUTE HAS ARISEN BECAUSE O F FIRST YEAR OF E-FILING OF RETURN OF INCOME, I WOULD HOLD THAT AS THE AUDIT REPORT HAS BEEN FILED AT THE APPELLATE ST AGE, EXEMPTION SHOULD BE GRANTED TO THE APPELLANT, OTHER WISE THE APPELLANT WOULD BE LOSING THE EXEMPTION FOR TEC HNICAL DEFAULT. THEREFORE I DIRECT THE A.O. TO ACCEPT THE AUDIT REPORT FROM THE APPELLANT AND GRANT EXEMPTION. THE APPELLANT HAS FILED RETURN IN FORM 3A PHYSICALLY BY HAND DELIVERY BEFORE THE ACIT CIRCLE-8 ON 29-12-2006, BU T AS THE SAME WAS NOT ACCEPTED BY THE COMPUTER PROGRAMME RETURN IN FORM NO. 1 WAS FILED BY E FILING. AS RETU RN IN FORM 3A HAS BEEN FIELD BY THE APPELLANT IN THIS YEAR AS IT HAS DONE IN THE PAST YEARS, THE ADDITIONAL GROUND RAISE D BY THE APPELLANT IS REJECTED FOR THE REASON THAT MAIN GROUND OF APPEAL HAS BEEN ALLOWED AND FOR THE REASON THAT THE APPELLANT HAS BEEN CONSISTENTLY FILING RETURN OF IN COME IN FORM 3A OVER THE YEARS IN THE PAST INCLUDING THE CU RRENT YEAR. 4. IN THE RESULT, THE APPEAL IS ALLOWED IN RESPECT OF THE MAIN GROUND AND DISMISSED IN RESPECT OF THE ADDITIO NAL GROUND. 5. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT THE ASSESSEE FILED HIS RETURN OF INCOME IN FOR M NO.1 WHICH WAS SUPPOSED TO BE FILED IN FORM NO.3A AND FURTHER THE ASSESSEE FAILED TO ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 11 FURNISH THE AUDIT REPORT IN FORM NO.10B WHICH IS CO MPULSORY REQUIREMENT FOR ELIGIBILITY OF EXEMPTION U/S 11A OF THE IT ACT AS IS STATED IN SECTION 12A (B) OF THE IT ACT. HE SUBMITT ED THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE IN SUPPORT OF THE CONTENTION RAISED BEFORE THE AUTHORITIES BELOW. NO EVIDENCE WA S FILED TO SHOW THAT THE AUDIT REPORT WAS FILED BY HAND BEFORE THE ACIT. NO EFFORTS WERE MADE BY THE ASSESSEE TO FILE THE AUDIT REPORT AT THE DAK COUNTER. FURTHER, AFFIDAVIT OF MOHMAD IQBAL VOHRA O F M/S. M. A. SHAH, CHARTERED ACCOUNTANTS (PB-4) WAS WRONG ON FACTS. HE HAS SUBMITTED THAT THE ASSESSEE DID NOT TAKE ANY STEP BEFORE THE SENIOR AUTHORITIES OF THE INCOME TAX DEPARTMENT TO EXPLAIN THAT E-FILI NG IS NOT POSSIBLE IN SUCH CIRCUMSTANCES. THE ASSESSEE DID NOT TAKE AN Y STEP FOR FILING THE AUDIT REPORT BY POST TO THE REVENUE AUTHORITIES . HE HAS SUBMITTED THAT SINCE IN EARLIER YEAR AND SUBSEQUENT YEARS THE ASSESSEE FILED THE AUDIT REPORT WITH THE RETURN OF INCOME AND FOLLOWED THE CORRECT PROCEDURE, THEREFORE, CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED. HE HAS SUBMITTED THAT IN THE ABSENCE OF ANY CORROBORAT IVE EVIDENCES, THE LEARNED CIT(A) SHOULD NOT HAVE ALLOWED THE CLAIM OF THE ASSESSEE. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND REFERRED TO PB-4, AFFIDAVIT OF MOHAMAD IQBAL VOHRA WHO EXPLAINED THE FACTS OF FILING OF THE AUDIT REPORT AND THE RETURN IN FORM NO.3A PERSONALLY BEFORE THE ACIT. HE HAS SUBMITTED THAT S INCE THE ASSESSEE WAS A CHARITABLE COMPANY, RETURN WAS FILED IN PROPER FORM, BUT AS E-FILING WAS NOT POSSIBLE AND DUE TO PROCEDU RAL PROBLEMS AS NOTED ABOVE, THE ASSESSEE WAS PREVENTED FROM FILING THE AUDIT REPORT ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 12 ON TIME. HE HAS STATED THAT THE LEARNED CIT(A) RIGH TLY CONDONED THE DELAY IN FILING THE AUDIT REPORT. HE HAS SUBMITTED THAT FORM NO.3A AND FORM NO.10B REPORT WAS FILED AT THE ASSESSMENT STAG E AS WELL AS BEFORE THE APPELLATE STAGE, THEREFORE, THE LEARNED CIT(A) RIGHTLY DIRECTED THE AO TO GRANT EXEMPTION TO THE ASSESSEE U/S 11 OF THE IT ACT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. THE FACTS NOTED ABOVE ARE NOT IN DISPUTE. THE AFFIDAVIT OF THE CONCERN PERSON MOHAMAD IQBAL VOHRA (PB-4) FILED BEFORE THE LEARNED CIT(A) IN SUPPORT OF THE CONTENT ION OF FILING OF THE PRESCRIBED RETURN OF INCOME. IT IS EXPLAINED IN THE AFFIDAVIT THAT DISPATCH CLERK REFUSED TO ACCEPT THE RETURN ON THE GROUND THAT ACIT, CIRCLE-6 IS COMPANY CIRCLE AND ONLY COMPANY RETURN CAN BE ACCEPTED. HE ADVISED TO FILE RETURN IN FORM NO.1 TH ROUGH E-FILING BECAUSE IT WAS MANDATORY TO DO SO. THE DISPATCH CLE RK OF ADIT (EXEMPTION) REFUSED TO ACCEPT THE RETURN ON THE GRO UND THAT THOUGH THE RETURN IS IN FORM NO.3A, THE PAN MENTIONED IS O F COMPANY; THEREFORE, SAME CANNOT BE ACCEPTED. SINCE BOTH THE DISPATCH CLERKS REFUSED TO ACCEPT THE PROPER RETURN, THEREFORE, INC OME TAX RETURN IN FORM NO.1 WAS FILED THROUGH E-MAILING ON 20-12-2006 . FORM NO.3A ALONG WITH AUDIT REPORT IN FORM NO.10B WAS HANDED O VER TO ACIT, CIRCLE- 6 IN PERSON ON 29-12-2006. THE LEARNED CIT( A) CALLED FOR COMMENTS OF THE AO AT THE APPELLATE STAGE. THE ASSE SSEE EXPLAINED THAT THE POWERS OF LEARNED CIT(A) IS COTERMINOUS AS THAT OF THE AO, THEREFORE, REPORT FILED BEFORE THE LEARNED CIT(A) M AY BE ADMITTED IN EVIDENCE. THE LEARNED CIT(A) ADMITTED THE SAME AUDI T REPORT AT THE ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 13 APPELLATE STAGE ON WHICH THE REVENUE HAS NOT TAKEN ANY GROUND OF APPEAL CHALLENGING THE DISCRETION EXERCISED BY THE LEARNED CIT(A) IN ADMITTING THE AUDIT REPORT AT THE APPELLATE STAGE. SINCE, THE FINDINGS OF THE LEARNED CIT(A) TO THAT EXTENT HAVE NOT BEEN DIS PUTED OR CHALLENGED, THEREFORE, IT STANDS FINALLY CONCLUDED THAT THE AUDIT REPORT IN PRESCRIBED FORM WAS ADMITTED AT THE APPELLATE ST AGE. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS HARDEODAS AGARWALLA TRUST (SUPRA) HELD AS UNDER: HELD, THAT, IN THE INSTANT CASE, THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY TO FILE THE AUDIT REPORT IN TH E 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 T HE POWER TO ACCEPT THE AUDIT REPORT AND DIRECT THE ASSESSING OFFICER TO REDO THE ASSESSMENT. 7.1 THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SHAHZEDANAND CHARITY TRUST 228 ITR 292 HELD AS U NDER: UNDER SECTION 11 OF THE INCOME-TAX ACT, 1961, SUBJECT TO CERTAIN PROVISIONS OF THE ACT, AND ON FULFILLING OF CERTAIN CONDITIONS PROVIDED UNDER SEC TION 12A, INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSE HAS BEEN EXEMPTED FROM PAYMENT OF TAX. SECTION 12A PROVIDES THAT THE PROVISIONS OF SECTIONS 11 AND 12 SHALL NOT APPLY IN RELATION TO T HE INCOME OF ANY TRUST OR INSTITUTION UNLESS THE TWO CONDITIONS PROVIDED IN CLAUSES (A) AND (B) OF SECTI ON 12A ARE FULFILLED. SECTION 12A LAYS DOWN THAT THE TRUST OR INSTITUTION HAS TO FURNISH AN AUDITORS REPORT D ULY SIGNED AND VERIFIED BY THE CHARTERED ACCOUNTANT WIT H THE RETURN OF INCOME. ACCORDING TO CIRCULAR DATED FEBRUARY 9, 1978 OF THE CENTRAL BOARD OF DIRECT TAX ES, ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 14 IT IS NOT MANDATORY UNDER SECTION 12A (B) TO FILE T HE AUDIT REPORT ALONG WITH THE RETURN OF INCOME. NORMALLY, A CHARITABLE OR RELIGIOUS TRUST OR INSTIT UTION IS EXPECTED TO FILE THE AUDITORS REPORT ALONG WITH THE RETURN BUT IN CASES WHERE FOR REASONS BEYOND THE CONTROL OF THE ASSESSEE SOME DELAY HAS OCCURRED IN FILING THE SAID REPORT, THE INCOME-TAX OFFICER, FOR REASONS TO BE RECORDED, HAS BEEN AUTHORIZED TO CONDONE THE DELAY IN FURNISHING THE AUDITORS REPOR T AND ACCEPT THE SAME AT A BELATED STAGE. IT HAS BEEN CLARIFIED THAT THE EXEMPTION AVAILABLE TO THE TRUST UNDER SECTION 11 MAY NOT BE DENIED MERELY ON ACCOUNT OF DELAY IN FURNISHING THE AUDITORS REPORT . THE WORD SHALL OCCURRING IN SECTION 12A CANNOT, UNDER THE CIRCUMSTANCES, BE READ AS MUST MAKING I T MANDATORY FOR THE TRUST TO FURNISH THE AUDITORS RE PORT ALONG WITH THE FILING OF THE RETURN. IF FOR CERTAIN UNAVOIDABLE CIRCUMSTANCES, THE ASSESSEE IS UNABLE TO FURNISH THE AUDITORS REPORT ALONG WITH THE RETU RN, THEN THE SAME CAN BE FURNISHED AT A LATER DATE WITH THE PERMISSION OF THE ASSESSING OFFICER WHO MAY PERMIT THE ASSESSEE TO DO SO AFTER RECORDING HIS REASONS. THE CENTRAL BOARD OF DIRECT TAXES BY ISSUING THE CIRCULAR DATED FEBRUARY 9, 1978, HAS TREATED THE PROVISIONS REGARDING FURNISHING OF AUDITORS REPORT ALONG WITH THE RETURN TO BE PROCED URAL AND, THEREFORE, DIRECTORY IN NATURE. BY SHOWING SUFFICIENT CAUSE, THE AUDITORS REPORT COULD BE PRODUCED AT ANY LATER STAGE EITHER BEFORE THE INCOM E- TAX OFFICER OR BEFORE THE APPELLATE AUTHORITY. 7.2 IN THIS CASE, THE AO HAS NOT GIVEN ANY NOTICE T O THE ASSESSEE AT THE ASSESSMENT STAGE THAT THE RETURN WAS INCOMPLETE BECAUSE OF NON- FILING OF THE AUDIT REPORT, THE SAME BE FILED AT TH E APPELLATE STAGE. THEREFORE, APPELLATE PROCEEDINGS BEING CONTINUATION OF THE ASSESSMENT PROCEEDINGS, THE LEARNED CIT(A) ON PROPE R APPRECIATION OF THE FACTS CORRECTLY ADMITTED THE AUDIT REPORT AT THE APPELLATE STAGE. ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 15 IN THE ABOVE POSITION, IT WAS HELD THAT THE ASSESSE E CAN FILE AUDITORS REPORT BEFORE THE APPELLATE AUTHORITY AND THE APPEA L BEING CONTINUATION PROCESS OF THE ASSESSMENT PROCEEDINGS, THE APPELLATE AUTHORITY HAS THE POWER TO ACCEPT THE AUDIT REPORT AND THE APPELLATE AUTHORITY CAN DO WHAT THE AO CAN DO AND DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. IN THIS CASE, IT IS NOT IN DISPUT E THAT THE AUDIT REPORT IN PRESCRIBED FORM WAS OBTAINED PRIOR TO FILING OF THE RETURN ON 20-12-2006; THEREFORE, THERE WAS NO REASON FOR THE ASSESSEE TO KEEP THE AUDIT REPORT WITH IT IN ORDER TO LOOSE THE EXEM PTION. THE ASSESSEE IN THE EARLIER AS WELL AS IN THE SUBSEQUENT ASSESSM ENT YEARS FILED THE AUDIT REPORT AND GOT THE EXEMPTION. THE CONDUCT OF THE ASSESSEE IN EARLIER YEAR AND SUBSEQUENT YEARS WOULD PROVE THAT DUE TO THE FACTS STATED ABOVE THERE WAS DELAY IN FILING THE AUDIT RE PORT AND THE CONTENTION OF THE ASSESSEE WAS SUPPORTED BY THE AFF IDAVIT OF MOHAMAD IQBAL VOHRA (PB-4). THE LEARNED CIT(A) ON P ROPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD IN THE LIGHT OF THE DECISIONS OF THE HONBLE PUNJAB & HARYANA HIGH COUR T AND THE HONBLE CALCUTTA HIGH COURT RIGHTLY DIRECTED THE AO TO ACCEPT THE AUDIT REPORT OF THE ASSESSEE AND GRANT EXEMPTION U/ S 11 OF THE IT ACT. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE LEARNED CIT(A). WE CONFIRM HIS FINDINGS AND DISMISS THE APP EAL OF THE REVENUE. ITA NO.2050/AHD/2009 THE ACIT, CIR-8, AHMEDABAD VS XAVIER KELVANI MANDAL PVT LTD. 16 8. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 17-06-2011 SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 17-06-2011 LAKSHMIKANT/ LAKSHMIKANT/ LAKSHMIKANT/ LAKSHMIKANT/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD