Sri Sharada Educational Trust , Mysore V. The Income Tax Officer (Exemptions) Ward-1 , Mysore

ITA 2316/BANG/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6575 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 03-08-2018
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER I TA NO. 2 316 /BANG/2018 ASSESSMENT YEAR : 20 1 3 - 1 4 M/S. SRI SHARADA EDUCATIONAL TRUST, NO. 3, GOKULAM MAIN ROAD, JAYALAKSHMIPURAM, MYSORE. PAN: AAKTS0335C VS. THE INCOME TAX OFFICER (EXEMPTIONS), WARD 1, MYSORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI RAVISHANKAR S.V., ADVOCATE REVENUE BY : SHRI M. RAJASEKHAR, ADDL. CIT (DR) DATE OF HEARING : 15 .0 7 .2019 DATE OF PRONOUNCEMENT : 02 .0 8 .2019 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), MYSORE DATED 28.05.2018 FOR ASSESSMENT YEAR 2013-14. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE LEARNED CIT(APPEALS). FAILED TO APPRECIATE THE FACT THAT IN RESPECT OF THE A.Y.2013-14 THERE WAS NO REQUIREMENT OF FILING THE AUDITORS' REPORT IN FORM 10B ELECTRONICALLY AS THE SAME BECAME APPLICABLE ONLY FROM THE A.Y.2014-15 AS THE PROVISO TO RULE 12(2) WAS INSERTED BY THE INCOME-TAX 4TH AMENDMENT (RULES) 2014 W.E.F. 01.04.2014 I.E., A.Y.2014-15 ONLY AND THAT FOR THE A.Y.2013-14 THERE WAS NO SUCH REQUIREMENT AS INDICATED UNDER 'ACTION POINTS' IN TAXMANN'S INCOME TAX RULES, 2013, 50 TH EDITION PAGE 1.741 WHICH READS AS UNDER: 1. ......... 2. ......... 3. EARLIER THE ASSESSEE WAS REQUIRED TO ENCLOSE THIS REPORT TO THE RETURN OF INCOME, FAILING WHICH THE ASSESSEE MAY BE DENIED THE BENEFIT OF EXEMPTION. NOW UNDER RULE 12(2), THIS REPORT SHOULD NOT BE ENCLOSED TO THE RETURN OF INCOME. IT MAY BE RETAINED BY THE ASSESSEE IN HIS RECORDS. 4. .. 2. THE LEARNED CIT (APPEALS) FAILED TO APPRECIATE THE FACT THAT THE A.O. HAD PASSED THE ORDER U/S.154 WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD OR EVEN DIRECTING THE ASSESSEE TO FILE A COPY OF THE AUDIT REPORT IN FORM 10B AS FOR THE A.Y.2013-14, ALL THAT THE ASSESSEE WAS REQUIRED TO ITA NO. 2316/BANG/2018 PAGE 2 OF 4 DO WAS TO OBTAIN THE AUDIT REPORT AND RETAIN IN ITS RECORDS WHICH THE ASSESSEE HAD DONE AND THEREFORE, THE REQUIREMENT OF FILING THE AUDIT REPORT WAS NOT MANDATORY BUT DIRECTORY AS HELD IN VARIOUS TRIBUNAL AND HIGH COURT DECISIONS INCLUSIVE OF IN THE CASE OF CIT VS. HARDEODAS AGARWALLA TRUST REPORTED IN (1992) 198 ITR 511. 3. THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE THE FACT THAT AS FILING THE AUDIT REPORT IN FORM 10B WAS NOT MANDATORY BUT DIRECTORY, IT WAS WITHIN HIS POWERS TO ACCEPT THE AUDIT REPORT (WHICH WAS FILED BEFORE HIM ALONG WITH THE FIRST APPEAL PAPERS) AND DIRECT THE A.O. TO REDO THE ASSESSMENT AS THE APPELLATE AUTHORITY HAS PLENARY POWERS IN DISPOSING OF AN APPEAL AND THE SCOPE OF HIS POWER IS COTERMINOUS AND CO-EXTENSIVE WITH THAT OF THE A.O. AND THEREFORE, OUGHT TO HAVE ACCEPTED THE AUDIT REPORT AND DIRECTED THE A.O. TO REDO THE ASSESSMENT. 4. THE APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIBUNAL, TO ADD, ALTER, DELETE, AMEND OR SUBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AS MAY BE NECESSARY AT THE TIME OF HEARING. 5. IN VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF JUSTICE AND EQUITY. 3. BRIEF FACTS ARE THAT THE PRESENT PROCEEDINGS WERE INITIATED BY THE AO BY PASSING AN ORDER U/S. 154 ON 12.02.2018. IN THE SAID ORDER, IT IS NOTED BY THE AO THAT THE ASSESSEE TRUST FILED ITS RETURN OF INCOME FOR THE PRESENT YEAR ON 25.11.2013 ELECTRONICALLY. SHE FURTHER NOTED THAT THE RETURN OF INCOME WAS PROCESSED BY CPC DENYING EXEMPTION U/S. 11 VIDE INTIMATION U/S. 143(1) DATED 12.03.2015 AND RAISED DEMAND OF RS. 17,07,800/-. SHE FURTHER NOTED THAT THE ASSESSEE MADE AN APPLICATION U/S 154 DATED 11.01.2018 IN WHICH IT IS STATED THAT THE TRUST IS REGISTERED U/S. 12AA AND AS SUCH, THE INCOME OF THE TRUST IS FULLY EXEMPT AS IT HAD APPLIED ITS FUNDS IN ACCORDANCE WITH SECTION 11, 12 AND 13 OF THE IT ACT AND REQUESTED FOR RECTIFICATION OF THE INTIMATION U/S. 143(1) DATED 12.03.2015. SHE FURTHER NOTED IN THE SAID ORDER THAT ON VERIFICATION OF THE RETURN OF INCOME FILED BY THE ASSESSEE, IT IS NOTICED THAT RETURN OF INCOME FILED BY THE ASSESSEE IS NOT ACCOMPANIED WITH AUDIT REPORT U/S. 10B ELECTRONICALLY AS REQUIRED U/S. 12A(1)(B) OF THE IT ACT. ON THE BASIS OF THIS, THE AO HELD IN ORDER U/S SECTION 154 THAT THE ASSESSEES CLAIM FOR EXEMPTION U/S. 11 CANNOT BE CONSIDERED U/S 154 AGAINST THIS ORDER PASSED BY THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS. NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. IT WAS SUBMITTED BY LD. AR OF ASSESSEE BEFORE US THAT AS PER THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF CIT VS. HARDEODAS ITA NO. 2316/BANG/2018 PAGE 3 OF 4 AGARWALLA TRUST AS REPORTED IN 198 ITR 511, IT WAS HELD THAT REQUIREMENT OF FURNISHING AUDIT REPORT IS A PROCEDURAL CONDITION AND IF THE ASSESSEE BEING THE CHARITABLE TRUST CLAIMING EXEMPTION U/S. 11 OF THE IT ACT HAD OBTAINED AUDIT REPORT BEFORE ASSESSMENT BUT THE REPORT WAS NOT FURNISHED DURING ASSESSMENT AND MERELY BECAUSE OF SUCH REPORT COULD NOT BE FILED IN COURSE OF PROCEEDINGS, EXEMPTION U/S. 11 OF THE IT ACT CANNOT BE DENIED TO SUCH AN ASSESSEE. IT IS ALSO HELD THAT THE APPELLATE AUTHORITY HAS THE POWER TO ACCEPT THE AUDIT REPORT AND DIRECT THE ASSESSING OFFICER TO REDO THE ASSESSMENT. HE SUBMITTED THAT IN THE PRESENT CASE, THE ASSESSEE HAS ALREADY FILED THE COPY OF AUDIT REPORT TO THE AO ON 11.01.2018 IN COURSE OF PROCEEDINGS U/S. 154 OF THE IT ACT AND THEREFORE, THIS JUDGMENT IS SQUARELY APPLICABLE IN THE PRESENT CASE. HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. MAYUR FOUNDATION AS REPORTED IN 274 ITR 562. HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. NAGPUR HOTEL OWNERS ASSOCIATION AS REPORTED IN 247 ITR 201. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE QUESTION BEFORE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. HARDEODAS AGARWALLA TRUST (SUPRA) WAS AS UNDER. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE PROVISIONS OF SECTION 12A(B) OF THE INCOME-TAX ACT, THE TRIBUNAL IS JUSTIFIED IN LAW IN SETTING ASIDE THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE INCOME-TAX OFFICER AND IN DIRECTING THE INCOME-TAX OFFICER TO ACCEPT THE AUDITOR'S REPORT IN FORM NO. 10B AND TO PROCESS THE ASSESSEE'S CLAIM FOR EXEMPTION UNDER SECTION 11 OF THE INCOME- TAX ACT AFRESH?' 6. AS PER THE FACTS NOTED BY HONBLE CALCUTTA HIGH COURT IN PARA 2 OF THIS JUDGMENT, THE ASSESSEE FILED RETURN OF INCOME WITHOUT AUDITORS REPORT IN FORM NO. 10B. EVEN IN COURSE OF ASSESSMENT PROCEEDINGS, THE AUDIT REPORT WAS NOT FURNISHED. THE HONBLE CALCUTTA HIGH COURT HAS FURTHER NOTED THAT THE AUDIT REPORT WAS OBTAINED ON 20.02.1985 IN FORM NO. 10B BUT THE SAME WAS NOT FILED AND THE AO COMPLETED THE ASSESSMENT DENYING EXEMPTION U/S. 11 OF THE IT ACT. IT IS FURTHER NOTED BY HONBLE CALCUTTA HIGH COURT IN THAT CASE THAT WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A), AT THE TIME OF HEARING OF THE APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED TWO COPIES OF THE AUDITED ACCOUNTS AND THE REPORT OF THE AUDITOR IN FORM NO. 10B. THE LD. CIT(A) HELD THAT THE TRUST HAD ITA NO. 2316/BANG/2018 PAGE 4 OF 4 NOT FULFILLED THE CONDITIONS LAID DOWN IN SECTION 12A(B) AND CONSEQUENTLY, ITS INCOME WAS NOT ENTITLED TO EXEMPTION PROVIDED U/S. 11 AND 12 OF THE IT ACT. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND RESTORED THE MATTER TO THE FILE OF AO WITH THE DIRECTION TO ACCEPT THE AUDITOR'S REPORT IN FORM NO. 10B AND PROCESS THE ASSESSEE'S CLAIM FOR EXEMPTION UNDER SECTION 11 AND FRAME A FRESH ASSESSMENT AS PER LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. AGAINST THIS TRIBUNAL ORDER, THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE HONBLE CALCUTTA HIGH COURT AND THE HONBLE CALCUTTA HIGH COURT HELD THAT THE TRIBUNAL CAME TO A CORRECT CONCLUSION. IN THE PRESENT CASE, THIS JUDGMENT OF HONBLE CALCUTTA HIGH COURT IS SQUARELY APPLICABLE AND RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE ORDER OF AUTHORITIES BELOW AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRAMING THE ASSESSMENT AFRESH AND FOR EXAMINING THE CLAIM OF THE ASSESSEE U/S. 11 ON MERIT INSTEAD OF REJECTING THE SAME ON THIS BASIS THAT AUDIT REPORT IN FORM NO. 10B WAS NOT FILED ALONG WITH THE RETURN OF INCOME FILED ELECTRONICALLY. WE DO NOT MAKE ANY COMMENT REGARDING THE ASSESSEES ELIGIBILITY FOR EXEMPTION U/S. 11 OF THE IT ACT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 02 ND AUGUST, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.