Pastoral Orientation Centre, Cochin V. Astt.Director of IT (Exemption), Cochin

ITA 250/COCH/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90788 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 29-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: L KURIAKOSE
• Keywords: Opportunity of being heard; Benefit of exemption
• Section: 143(3); 12A; 10B; 263; 12

Judgement Text

ITA NO. 250/COCH/2015 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & GHEORGE GEORGE.K , J M ITA NO . 250/COCH/2015 (ASST YEAR 2010 - 11 ) PASTORAL ORIENTATION CENTRE 2187, XXIII POC BUILDING MKK NAIR ROAD, PALARIVATTOM (PO) KOCHI 682 025 VS THE ASST DIRECTOR OF INCOME TAX (EXEMPTION) RANGE 4 KOCHI ( APPELLANT) (RESPONDENT) PAN NO. AAATP2453Q ASSESSEE BY SHRI L KURIAKOSE REVENUE BY SHRI M ANIL KUMAR, CIT - DR DATE OF HEARING 08 TH JULY 2015 DATE OF PRONOUNCEMENT 10 TH JULY 2015 O R D ER PER GEORGE GEORGE. K. J M: THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE CITS ORDER DATED 11.3.2015 , PASSED U/S 263 OF THE ACT. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. 2 THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. TH E ORDER PASSED U / S . 263 BY THE LEARNED COMMISSIONER OF INCOME TAX FOR THE ASSESSMENT YEAR 2010 - 11 IS AGAINST LAW , FACTS, AND WEIGHT OF EVIDENCES , 2. THE LEARNED COMMISSIONER OF INCOME TAX WHI L E PASSING THE ORDER U/S . 263 HAS NOT CONSIDERED ANY OF THE SUBMISS IONS MADE BY THE A SSESSEE INSTITUTION IN ITS REPLIES TO NOTICE DT . 9. 2 . 2015 . 3. THE LEARNED COMMISSIONER OF INCOME TAX IS NOT CORRECT IN REJECTI NG THE SUBMISSION OF ASSESSEE THAT IT HAD GOT ITS ACCOUNTS AUDITED AND OBTAINED THE AUDIT REPORT IN 10B AND FILE D ALONG WITH THE RETURN OF INCOME ITA NO. 250/COCH/2015 2 4. THE LEARNED COMMISSIONER OF INCOME TAX HAS NOT CONSIDERED THE SUBMISSION , THAT THE ASSESSING OFFICER , WHILE COMPLETING THE ASSESSMENT U/S . 143(3), THOU GH HAS ISSUED NOTICE REQUIRING EXPLANATIONS ON MANY ISSUES, NOT MENTIO NED THE OMISSIONS TO FILE AUDIT REPORT IN 10B AND ASKED FOR ANY EXPLANATIONS FOR THE SAME AND NO OPPO R TUNITY WAS GIVEN TO THE APPELLANT TO RECTIFY THE ALLEGED DEFECT . . 5. THE ASSESSEE HAD SUBMITTED BEFORE THE LEARNED COMMISSIONER , THAT A PROCEDURAL PROVISIO N ORDINARILY SHOULD NOT BE CONSTRUED AS MANDATORY, IF THE DEFECT IN T HE ACT DONE IN PURSUANCE OF IT CAN BE CURED BY PERMITTING APPROPRIATE RECTIFICATION TO BE CARRIED OUT AT A SUBSEQUENT STAGE. THE COPY OF THE AUDIT REPORT UNDER SEC . 12A(1)B FILED BEFORE T HE COMMISSIONER OF INCOME TAX , ALONG WITH THE REPLY TO THE NOTICE UNDER SEC . 263 WAS NOT CONSIDERED BY THE LEARNED COMMISSIONER . THE DECISION OF THE HONORABLE CALCUTTA HIGH COURT IN CIT V S . HARDEODAS AGARWALLA TRUST , 198 ITR 5 11 (CAL) IS A CASE DIRECTLY O N ISSUE INVOLVED IN THIS CASE AND THE SAME WAS BROUGHT TO THE NO T I CE OF THE LEARNED COMMISSIONER WHICH WAS NOT CONSIDERED WHILE PASSING THE ORDER UNDER SECT I ON . 263. 6. THE LEARNED COMMISSIONER OF INCOME TAX , WHO PASSED THE ORDE R IN THIS CASE HAS NOT GIVEN A PERSONAL HEARING TO THE A SSESSEE BEFORE PASSING THE ORDER U/S . 263. 3 THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: 4 THE ASSESSEE IS A RELIGIOUS TRUST ESTABLISHED IN THE YEA R 1 96 8 AND I S REGI S T E R ED UNDER THE TRAVANCORE - COCHIN SCIENTIFIC , LITERATARY AN D CH A R I TAB L E SOCIETIES REG I ST R A T ION AC T . I T I S ALSO REG I STERED UNDER 12A OF THE IT ACT VIDE ORDER OF THE CIT KE R ALA DATED 29.12.1976 . THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR WAS FILED ON 28.9.2010 . NO DEFECTS WERE POINTED OUT TO THE RETUR N OF INCOME FILED . THE RETURN WAS PROCESSED UNDER SECTION 143(1) AND T HEREAFTER TAKEN UP FOR SCRUTINY BY ISSUING NOTICE U/S 142(2) OF THE ACT. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 26 .12.2012 ACCEPTI N G THE R ETURN ED IN COME . SUBSEQUENTLY, NOTICE U/S 263 W AS I S SUED , STATING THAT THE ASSESSEE TRUST H AS NOT FILED THE AUDI T ITA NO. 250/COCH/2015 3 REPO R T IN FOR M 10B. 5 THE ASSESSEE FILED DETAILED REPLY ON 25 .2.2015 AND ON 5 .3.2015 . IN THE REPLIES THE A SSESSEE POINTED THA T IT HAD OBTA I NED THE AUDIT REPORT IN FO R M 10B ON 21 . 9. 2010 AND F I LED THE SAME ON 28.9.2010 ALON G W I TH TH E RE T UR N I NCOME . I T WAS FURTHER SUBMITTED THAT THE AO HAS NOT PO I NTED OUT THE ABSENCE OF 10B D U RI N G THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING U/S 143(3 ) OF THE I T A CT. THE ASSESSEE ALSO FILED COPY OF AUDIT REPORT IN FORM 10B BEFORE THE COMMI S SI ON ER OF INCOME TAX DURING THE COURSE OF REVISIONARY PROCEEDINGS. FURTHER , I N THE REPLY DT 5.3. 2015, I T WAS CONTENDED THAT THE R EQU IR EMENT OF FILING T H E A U D IT REPORT IN FORM 10 B ALONG W I TH THE RETURN OF INCO ME IS ONLY DIRECTORY AND DEFECT , IF ANY , CAN BE C UR ED BY FILING THE SAME AT A LATER STAGE. FOR THE ABOVE PROPOSITION, RELIANCE WAS PLACED ON THE JUDGMENT REPORTED IN 198 ITR 511 IN THE CASE OF CIT VS HARDEODAS AGARWALLATRUST . THE CIT, HOWEVER, REJECTED TH E CONTENTION OF THE ASSESSEE TRUST AND SET ASIDE THE ASSESSMENT FOR THE REASON THAT THE FILING OF THE AUDI T OR ' S CERTIF I CATE IN FORM 10B IS M A N DAT O RY A N D T HE ASSESSEE HAS NOT COMPL I ED WITH THE SAME . THE RELEVANT OBSERVATION OF THE CIT READS AS UNDER: 5 . I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE DURING THE COURSE OF HEARING U/S 263 OF THE ACT . HOWEVER , I AM NOT IN A POSITION TO ACCEPT THE CONTENTIONS OF THE ASSESSEE. SECTION 12A(1 )(B) STIPULATES THAT WHERE THE TOTAL INCOME OF THE TRUST OR I NSTITUTION AS COMPUTED UNDER THIS ACT WITHOUT GIVING EFFECT TO (THE PROVISIONS OF SECTION 11 AND 12 EXCEEDS THE MAXIMUM AMOUNT WHICH IS ' NOT CHARGEABLE TO I NCOME TAX IN ANY PREVIOUS YEAR), THE ACCOUNT OF THE TRUST OR INSTITUTION FOR THAT YEAR HAVE BEEN AUD ITED BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB - SECTION (2) OF SECTION 288 AND THE PERSON IN RECEIPT OF THE INCOME ITA NO. 250/COCH/2015 4 FURNISHES ALONG WITH THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DU LY SIGNED AND VERIFIED B Y SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED. THUS , ' IT IS CLEAR THAT IF AN ASSESSEE FAILS TO COMPLY WITH THE PROVISIONS OF SECTION 12A(1) WHICH PRESCRIBES CONDITIONS FOR APPLICABILITY OF SECTIONS 11 AND 12 , THE PROVISIONS OF SECTION 11 AND SECTION 11 AND 12 SHALL NOT APPLY IN RELATION TO THE INCOME OF ANY TRUST OR INSTITUTION UNLESS THE CONDITIONS ARE FU L FILLED . SINCE THE PROVISIONS OF SECTION 12A(1)(B) OF THE INCOME TAX ACT IS CLEAR AND, THEREFORE , IT IS MANDATORY TO THE ASSESSEE TO FILE AUDIT REPORT IN FORM 10B ALONG WITH RETURN OF INCOME. HOWEVER, THE ASSESSEE HAS FAILED TO DO. 6. IN THE LIGHT OF THE ABOVE DISCUSSION, I FIND THAT THE ASSESSMENT ORDER PASSED BY THE ASSESS I NG OFFICER U/S 143(3) OF THE INCOME TAX ACT DATED 26.12. 2012 FOR THE ASSESSMENT YEAR 2010 - 11 IS ERRONEOUS I N SO FAR AS I T IS PREJUD I CIAL TO THE INTEREST OF REVENUE AS THE ASSESSEE HAS FAILED TO FURNISH THE MANDATORY CERT I FICATE IN FORM O. 10B ALONG WITH THE RETURN OF INCOME FOR CLAIMING EXEMPTION U/S 11 . ACCORD I NGLY , INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT , 1961 , THE ASSESSMENT ORDER DATED 26.12. 2012 IS SET ASIDE WITH A DIRECTION TO THE ASSESSING OFFICER TO REDO THE SAME AFRESH AFTER CONSIDERING ALL ISSUE S RAISED HEREIN ABOVE AND AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 6 THE ASSESSEE TRUST BEING AGGRIEVED IS IN APPEAL BEFORE US. 7 THE LD COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE CIT. THE LD DR, ON THE OTHER HAND SUBMITTED THAT THE ASSESSMENT ORDER BEING CRYPTIC AND NON SPEAKING, THE CIT IS JUSTIFIED IN PASSING REVISIONARY ORDER U/S 263 OF THE A CT. 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE AUDIT REPORT IN FORM 10B HAS BEEN FILED ALONG WITH THE RETURN OF INCOME . THEREFORE , THE ORDER OF THE CIT INVOKING THE PROVISION U/S 263 IS JUSTIFIED AND LEGAL . HOWEVER, WE NOTICE THAT THE CIT IN PARA 5 & 6 OF THE IMPUGNED O RDER HAS HAD RECORDED THAT FILING OF AUDIT REPORT IN FORM 10B IS MANDATORY. THE CONCLUSION OF THE CIT IS ITA NO. 250/COCH/2015 5 INCORRECT IN VIEW OF THE BOARD CIRCULAR NO.1/1148 - CBDT F NO.267/482/77IT(PART) DATED 9 TH FEB 1978 WHEREIN IT IS MENTIONED THAT REQUIREMENT OF F ILING AUDIT REPORT IN FORM 10B ALONG WITH RETURN OF INCOME IS NOT MANDATORY BUT DIRECTORY AND THE AO CAN ACCEPT THE SAME AT A LATER STAGE. FURTHER, THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE REPORTED IN 228 ITR 292 IN THE CASE OF CIT VS SHAH ZEDANAND CHARITY TRUST HAD CATEGORICALLY HELD THAT FILING OF AUDIT REPORT IN FORM 10B ALONG WITH RETURN OF INCOME IS NOT MANDATORY BUT ONLY DIRECTORY AND THE REPORT CAN BE FURNISHED EVEN AT APPELLATE STAGE AND THEREFORE, DEFECT, IF ANY, IS ONLY CURABLE. IN VIEW OF THE BOARD CIRCULAR AND THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT (SUPRA), WE DELETE THE OBSERVATION OF THE CIT THAT FILING OF AUDIT REPORT IN FORM 10B ALONG WITH RETURN OF INCOME IS MANDATORY. WE DIRECT THE AO TO TAKE ON RECO RD THAT THE AUDIT REPORT FILED BEFORE THE CIT AND CONSIDER THE CASE AFRESH AS PER THE DIRECTIONS OF THE CIT. NEEDLESS TO STATE THE AO IS AT LIBERTY TO DENY THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT FOR ANY REASONS OTHER THAN THE REASON THAT THE AUDIT REP ORT IN FORM 10B IS NOT FILED. IT IS ORDERED ACCORDINGLY . 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH , DAY OF JULY 2015. SD/ - SD/ - ( B P JAIN) (GEORGE GEORGE K) ACCOUNT ANT MEMBER JUDICIAL MEMBER COCHIN: DATED 10 TH . JULY 2015 RAJ* ITA NO 250/COCH/2015 1 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT , 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN