Shri Visha Oswal Jain Sewa Samaj, Vadodara V. The ITO, Exmption , Vadodara

ITA 59/AHD/2022

AI Insights

The case involves Shri Visha Oswal Jain Sewa Samaj, a charitable trust, which appealed against the decision of the National Faceless Appeal Centre (NFAC) that upheld the Income Tax Officer's (ITO) denial of tax exemption under sections 11 and 12 of the Income Tax Act, 1961, for the Assessment Year 2015-16. The ITO had initially disallowed the trust's expense claims and demanded tax, citing non-filing of the Audit Report in Form 10B with the return of income. The trust later filed the report, but the NFAC dismissed the appeal due to the report not being filed in time. The Tribunal, referencing various judicial precedents, found that the procedural requirement of filing the audit report was met and directed the ITO to assess the claim on its merits.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114127 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-10-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 22-02-2022
• Other Referred Cases: Association of Indian Panel Board Manufacturer Vs. DCIT, Shree Bhairav Seva Samiti Vs. ITO (Exemption), ITO Vs. Shri Laxmanarayan Dev Shrishan Seva Khendra
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Charitable institution; Maximum Marginal Rate; Benefit of exemption; Set aside
• Section: 12; 154; 11; 12A; 12AA; 10B; 143(1); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Shri Visha Oswal Jain Sewa Samaj, 301, Ambar Residency Flats, Near Haveli Temple, Ambawadi, Akota, Baroda PAN: AAOTS6977N (Appellant) Vs Income Tax Officer, (Exemptions), Ahmedabad (Respondent) Assessee Represented: Shri Tej Shah, A.R. Revenue Represented: Shri Akhilendra Pratap Yadav, CIT-DR Date of hearing : 04-10-2023 Date of pronouncement : 11-10-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 25.12.2021 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), arising out of the rectification order passed under section 154 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2015-16. ITA No. 59/Ahd/2022 Assessment Year 2015-16 I.T.A No. 59/Ahd/2022 A.Y. 2015-16 Page No Shri Visha Oswal Jain Sewa Samaj vs. ITO(E) 2 2. The brief facts of the case is that the assessee is a charitable trust engaged in education and other charitable activities. For the Assessment Year 2015-16, the assessee Trust filed its Return of Income showing gross income of Rs. 3,81,030/- and claimed expense of Rs. 3,70,516/-. The return was taken for prima facie adjustment by Computer Processing Centre and disallowed the entire claim of expenses and demanded a tax of Rs. 1,67,290/- vide intimation u/s. 143(1) dated 16-03-2018. 3. Aggrieved against the same, the assessee filed rectification application dated 26-11-2019 and also filed Audit Report in Form 10B on 07-07-2020. This rectification application was also rejected on the ground that Audit Report in Form 10B was not filed along with the Return of Income, thereby the exemption u/s. 11 & 12 is not applicable to the assessee. Thus the rectification application was rejected. 4. Aggrieved against the same, the assessee filed an appeal before National Faceless Appeal Centre. The Ld. NFAC held that the Assessing Officer rejected the rectification petition observing that the assessee did not file the Audit Report in Form 10B and during the appellate proceedings. The assessee failed to furnish the date on which Audit Report in Form 10B was filed by the assessee and also failed to explain the delay in filing Form 10B was whether condoned by CIT(E). In the absence of any details, the appeal filed by the assessee was dismissed by Ld. NFAC. I.T.A No. 59/Ahd/2022 A.Y. 2015-16 Page No Shri Visha Oswal Jain Sewa Samaj vs. ITO(E) 3 5. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The NFAC erred in law and in the facts of the case in confirming the order of the AO in denying exemption u/s 11 and 12 of the act. 2. The NFAC erred in law and in the facts of the case in confirming the action of the AO in allowing prima facie adjustment u/s 143(1)(a) of the act. 3. The NFAC erred in law and in the facts of the case in confirming the action of the AO in not allowing rectification of its order u/s 154 of the act. 4. The NFAC erred in law and in the facts of the case in confirming the order of the AO in charging tax at the maximum marginal rate. 5.1. Ld. Counsel Shri Tej Shah appearing for the assessee submitted that the assessee was not given any communication by CPC for non-filing of Audit Report in Form 10B along with the Return of Income. Without giving such communication, CPC denied the benefit of section 11 and 12 and demanded a tax of Rs. 1,67,290/- which is against the Principle of Natural Justice. However the assessee trust filed a rectification application before the Jurisdictional Assessing Officer (JAO) namely ITO, Exemption, Vadodara. The Ld. JAO rejected the rectification application vide order dated 05-10-2022 stating that the assessee failed to file the Audit Report in Form 10B along with the Return of Income, thus the assessee is not eligible for benefit u/s. 11 of the Act. It is thereafter the assessee filed Form 10B duly signed by the Chartered Accountant and uploaded the same on 07-07-2020. However the Ld. NFAC dismissed the assessee appeal that Form 10B is not filed before Ld. NFAC. 5.2. Ld. Counsel drawn our attention to the Jurisdictional High Court Judgments in various cases held that furnishing of Audit I.T.A No. 59/Ahd/2022 A.Y. 2015-16 Page No Shri Visha Oswal Jain Sewa Samaj vs. ITO(E) 4 Report in Form 10B along with the Return of Income is to be treated as procedural provision and therefore directory in nature and referred to: (i) The Hon’ble Gujarat High Court in the case of Association of Indian Panel Board Manufacturer Vs. DCIT in Tax Appeal No. 655 of 2022 dated 21.03.2023. (ii) The Mumbai Bench of the Tribunal Decision in the case of Shree Bhairav Seva Samiti Vs. ITO (Exemption) reported in [2023] 149 taxmann.com 478. (iii) In the case of ITO Vs. Shri Laxmanarayan Dev Shrishan Seva Khendra in ITA No. 410/Ahd/2022 dated 19-05-2022. When the same was filed during the pendency of the appellate proceedings, the assessee ought not to have been denied the benefit of exemption u/s. 11 of the Act and therefore pleaded to allow the appeal filed by the assessee trust. 6. Per contra, Ld. CIT-DR Shri Akhilendra Pratap Yadav appearing for the Revenue supported the order passed by the Lower Authorities and pleaded to dismiss the appeal filed by the assessee. 7. We have given our thoughtful consideration and perused the materials available on record. It is an admitted fact and on perusal of intimation u/s. 143(1), the assessee was not communicated the filing of Form 10B along with the Return of Income. During the rectification petition also, it came to light that non-filing of Audit Report in Form 10B along with the Return of Income is the reason for disallowance of claim of deduction/exemption. It is thereafter the assessee filed Form 10B on 07-07-2020, during the pendency of the appellate proceedings before Ld. NFAC. I.T.A No. 59/Ahd/2022 A.Y. 2015-16 Page No Shri Visha Oswal Jain Sewa Samaj vs. ITO(E) 5 8. It is no more res integra that filing of Form 10B as required u/s. 12A are directory in nature, as such the Assessing Officer are not powerless to allow an assessee to file Audit Report, if not filed along with return, any time before completion of assessment and also before Appellate Authorities. 8.1. The Hon’ble High Court of Gujarat in the case of Association of Indian Panel Board Manufacturer (cited supra) as held as follows: “....6. The moot aspect thus centres around to the requirement of the availability of the audit report when the assessment was undertaken by the Assessing Officer even though the same may not have been filed along with the return of income. Filing of audit report is held to be substantive requirement but not the mode and stage of filing, which is procedural. 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 that view, the Income Tax Tribunal was not justified in dismissing the appeal of the assessee. 6.1 The appellant assessee has to be held to be eligible and entitled to exemptions under Section 11(1) and 11(2) of the Act and the alleged ground of non-filing of audit report alongwith return of income which was at the best procedural omission, could never to an impediment in law in claiming the exemption.” 8.2. On similar set of facts the Mumbai Bench of the Tribunal in the case of Shree Bhairav Seva Samiti (cited supra) as held as follows: “...9. In the present case, it is undisputed that the assessee trust is registered under section 12AA of the Act for the past 40 years and the said registration is still in existence. It is also not the case of the Revenue that the assessee has ceased to be a religious or charitable institution. Further, it is also not the case of the Revenue that the accounts of the assessee have not been audited by an accountant, and an audit report in Form 10B has not been obtained. Only on the technical aspect that Form 10B was not filed along with the return of income for the relevant assessment year, the exemption claimed under section 11 of the Act has been denied to the assessee without going into the merits. Further, no relief was granted to the assessee even when the assessee filed the application under section 154 of the Act. We find that while dealing with similar facts the Co– ordinate Bench of the Tribunal in Trinity Education Trust vs ITO, ITA No. I.T.A No. 59/Ahd/2022 A.Y. 2015-16 Page No Shri Visha Oswal Jain Sewa Samaj vs. ITO(E) 6 669/Srt./2018, vide order dated 28/02/2022, decided the issue in favour of the taxpayer by observing as under: “8. We have considered the rival submissions both the parties and perused the order of lower authorities carefully. We find that there is no dispute that at the time of filing of return of income, the audit report has required under Form 10B was not uploaded once uploaded on the system consequently the AO/CPC not allowed the exemption claimed under section 11. Assessing Officer/CPC brought the entire receipt as taxable income. On receipt intimation under section 143(1) of the Act the assessee uploaded in Form 10B and filed application for rectification under section 154 of the Act. The application of the assessee was rejected on the ground report in Form 10B was not furnished before due date of return of income. The Id. CIT(A) dismissed the appeal of the assessee by taking view the audit report in Form 10B was not uploaded before due date of return of income. 9. We find that the Hon'ble jurisdictional High Court in case of CIT vs. Xavier Kalavani Mandal (P.) Ltd. (supra) held that in order to claim exemption under section 11, the assessee can filed audit report in Form 10B even at later stage either before the Assessing Officer or before appellate authority by showing a sufficient cause. Further, Hon'ble jurisdictional High Court decision in case of Sarvodaya charitable Trust vs. ITO (Exemption) (supra) also held that where the assessee is a public charitable trust registered under section 12A of the Act and substantially satisfied condition for availing benefit of exemption as a charitable could not be denied exemption, the assessee merely on bar of limitation in furnishing audit report in Form 10B. Considering the aforesaid and legal discussion, we find that though the assessee has not filed any return of income at the time, however, it was available before the Id. CIT(A) as it was uploaded much before filing application under section 154. Therefore, respectfully following the decisions of Hon'ble jurisdictional High Court in case of CIT vs. Xavier Kalavani Mandal (P.) Ltd. (supra) and in Sarvodaya charitable Trust vs. ITO (Exemption) (supra), we find that the assessee has complied the procedural requirement, therefore, the Assessing Officer/CPC is directed to verify the claim of the assessee and grant necessary deduction under section 11 of IT Act. In the result, the appeal of the assessee is allowed for statistical purposes.” 10. As in the present case also the assessee has complied with the procedural requirement of obtaining and filing Form 10B, therefore, respectfully following the aforesaid decision of the Co-ordinate Bench of the Tribunal, the Assessing Officer is directed to decide the claim of the assessee under section 11 on merits, after accepting the Form 10B filed by the assessee. I.T.A No. 59/Ahd/2022 A.Y. 2015-16 Page No Shri Visha Oswal Jain Sewa Samaj vs. ITO(E) 7 8.3. Further very same Bench of this Tribunal in the case of ITO Vs. Shri Laxmanarayan Dev Shrishan Seva Khendra in ITA No. 410/Ahd/2022 dated 19-05-2022 held as follows: “....6. We have given our thoughtful consideration and perused the materials available on record. The moot question whether it is permissible to the assessee to produce the audit report at the appellate stage is correct in law is been decided by the Jurisdictional High Court in the case of CIT Vs. Gujarat Oil & Allied Industries Ltd. [1993] 201 ITR 325 (Guj.) wherein it is held that the provisions regarding furnishing of audit report along with the return has to be treated as a procedural provision. It is directory in nature and its substantial compliance would suffice. Thus the Hon’ble Court Held that the benefit of exemption should not be denied merely on account of delay in furnishing the same. 6.1. Similarly in the case of Social Security Scheme of GICEA (cited supra) the Hon’ble Jurisdictional High Court held as follows: 5. “.....the only question which falls for consideration is whether respondent committed an error in passing the order by not condoning the delay in filing Form No. 10B along with the return filed. In the decision of this Court in Sarvodaya Charitable Trust (supra) this Court has observed that furnishing of audit report along with return filed is to be treated as a procedural requirement. It is though mandatory in nature the substantial compliance is required to be made. In the case of Sarvodaya Charitable Trust (supra) the assessee had produced the audit report after processing the return under section 143(1). This Court in the said order has observed that the approach of the authority in these type of cases should be equitable, balancing and judicious. Technically speaking, respondent No. 2 might be justified in denying the exemption under section 11 of the Act by rejecting such condonation application, but an assessee, which is a public charitable trust for past 30 years which substantially satisfies the conditions for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay. Applying the said principle, the petition is allowed. The impugned order passed by respondent dated 12-3-2021 is quashed and aside. The impugned order of rectification under section 154 of the Act dated 25-1-2019 is also quashed and set aside. The application for condonation of delay filed by the petitioner before the respondent is allowed. 6. The respondent is now directed to process the return in accordance with law. It is noticed that no assessment is framed and only an intimation under section 143(1) of the Act was issued. No scrutiny could be carried out by the respondent since the audit report under section 10B was not on record. Learned advocate for the petitioner Mr. B.S. Soparkar fairly submitted that the issue of I.T.A No. 59/Ahd/2022 A.Y. 2015-16 Page No Shri Visha Oswal Jain Sewa Samaj vs. ITO(E) 8 benefit of exemption may be examined by issuance of notice u/s 143(1)/143(2) and the petitioner shall not object to the said proceedings by taking the ground of limitations.” 6.2. Respectfully following the above judicial pronouncements by Jurisdictional High Court, we have no hesitation in confirming the order passed by Ld. CIT(A) who has directed the Jurisdictional Assessing Officer (JAO) to verify the Form No. 10B and allow the claim of exemption u/s. 11 and compute the total income. Thus the grounds raised by the Revenue is devoid of merits and the same is liable to be dismissed.” 9. In the present case before us Audit Report in Form 10B though filed belatedly by the assessee, the same was not considered by the Ld. NFAC and Ld. A.O.. Thus none of the authorities had any occasion to verify Audit Report in Form 10B belatedly filed by the assessee. Further there is no regular assessment order passed u/s. 143(3) of the Act in the case of the Assessee Trust. Therefore we hereby direct the Jurisdictional Assessing Officer to verify the Audit Report in Form No. 10B and then allow the claim of exemption u/s. 11 of the Act, in accordance with law by giving adequate opportunity to the assessee. Thus the grounds raised by the assessee are hereby allowed. 10. In the result, the appeal filed by the Assessee is allowed for statistical purposes. Order pronounced in the open court on 11-10-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 11/10/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee I.T.A No. 59/Ahd/2022 A.Y. 2015-16 Page No Shri Visha Oswal Jain Sewa Samaj vs. ITO(E) 9 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद