Al Mehmood Charitable Trust, Bharuch V. Income Tax Officer, Ward- 1(5), Bharuch

ITA 93/SRT/2022

AI Insights

The case involves Al Mehmood Charitable Trust, which appealed against the orders of the National Faceless Appeal Centre (NFAC) and the CIT(A), which confirmed the disallowance of a deduction claim under section 11 of the Income Tax Act for the Assessment Years 2016-17 and 2017-18. The primary contention was the timing of the audit report submission relative to the income tax return filing. The Trust argued that the audit report was filed immediately after the return and was available during the processing of the return, thus should not have been disallowed. The Tribunal found merit in the Trust's arguments, referencing several precedents that supported the filing of the audit report at the assessment stage rather than at the return filing stage.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301947 (ITAT-SURAT)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-01-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 20-04-2022
• Other Referred Cases: CIT vs. Devradhan Madhavlal Genda Trust, CIT vs Rai Bahadur Bissesswarlal, Zenith Processing Mills vs. CIT, CIT vs. Gujarat Oil and Allied Industries, CIT-IV vs. Xavier Kelavani Mandal P. Ltd., Sarvodaya Charitable Trust vs. Income Tax Officer, Trust For Reaching The Unreached Through Trustee vs. CIT (Exemptions), CIT vs. Hardeodas Agarwalla Trust, CIT vs. Dr. L.M. Singhvi, CIT vs. Garment Exporters Association of Rajasthan, M/s. Begani Dyeing Mills Pvt. Ltd. vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Charitable institution
• Section: 12; 154; 10B; 143(1); 201; 139(4)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA Nos.92 & 93/SRT/2022 Ǔनधा[रण वष[/Assessment Years: (2016-17 & 2017-18) (Physical Court Hearing) Al Mehmood Charitable Trust, By Pass Road Jambusar, Bharuch-392150 Vs. Income Tax Officer, Ward-1(5), Bharuch. (Appellant) (Respondent) èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAATA 2702 M िनधाªåरती कì ओर से /Assessee by Shri Rasesh Shah, CA राजÖव कì ओर से /Respondent by Shri Ashok B. Koli, CIT-DR स ु नवाई कì तारीख/Date of Hearing 12/01/2023 उĤोषणा कì तारीख/Date of Pronouncement 24/01/2023 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned two appeals filed by the single assessee, pertaining to Assessment Years (AYs) 2016-17 and 2017-18, are directed against the order passed by the National Faceless Appeal Centre [in short ‘the NFAC”] / ld.CIT(A), which in turn arise out of assessment order passed by DCIT (CPC) u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. These two appeals, relate to the single assessee for different assessment years, however facts are identical and similar, therefore these two appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The facts as well as grounds of appeal narrated in ITA No.92/SRT/2022 for AY.2016-17 have been considered for deciding these two appeals en masse. 3. The grounds of appeal raised by the assessee in “lead” case in ITA No.92/SRT/2022 for A.Y.2016-17, are as follows: Page | 2 ITA Nos.92-93/SRT/2022 AYs.16-17 & 17-18 Al Mehmood Charitable Trust “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer (Central Processing Centre, Bengaluru) in making adjustment u/s 143(1) by disallowing the claim of deduction of Rs.1,77,41,090/- u/s 11 although the adjustment does not fall within the ambit of section 143(1) and thereby erred in rejecting the application u/s 154. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in treating Rs.49,65,411/- which is the corpus donations as the income of the trust. 3. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in levying tax on gross income of Rs.1,77,41,090/- without granting deduction of expenses of Rs.1,27,86,963/-. 4. It is prayed that the assessment may please be quashed and/or disallowance made by the assessing officer and confirmed by CIT(A) may please be deleted. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 4. Succinct facts are that assessee filed return of income for the AY 2016-17 on 28-03-2018 declaring a total income of Rs.25,210/- after claiming deduction u/s 11 of Rs.1,77,41,090/-. The case was processed u/s 143(1) of the Act on 01- 03-2019 and the claim of the assessee u/s 11 of Rs.1,77,41,090/- was disallowed. The assessee filed rectification application u/s 154 on 05-04-2019 before the Assessing Officer. The Assessing Officer passed order u/s 154 on 07-06-2019 disallowing the claim of the assessee. 5. On appeal, the CIT(A) has confirmed the order of Assessing Officer, therefore assessee is in further appeal before us. 6. Shri Rasesh Shah, Learned Counsel for the assessee, argues that return of income was filed by the assessee on 28.03.2018, whereas the audit report was filed on 29.03.2018 (very next day). The assessee further claimed that nowhere in the provisions of section 12A(1)(b) there is any obligation on assessee to file Form 10B along with or before filing of the return of income in order to claim Exemption u/s 11 of the Act. The assessee also relied on the decisions of the Hon'ble jurisdictional High Courts in the case of CIT vs. Devradhan Madhavlal Page | 3 ITA Nos.92-93/SRT/2022 AYs.16-17 & 17-18 Al Mehmood Charitable Trust Genda Trust (230 ITR 714 (MP.)) and CIT vs Rai Bahadur Bissesswarlal (195 ITR 825 (Gal). 7. On the other hand, Ld. CIT-DR for the Revenue reiterated the stand taken by the NFAC/Ld. CIT(A) and stated that Audit Report should be filed by assessee along with return of income. The ld DR for the Revenue, therefore stated that order passed by ld CIT(A) is just and proper and therefore it should be upheld. 8. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. In our considered view, it was wholly erroneous on the part of the authorities below to disallow the claim of assessee in respect of exemption u/s 11 of the Act, as audit report was filed on 29.03.2018 by way of Form 10B, which was available before the assessing officer at the time of processing return of income under section 143(1) of the Act. The audit report was filed on 29.03.2018 by assessee, whereas assessee`s return of income was processed under section 143(1) on 07.06.2019. The return of income was filed on 28.03.2018 while the audit report was uploaded on 29.03.2018. As per the provision stood at that time, there was no requirement to file the audit report along with the return of income, within due date for claiming the exemption. 9. We note that clause (ba) of section 12A(1) was inserted only w.e.f. 01.04.2018 which is reproduced as under: "the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section." 10. The relevant clause, which is applicable is clause (b) of section 12A(1). Before amendment made w.e.f. 01.04.2020, the relevant clause (b) was as under: "(b) where the total income of the trust of institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant to defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of Page | 4 ITA Nos.92-93/SRT/2022 AYs.16-17 & 17-18 Al Mehmood Charitable Trust income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed” 11. From the above, it is clear that there was no requirement before 01.04.2020 to file the audit report within due date. Of course, the assessee didn't file the audit report along with the return of income but it was prepared and filed immediately on next day within the time limit available u/s 139(4) of the Act. Further, it is submitted that the report was available at the time of processing the return of income made on 01.03.2019 for A.Y. 2016-17 and 27.03.2019 for A.Y. 2017-18. We note that ld Counsel for the assessee relied on case laws, wherein it was held that the report u/s 10B of the Act can be filed at the time of assessment proceedings, for claiming exemption / deduction for assessment years 2016-17 and 2017-18. The case law relied on by the ld Counsel are as follows: • Zenith Processing Mills vs. CIT - [1996] 219 ITR 721 (Gujarat) • CIT vs. Gujarat Oil and Allied Industries - [1993] 201 ITR 325 (Gujarat) • CIT-IV vs. Xavier Kelavani Mandal P. Ltd. - [2014] 41 taxmann.com 184 (Gujarat) • Sarvodaya Charitable Trust vs. Income Tax Officer - [2021] 125 taxmann.com 75 (Gujarat) • Trust For Reaching The Unreached Through Trustee vs. CIT (Exemptions) - [2021] 126 taxmann.com 77 (Gujarat) • CIT vs. Devradhan Madhavlal Genda Trust (230 ITR 714) (MP.) • CIT vs. Hardeodas Agarwalla Trust - [1992] 198 ITR 511 (Calcutta) • CIT vs. Dr. L.M. Singhvi - 289 ITR 425 (Raj. HC) • CIT vs. Garment Exporters Association of Rajasthan - 386 ITR 20 (Raj. HC) • M/s. Begani Dyeing Mills Pvt. Ltd. vs. DCIT [ITA No. 405 & 406/SRT/2019] 12. Based on these facts and circumstances, as narrated above, we are of the view that assessee trust is entitled to claim exemption u/s 11 of the Act. We note that assessing officer disallowed the claim of the assessee under section 143(1) of the Act, by making adjustments, based on the technical issue (not filing the audit report on time), hence there is no adjudication on merit by the Assessing Officer. Page | 5 ITA Nos.92-93/SRT/2022 AYs.16-17 & 17-18 Al Mehmood Charitable Trust Therefore, we direct the Assessing Officer to allow the claim of the assessee u/s 11 of the Act, after verification of relevant documents and as per the provisions of section 11 of the Act, in accordance with law. For statistical purposes, both appeals filed by the assessee are allowed. 13. Since, we have remitted the entire issue back to the file of the Assessing Officer for fresh adjudication on merit, therefore we do not adjudicate ground No.1 raised by the assessee (in both these appeals). 14. In the result, appeals filed by the assessee (ITA No. 92 and 93/SRT/2022) are allowed for statistical purposes. Registry is directed to place one copy of this order in all appeals folder / case file(s). Order pronounced on 24/01/2023 by placing the result on the Notice Board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 24/ 01/2023 SAMANTA/Dkp Out Sourcing Sr.P.S Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat