Gujarat High Court
Association Of Indian Panelboard ... vs The Deputy Commissioner Of Income Tax on 21 March, 2023
Author: N.V.Anjaria
Bench: N.V.Anjaria
NEUTRAL CITATION
C/TAXAP/655/2022 JUDGMENT DATED: 21/03/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 655 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE N.V.ANJARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
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1 Whether Reporters of Local Papers may be allowed Yes
to see the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy No
of the judgment ?
4 Whether this case involves a substantial question No
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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ASSOCIATION OF INDIAN PANELBOARD MANUFACTURER
Versus
THE DEPUTY COMMISSIONER OF INCOME TAX
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Appearance:
MS VAIBHAVI K PARIKH(3238) for the Appellant(s) No. 1
MS MAITHILI D MEHTA(3206) for the Opponent(s) No. 1,2
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CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 21/03/2023
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned senior advocate Mr.Tushar Hemani with learned advocate Ms.Vaibhavi Parikh and learned advocate Mr.Parimalsinh Parmar for the petitioner and learned advocate Page 1 of 9 Downloaded on : Sun Sep 17 22:53:38 IST 2023 NEUTRAL CITATION C/TAXAP/655/2022 JUDGMENT DATED: 21/03/2023 undefined Ms.Maithili Mehta for the respondent Department.
2. The present Tax Appeal under Section 260A of the Income Tax Act, 1961 is directed against judgment and order dated 22.7.2022 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in Income Tax Appeal No.24 of 2022 for the assessment year 2018-19. The appeal filed by the assessee came to be dismissed.
3. The facts are that the appellant which is a charitable trust registered under Section 12AA of the Income Tax Act, 1961 (hereinafter referred to as 'the Act), filed return of income on 31.12.2018, in respect of the assessment year 2018-19 declaring total income to be nil, after claiming exemption of Rs.1,37,628/- under Section 11(1) of the Act, and also exemption to the extent of Rs.46,62,372/- under Section 11(2) of the Act.
3.1 It is the case of the petitioner that by inadvertance it did not file alongwith the return of the income, the audit report in Form 10B. The Form 10B was admittedly filed however electronically on 7.12.2019. On the same date intimation was given by the income tax authority denying exemptions claims under Section 11(1) and 11(2) of the Act on the ground that the appellant assessee had not filed audit report in Form 10B alongwith return of income.
3.2 The appellant preferred appeal against the said decision of denial of exemption reflected in communicated by intimation dated 7.12.2019. The Commissioner of Income Tax (Appeals)- the appellate authority dismissed the appeal on 24.12.2021.
Page 2 of 9 Downloaded on : Sun Sep 17 22:53:38 IST 2023NEUTRAL CITATION C/TAXAP/655/2022 JUDGMENT DATED: 21/03/2023 undefined Thereafter the assessee preferred the appeal before the Tribunal which was dismissed on 22.7.2022, to become order impugned herein.
3.3 This court issued notice for final disposal on 6.12.2022 observing inter alia that the following substantial questions of law arise for consideration.
"1. We have heard learned Senior Advocate Mr.Tushar Hemani assisted by Ms.Vaibhavi Parikh for the appellant. He has relied upon judgement delivered by this Court in the case of Commissioner of Income-tax v. Mayur Foundation reported in [2005] 274 ITR 562 (Gujarat) and in the case of Commissioner of Income-tax- IV v. Xavier Kelavani Mandal (P.) Ltd. reported in [2014] 41 taxmann.com 184 (Gujarat) and submitted that there is no change in law from 1/04/1996, which would unsettle the position settled by this Court in both the aforesaid decisions.
2. The following substantial questions of law arise before this Court :
"(i) Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in confirming the order of the respondent in denying the claim of exemptions under section 11(1) and 11(2) of the Act merely on the ground of belated filing of Audit Report in Form 10B, more so when such audit report was admittedly filed electronically well before the order denying such exemptions came to be passed ?
(ii) Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in not following the binding judgements of Hon'ble the jurisdictional High Court ?
(iii) Whether the order passed by the Income Page 3 of 9 Downloaded on : Sun Sep 17 22:53:38 IST 2023 NEUTRAL CITATION C/TAXAP/655/2022 JUDGMENT DATED: 21/03/2023 undefined Tax Appellate Tribunal is perverse inasmuch as the same is contrary to law laid down by the Hon'ble the jurisdictional High Court?"
Notice for final disposal, returnable on 13/12/2022."
4. Assailing the impugned judgment and order of Tribunal, following submissions were made on behalf of the appellant.
(i) Though Form 10B has been filed belatedly, the same was very much available on record when return on income was being processed under Section 143(1); hence, exemptions under Section 11(1) and 11(2) could not have been denied by the authorities.
(ii) Though the requirement of furnishing
of audit report may be a mandatory
requirement, the same to be filed along with return of income is held to be a procedural and therefore directory in nature.
(iii) Under the circumstances, even if Form 10B is filed at the later stage, the exemptions under Section 11(1) and 11(2) could not have been denied on that ground.
(iv) The tribunal failed to consider facts of the case and also the legal position in relation to requirement of filing audit report in Form 10B.
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(v) The tribunal has erred in not appreciating that filing of application under Section 119 of the Act for condonation of delay in filing Form 10B is an additional remedy which does not affect the powers of appellate authority in dealing with issue of pertaining to delay in filing Form 10B.
(vi) The tribunal erred in referring to and relying upon amendments by Finance Act, 2015 which do not change the settled legal position insofar as the issue on hand is concerned.
(vii) The tribunal committed error in not following binding decision of the jurisdictional High Court and has further erred in distinguishing the same on erroneous grounds.
4.1 In support of the above submissions, reliance was placed on the decisions of this court in CIT Vs. Mayur Foundation [(2005) 274 ITR 562], in CIT Vs. Xavier Kelavani Mandal P. Ltd [(2014) 41 taxmann.com 184], in CIT Vs. Andra Pradesh State Road Transport Corporation [(2006) 285 ITR 147] and CIT Vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust [(1992) 65 taxmann 273].
5. The decision of the Division Bench of this court in Xaviers Kelavni Mandal P. Limited (supra) leaves the issue no longer res integra. In that case Form 10B was not filed by the assessee Page 5 of 9 Downloaded on : Sun Sep 17 22:53:38 IST 2023 NEUTRAL CITATION C/TAXAP/655/2022 JUDGMENT DATED: 21/03/2023 undefined alongwith the return of income, however the appellate authority permitted the assessee to file Form 10B audit report at the appellate stage and accepted the same to allow the exemption under Section 11. The department filed appeal which came to be dismissed.
5.1 The Division Bench of this court dismissed the appeal before it confirming the view taken observing that the provisions regarding filing of audit report was procedural in nature, "4. The question whether it is permissible to the assessee to produce the audit report at the appellate stage, has already been answered by this court in CIT Vs. Gujarat Oil & Allied Industries Ltd. [(1993) 201 ITR 325 (Guj.)], wherein it is held that the provision 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. In that case, the assessee had not produced the audit report along with the return of income, but produced before completion of the assessment. The Punjab and Haryana High Court in CIT Vs. Shahzadanand Charity Trust [(1997) 228 ITR 292] has reiterated the same principle holding that the benefit of exemption should not be denied merely in account of delay in furnishing the same, and it is permissible for the assessee to produce the audit report at a later stage either before the Income Tax Officer or before the appellate authority by showing a sufficient cause. This decision of Punjab & Haryana High Court has been relied on by the Tribunal."
5.2 The decision of this court in Mayur Foundation (supra) stands to support the submission of the appellant. The decision in Rai Bahadur Trust (supra) of Culcutta High Court takes a Page 6 of 9 Downloaded on : Sun Sep 17 22:53:38 IST 2023 NEUTRAL CITATION C/TAXAP/655/2022 JUDGMENT DATED: 21/03/2023 undefined same view as was taken as by this court in Xaviers Kelavni Mandal (supra). It that case the assessee- charitable trust filed the return of income but was not accompanied by audit report in Form 10B as required under Section 12A. The Culcutta High Court held that the provisions of Section 12A are directory in the sense that Assessing Officer are not powerless to allow an assessee to file audit report, if not filed alongwith return, anytime before completion of assessment.
5.3 Learned advocate for the respondent was not in position to dispute the law emanating from the decision of Xaviers Kelavani Mandal (supra) and the other decisions on the issue.
5.4 Recollecting the relevant dates, the income was filed on 31.8.2018. On 15.3.2019 Form 10B was filed electronically. On 7.12.2019 intimation under Section 143(1) of the Act was given to the appellant that the exemptions were denied, while processing the return of income on the ground that alongwith the return of income Form 10B was not filed.
5.5 It is to be observed in the present case that the Form D- the audit report, though was not filed with the return of income, the same was available with the Assessing Officer when he processed the return of income under Section 143(1) of the Act. The conditions for claiming exemption under Section 11 was satisfied. Although the requirement of furnishing report was mandatory, filing thereof is a procedural aspect. Even though the Form 10B was filed at a later stage, when it was part of the record of the Assessing Officer in course of the processing of the return of income, the Assessing Officer could not have denied Page 7 of 9 Downloaded on : Sun Sep 17 22:53:38 IST 2023 NEUTRAL CITATION C/TAXAP/655/2022 JUDGMENT DATED: 21/03/2023 undefined the exemption claimed by the assessee under Sections 11(1) and 11(2) on the ground that the audit report was not filed.
5.6 The tribunal further committed an error in appreciating the import of Section 119 2(b) of the Act inasmuch as the application contemplated thereunder is only additional remedy for the assessee which could not be said to be compulsorily resorted to by the assessee. The circular No.7/18 dated 20.12.2018 issued under Section 119 of the Act could not be, therefore said to have taken away the appellate remedy.
5.7 The tribunal misdirected itself in yet another way when it observed that The Finance Act, 2015 with effect from 1.4.2016, that is from assessment year 2016-17 changed the legal position. There is no such change which could be said to have altered the legal position. The only change is with regard to compulsory filing of audit report in Form 10B in electronically form which is made mandatory under Rule 12 (2) of the Income Tax Rules, 1962 but there is no change with regard to the substantive law about filing of audit report as stated above.
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 Page 8 of 9 Downloaded on : Sun Sep 17 22:53:38 IST 2023 NEUTRAL CITATION C/TAXAP/655/2022 JUDGMENT DATED: 21/03/2023 undefined 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.
6.2 Accordingly the substantial questions of law have to be decided in favor of the appellant.
7. They are accordingly decided. The appeal is allowed.
(N.V.ANJARIA, J) (NIRAL R. MEHTA,J) Manshi Page 9 of 9 Downloaded on : Sun Sep 17 22:53:38 IST 2023