Income Tax Appellate Tribunal - Bangalore
Sindhi Youth Association Ladies Wing vs Income-Tax Officer on 7 September, 1993
Equivalent citations: [1994]48ITD119(BANG)
ORDER
A.V. Balasubramanyam, Judicial Member
1. The appeal by the assessee raises a short question. That is, whether the assessee was/is entitled to get exemption under Section 11 although the audit report in Form No. 10B had not been filed along with the return for the assessment year 1983-84.
2. The assessee is an association. It had been claimed that the assessee is a charitable association registered under Section 12A and that, in view of its objects, income of the year is exempt under Section 11. The Assessing Officer declined the relief on the reason that the audit report in Form No. 10B had not been filed along with the return.
3. It was an admitted fact that audit report had not been filed with the return. The plea of the assessee was that it had been subsequently given to the Assessing Officer at the hearing of the assessment proceeding. The Commissioner of Income-tax (Appeals), in appeal, upheld the order of the Income-tax Officer denying exemption. The assessee had come up before the Tribunal in second appeal - being ITA No. 996/Bang/87 and the operative portion of the Tribunal's order was:
... We will set aside the assessment. We will direct the ITO to make the assessment afresh after taking into consideration Form No. 10B which is stated to have been filed at the time of hearing before the ITO.
4. When the matter went back before the Income-tax Officer, he found no report on the file. Impliedly, the plea that report had been filed during the assessment stage was not accepted. He, therefore, once again made an assessment denying exemption under Section 11 and by specifying that the conditions in Section 12A(b) had not been fulfilled.
5. The assessee had once again appealed and the Commissioner (Appeals) affirmed the order of the Income-tax Officer.
6. In this second appeal by the assessee, the learned Counsel, Shri Javali, filed a copy of the auditor's report in Form No. 10B along with a letter (copy) addressed to the Assessing Officer on 30-3-1992. It may be mentioned that the assessment which the Income-tax Officer came to pass for the second time is dated 3-4-1992.
7. The assessment had been set aside and the entire matter was remitted to Income-tax Officer since it had been stated that audit report had been filed during the regular assessment stage. It was seen, as a fact, that no such report was forthcoming in the record. The Income-tax Officer has technically disposed of the question in the second assessment while complying with the direction of the Tribunal to take into consideration the report in Form No. 10B said to have been filed.
8. On 30-3-1992, the assessee had forwarded to the Income-tax Officer the audit report in Form No. 10B which is dated 6-4-1983. The letter, further, reads:
You will recollect that this was handed over at the time of hearing by our Auditor. However, since you have mentioned that the same was not available in your files we have now arranged for a copy to be handed over.
The second assessment, which is dated 3-4-1992, does not refer to the report filed on 30-3-1992. Shri Javali argued that the auditor might have made a mistake in not filing the report at the original assessment stage and that the report subsequently filed should have been taken into consideration without making a fuss of technical formality as the whole assessment was once again before the Income-tax Officer for re-consideration. The argument of Shri Puniha, the learned departmental representative, was that the jurisdiction of the Income-tax Officer was limited to see whether the audit report had been filed during the first assessment stage or not and that the audit report (if any) filed during the second assessment had been rightly not countenanced.
9. The decision of the Bangalore Bench of the Tribunal in the case of Shree Shree Ma Ananda Mayee Trust [IT Appeal No. 772 (Bang.) of 1987, dated 22-3-1991] is that a report filed before the Income-tax Officer completed the assessment was valid to be considered for the purpose of Section 11 read with Section 13 and that exemption cannot be denied merely because procedural formality had been breached by not filing a report with the return. Shri Puniha distinguished this decision on the reason that such concession which may be once available to an assessee on the basis of the principle explained by the Tribunal in the case of Shree Shree Ma Ananda Mayee Trust (supra) will not enure for second time if a report is filed in reassessment proceeding.
10. The audit report shows that it was prepared on 6-4-1983. The first assessment order shows that when the Income-tax Officer called upon the assessee to explain in regard to the report which had not been filed along with the return time had been sought on behalf of the assessee on the reason that the auditor was not in a station. However, the Income-tax Officer, as the assessment order shows, had completed the assessment as it was "time barring" and as sufficient opportunity had been given to the assessee.
11. It is not correct to say that the jurisdiction of the Income-tax Officer was limited to seeing whether the audit report had been filed by the assessee before the original assessment was completed. The whole assessment had been set aside and the Income-tax Officer was directed "to make a fresh assessment". When the whole assessment is set aside and the entire matter was once again before the Assessing Officer, the scope would be the same as that of the original assessment proceeding and if an authority is required we may refer to the decision of the Allahabad High Court in the case of Abhai Ram Gopi Nath v. CIT [1971] 79 ITR 339 wherein Their Lordships have pointed out:
Where in an appeal from an assessment the Appellate Assistant Commissioner sets aside the assessment and directs the Income-tax Officer to make a fresh assessment the Income-tax Officer is bound by the direction of the Appellate Assistant Commissioner in making the fresh assessment. But, subject to those directions, he has the same powers in a fresh assessment as he had originally in making an assessment under Section 23 of the Act. There are no restrictions at all on the power of the Income-tax Officer when he proceeds to make a fresh assessment, for the fresh assessment is nothing but a second assessment in substitution of the one set aside.
A similarly considered case is of the Madras High Court in CIT v. Seth Manicklal Forma [1975] 99 ITR 470. It is observed at page 474:
... Once the order of assessment is set aside and the matter comes up for fresh assessment before the Income-tax Officer, we are of opinion that the power will have to be decided with reference to the provisions Under-Section 143(3) and not with reference to any observations made by the Appellate Assistant Commissioner in his order or with reference to the scope of the appeal before the Appellate Assistant Commissioner.
The above decisions are followed by the Rajasthan High Court in the case of Rambilas Chandram v. CIT [1985] 156 ITR 344. By way of analogy we may refer to the decision of the Madras High Court in the case of Sri Gajalakshmi Ginning Factory Ltd. v. CIT [1952] 22 ITR 502. Whether the remand order is one passed by the Tribunal or the first appellate authority, it would not, in principle, make any difference. If the Tribunal had given a direction which the Income-tax Officer is, no doubt, bound to comply with. But that is not to say that the Income-tax Officer ought not to do anything which he is otherwise competent to do in law unless the order of remand itself specifically restricts the scope of re-doing.
12. The audit report is only to see the entitlement of the assessee. Filing of the report along with the return is only a procedural formality. So long as the assessee is in a position to comply with the formality at any time before the assessment, there is no reason why the prayer should be refused on technical pretence. In a given case the omission might be owing to some lapse on the part of the authorised representative; but an institution like a trust or, for that matter, even an individual, should not suffer if really the claim is genuine. The original assessment had been made on 13-1-1986 while the audit report was ready by 6-4-1983. There could have been no reason for the assessee to withhold the report. Perhaps, there was remissness on the part of the auditor who was statedly not in the station when the Income-tax Officer had given an opportunity.
13. It is true that the assessee could have filed the report much earlier to 30-3-1992. This is only a circumstance which may invite a comment and a real claim should not go unanswered because there was a delay in fulfilling the formality. We have before us a copy of the report dated 6-4-1983, which, according to the letter addressed by the Income-tax Officer, should have reached on 30-3-1992. Having regard to all facts and in the interest of justice, we are clearly of the view that the audit report now filed should be examined by the Assessing Officer and, for this purpose, we remit this issue once again to the file of the Income-tax Officer with a direction that he shall consider the report and pass a fresh order. If, for any reason, the report is not before him, the assessee shall make available to the Assessing Officer the report in Form No. 10B which he shall consider as validly filed. The assessee shall be given an opportunity of being heard in the matter.
14. The impugned orders passed by the authorities below are set aside and the Income-tax Officer is directed to make a fresh assessment bearing in mind the directions in this order.
15. The appeal shall be treated as allowed for statistical purposes.