Income Tax Appellate Tribunal - Delhi
Income-Tax Officer vs Arihant Kalyan Trust on 16 September, 1987
Equivalent citations: [1989]28ITD135A(DELHI)
ORDER
S.P. Kapur, Judicial Member
1. The Revenue is in appeal with the following specific ground :
Whether on the facts and in the circumstances of the case, the AAC was not justified in directing the ITO to allow the benefit of Section 11 of the IT Act, 1961, even though the assessee have failed to comply with the statutory provisions of Section 12A(b) of the IT Act ?
2. The background facts as are found from the assessment order are to the following effect:
Return declaring nil income was filed on 12-9-1983. Notice-under Section 143(2) was issued in response to which Sh. P.K. Sunderka, CA appeared from time to time. Case was discussed. On perusal of the return it was noticed that the assessee did not file with the return the audited copies of accounts and an audit report in Form No. 10B prescribed under Rule 17B of the IT Rules, 1962. Since the non-filing of the said documents with the return amounted to the violation of the provisions of Section 12A(b) the counsel of the assessee was required to explain as to why the benefit of sees, U and 12 should not be disallowed to the assessee on account, of the said statutory lapse. In response to this the counsel of the assessee explained that the books of the assessee were audited only on 30-6-1984 and hence the audited accounts and audit report in Form No. 10B could not be filed with the return. The counsel, however, filed a revised return under Section 139(5) which was enclosed with the audited copies of the statements of accounts and also the audited report in Form No. 10B. On perusal of these documents it was noticed that on the date of the filing" of the original return the assessee do not have the audited books of accounts. The revised, return filed under Section 139(5) is also not a return in the eyes of law in as much as the original return was neither a return under Section 139(1) or under Section 139(2). Since the revised return is invalid return the audit copies of the statements of accounts and the audit report in Form No. 10B filed with it cannot be treated as the compliance of the provisions of Section 12A(b) at best these documents can be regarded to have been filed during the course of asstt. proceedings. Now the question that needs consideration is that whether the assessee can comply with the provisions of Section 12A(&) during the course of asstt. proceedings. Or this purpose reference has to be made to the spirit of law contained in Section 12A(b). Various ingredients of Section 12A(b) are discussed in the ensuing paragraphs.
According to the scheme of Income-tax Act any person claiming exemption under Sections 11 and 12 is legally required to file the audited copies of statements of accounts and an audit report in Form No. 10B along with the return of income. The law has not prescribed any specified time limit for compliance of these provisions. The only requirement under the section is that the return should be accompanied by the audited copies of statements of accounts and an audit report in Form No. 10B. In other words only requirement of law under this section is that on the. date of filing of the return the assessee must have the audited books of accounts. If the assessee had the audited copies of the books of accounts on the date of filing of the return and if per chance he forgets to file the audited copies of statements of accounts and Form No, 10B along with its return of income the law can permit him to file the said documents during the course of asstt. proceedings also. The law contained in Section 12A(b) appears to be of procedural nature but the penalty prescribed for its infringement speaks volumes about the intention of the Legislature in laying down these provisions. By bringing these provisions on the statute the Legislature has made it mandatory on the part of the charitable institution to maintain regular and perfect books of accounts during the course of their activities and also to get them'audited by a CA immediately after the expiry of the accounting period or at least before the filing of the return. This has been done to avoid any tempering or adjustment in the books of accounts after the filing of the return.
If we apply the text discussed in para 3 above to the facts of the assessee's case we notice that the assessee did not have the audited books of accounts on the date of filing of the return and thus he lost his right to file the statements of accounts in Form No. 10B during the course of asstt. proceedings. He has, therefore, violated the section of Section 12A(b). I, therefore, disallow the benefit of Sections 11 and 12 to the assessee.
[Emphasis supplied by us]
3. On appeal by the assessee the learned AAC held the assessee to be entitled to the benefit of Section 11, inter alia, relying upon the ratio of the decision of the Allahabad High Court in CIT v. Sri Baldeoji Maharaj Trust [1983] 142 ITR 584. He held the assessee to be entitled to file the revised return of income.
4. On our part we have heard the parties at length. The stand of the Revenue is reflected in the reasoning of the ITO, which has been reiterated before us by the learned departmental representative. The learned D.R. also relied upon the ratio of the decision of the Delhi High Court in O.P. Malhotra v. CIT [1981] 129 ITR 379, at pages 383 to 385 and further contended that original return of income, filed by the assessee, being not under Section 139(1) of the Act, the assessee had no right to revise the return under Section 139(5). Section 139(4A) of the Act is also pressed into service on behalf of the Revenue, along with ratio of the decision of the Hon'ble Supreme Court as stands reported in 18 ITR 274 (sic). The learned departmental representative further contended that audit report was not in existence when the assessee filed the original return of income, hence the assessee is not entitled to any benefit. The learned D.R. as such assailed the order of the learned AAC and further contended that learned AAC should have applied the ratio of the decision of the Hon'ble jurisdictional High Court in O.P. Malhotra's case (supra) as against that of the Hon'ble Allahabad High Court as relied upon by him in Sri Baldeoji Maharaj Trust's case (supra).
5. On his part the learned authorised representative of the assessee strongly relied on the order of the learned AAC and cases reported as Mahindra & Mahindra Ltd. v. Union of India [1983] 141 ITR 174 (Delhi) at page 200, CIT v. Mahindra & Mahindra Ltd. [1983] 144 ITR 225 (SO, Sri Baldeoji Maharaj Trust's case (supra), ITO v. Shahaji Chhatrapati General Charitable Trust [1986] 15 ITD 556 (Pune) and ITO v. Manav Hitkari Trust [1987] 20 ITD 42 (Delhi) have also been pressed into service. The case of the assessee being that statutory audit report was with the assessing officer during the course of assessment proceedings and before the presently impugned assessment order dated 25-3-1985 was passed. The learned counsel for the assessee as such contended that statutory requirement stood complied with, hence the assessee was entitled to the benefit of Section 11, as has been allowed to the assessee by the learned AAC.
6. We have reproduced above the verbative reasoning of the learned ITO. He has observed that, "... at best these documents can be regarded to have been filed during the course of asst. proceedings". He has also held that, "The law contained in Section 12A(b) appears to be of procedural nature but the penalty prescribed for its infringement speaks volumes about the intention of the Legislature in laying down these provisions.
7. Being that, what is the second of the Revenue at the assessment stage, then any non-compliance of procedure will result in an irregularity and certainly not an illegality. Non-compliance and non-furnishing of statutory audit report in statutory Form No. 10B along with the return of income filed, can, at best be said to be a procedural irregularity, which the assessee had made good before the assessment stood finalised as is evident from the observations of the ITO himself, when he says, "at best these documents can be regarded to have been filed during the course of assessment proceedings".
8. In the case of Shahaji Chhatrapati General Charitable Trust (supra) held that the audit report in Form No. 10B was not enclosed with the return of income, also lost its force, when once it was accepted that such audit report was produced before the ITO at the time of hearing in response to the notice under Section 143(2). Moreover, this is not the requirement of law that such audit report in Form No. 10B should be attached in the sense pinned to the return of income of the assessee in order to entitle the assessee to exempt under Section 11.
9. Again ITAT Delhi Bench 'B' (SMC) in the case of Mohan Hitkari Trust's case (supra) which was on identical facts, held as under:
Having regard to the built in deeming feature in Section 139(4A) the return filed by a trust was to be treated for all purposes as a return under Section 139(1) and, therefore, could be revised and since the audit report in the present case, was admittedly filed with the revised return, there was no default under Section 12(6) and the infirmity, if any, got cured and the assessee has entitled to exemption under Section 11. Moreover, there is no requirement that the audited balance sheet must be attached to the return and it would be sufficient compliance if the audit report is filed before the completion of assessment. In the instant case, the assessment proceedings were commenced only after the second return was filed and, therefore, right of the initiation of proceedings the report was in the hand of the ITO and, therefore, the ITO was not right in denying the exemption under Section 11 to the assessee.
10. Following the above reasoning, we also hold accordingly. The assessee is held to be entitled to the benefits of Section 11, but not on the reasoning of learned AAC as found out in the impugned order, but for the above reasoning, i.e., of the two Benches of the ITAT, referred to above.
11. Revenue's ground stands rejected and the appeal fails.