Income Tax Appellate Tribunal - Chandigarh
M/S Genius Education Society, Mandi vs Acit, C-2, (E), Chandigarh on 20 August, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH 'A', CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No.238/Chd/2018 (Assessment Year : 2012-13) M/s Genius Education Society, Vs. The A.C.I.T., Tanda Balt, Sadar, Mandi, Circle-2(Exemptions), Himachal Pradesh. Chandigarh.
PAN: AAAJG1473H
(Appellant) (Respondent)
Appellant by : S/Shri Ajay Jain, CA
B.M. Monga, Adv.
Respondent by : Shri Surinder Meena, JCI T
Date of hearing : 24.05.2018
Date of Pronouncement : 20.08.2018
O RDE R
PER ANNA PURNA GUPTA, A. M. :
Th e p r e s e n t a p pe a l h a s b e e n p ref e r r e d b y t h e a s se s s e e against the o r de r of Ld. C o mm i s s i o n e r of I nc o m e Ta x ( A p p e a l s ) ( h er e i na f t e r re f e r r ed t o a s 'L d . CI T( A ) ' ) , P a l a m pur d a t e d 3 0 .1 1 . 2 0 17 r e l a t i ng t o as se s s m e n t ye a r 2 01 2 - 1 3 .
2. The assessee has rai sed fol l o wi ng grounds:
"1. T hat the order of Learned Co mmis s ioner of Inco me T ax ( App e al s ) is ag ains t the l a w and f acts of the c ase.
2. T hat the Le arned Co mmis s ioner of Inco me T ax ( Appe al s ) h as gr ossl y erred in u phol d ing the ac tion of Assess ing Of f icer in reo pen ingu/s147 -148, wh ic h reo pen ing/re asse ss men t/no tice is i tself il l eg al and b arred b y the prov isos to S ec tion-12A of the Inco me T ax A c t, 1961.
3. T hat the Le arne d Co mmis s ioner o f Inco me T ax ( Appe al s ) , h as g rossl y erred in u phol d ing the re assess men t p asses by the Asse ss ing Of f icer by hol d ing th at the prov isos to Sec tion 12 A are pros pec tive in n ature, wh ic h is ag ains t th e we l l se ttl ed l a w.2 ITA No.238/Chd/2018
A.Y.2012-13
4. T hat the Le arned Co mmis s ioner of Inco me T ax ( Appe al s ) is no t jus tif ied in up hol d ing the add i tion of Rs. 54, 02, 845/- as made b y th e Assess ing Of f icer, wh ich is ag ain s t the f ac ts and the c ircu ms tances of the c ase .
5. T hat the Le arned Co mmis s ioner of Inco me T ax ( Appe al s ) h as gr ossl y erred in u phol d ing the ac tion of Assess ing Of f icer, wh en the re assess men t f rame d u/s 147-1 48 itself is il l eg al , wi th ou t p ro per s anc tion, v o id ab in i tio and wi th ou t jur is d ic tion.
6. T hat the appel l an t cr aves l e av e to add or ame nd the ground of appe al bef ore the appe al is f in al l y he ard and d is posed of f . "
3. Bri efl y facts rel ati ng to the case are that the ass essee had appl i ed for regi strati on u/s10( 23C) ( vi ) of the Act, on 03- 05-2012 whi ch was deni ed by the Chi ef Commi ssi oner of I ncome Ta x, Shi ml a, vi de order dated 15-05-2013. The assessee had also appl i ed for regi strati on as a chari tabl e soci et y u/s 12A A of the Act, o n the same da y whi ch was granted by the Pri nci pal Commi ssi oner of I ncome Ta x , Shi ml a vi de order date 07-11-2012 wi th effect from 01-04- 2012 effecti ve fr om Assessment Year 2013-14. Th e Assessi ng Offi cer noti ced that for the i mpugned Assessment Year i .e. Assessment Year 2012-13, no re turn of i ncome had been fi l ed by the assessee and the assessees appli cati on for approval u/s 10( 23C) ( vi ) of the Act had been re jected. Consequentl y reopeni ng proc eedi ngs were i n i ti ated by i ssui ng noti ce u/s 148 of the Act on 27/28.05.2014. I n response to the same the assessee fi l ed Ni l return of i ncome on 31-03-2015. Duri ng assessment proceedi ngs t he assessee contended that havi ng been granted regi strati on u/s 12AA effecti ve from Assessment Year 2013-14, the benefi t of the same was avai l abl e to i t i n the i mpugned year al so by the 3 ITA No.238/Chd/2018 A.Y.2012-13 vi rtue of the fi rst provi so to Secti on 12A( 2) of the Act. The Assessi ng Offi cer re jected thi s contenti on of the assessee hol di ng that the sai d benefi t was avai l abl e onl y if the proceedi ngs rel ated to the i mpugned year were pendi ng as on the date of gr ant of regi strati o n u/s 12AA of th e Act and si nce regi strati on i n the present case was granted on 07-11- 2012 whi l e the proceedi ngs fo r the i mpugned year were i ni ti ated by wa y of i ssui ng noti ce u/s 148 onl y thereafter, on 27/28-05-2014, the assesse e was not enti tl ed for the benefi t of the fi rst provi so to Secti on 12A( 2) .Accordi ngl y the Net Profi t sho wn by the assessee of Rs.1,42,21,024/- was hel d as ta xabl e i ncome for the year.
4. The matter was carri ed i n appeal before the Ld. CI T( A) , who uphel d the order of the Assessi ng Offi cer hol ding that the benefi t of t he fi rst Provi so to Secti on 12A( 2 ) was not avai l abl e to asse ssee si nce no as sessment proceedi ngs were pendi ng on the date of grant of regi strati on u/s 12A of the Act. Further, the ass essee rai sed ano ther contenti on before the CI T( A) , that i ts case was covered under the Second Provi so to Secti on 12A ( 2) of the Act. It was poi nted out that the sai d provi so bars the Assessi ng Offi cer from i ni ti ati ng acti on u/s 147 to make the income of precedi ng years ta xabl e in case of trusts whi ch had been granted regi strati on. Th e CI T( A) re jected thi s contenti on of the assessee al so, stati ng that the benefi t of Second Provi so i s not avai l abl e to the assessee si nce i n the present case the assessee was i nel i gi bl e to cl ai m exempti on not on account of 4 ITA No.238/Chd/2018 A.Y.2012-13 absence of regi s trati on u/s 12A of the Act, but b ecause of the fact that ass essee had fai l ed to fi l e i ts return of i ncome and report of audi t, as requi red under the provi si ons of Secti on 12A( b) of the Act. Further the CI T( A) took note of the fact that the i ncome assessed of the assessee societ y had been reduced to Rs.54,02,845/- by wa y of recti fi ca ti on order passed u/s 154 of the Act as agai nst Rs.1,4 2,21,000/- assessed earl i er.
The rel evant fi n di ngs of the CI T( A) at Para 7 of the order i s as under:
"7. ( i) I h ave cons idere d the f ac ts of th e c ase and sub miss ions of the appel l an t. T he appel l an t appl ied f or regis tr ation u/s 10( 23C)( v i) on 03-05- 2012 wh ich was den ied b y wo r thy CC IT , Sh i ml a, v ide order d ated 15-05- 2013. No appe al ag ains t the above order is s tated to h ave been f il ed bef ore Hon'bl e IT AT . T he appel l an t al so appl ied f or reg is tr ation u/s 12AA on the s ame d ate wh ich wa s gr an ted b y Pr. C IT , Shi ml a, v ide h i s order d ated 07- 11-2012, w. e.f . 01-04-2012 an d ef f ective f rom Assess men t Ye ar 2013-14.
( ii) No regul ar re turn of inco me u /s 139 was f il ed by the appel l an t f or Assess men t Ye ar 2012-13. Consequen t to ref usal of reg is tr ation u/ s 10( 23C)( v i), a n o tice u/s 148 of the Ac t was accord ingl y issu ed to the appel l an t on 27/28-05 - 2014. In res pons e, a re turn of inc o me was f il ed on 31-03-2015 decl ar ing inco me at Rs . N il .
( ii i) Dur ing assess me n t proceed ings, the appel l an t sub mi tted th at th ough it h ad been ref used approv al us 10( 23C)( v i) of the Ac t, bu t i t was in possess io n of regis tr ation u /s 12AA of the Ac t gr an ted w. e. f . 01-04-2012 and ef f ective f ro m Assess men t Y e ar 2013-14. Hence, its c ase was c overed under 1 s t prov iso to sec ti on 12A( 2) and the benef it o f reg is tr ation was av ail abl e to i t r e tros pec tivel y f or Assess men t Ye ar 2012-13 as we l l . I h ave cons idered above con ten tion. It is hel d th at Le arne d Assess ing Of f icer r igh tl y re jec ted th is con ten tion of the appel l an t b y hol d ing th at i ts c ase was no t covered under th e 1 s t Prov iso to sec tion 12A( 2) of the Ac t. T he Prov iso is app l ic abl e onl y to 5 ITA No.238/Chd/2018 A.Y.2012-13 assess men t pro ceed ings pend i ng bef ore the Assess ing Of f icer as on the d ate of gran t of reg is tr ation u/s 12AA of the ac t prov ided th e ob jec ts and ac ti v ities of the ins ti tu tion we re the s ame dur ing the preced ing assess men t ye ar s assess men t f or wh ic h is pend in g co mpl e tion as dur ing the as sess men t ye ar f or wh ich the ins ti tu tion h as been gr an ted reg is tr ation u/s 12AA. In the c ase of the appel l an t, no re turn of inco me h ad been f il ed by i t u/s 13 9 of the Ac t f or Assess men t Ye ar 2012-13. T he re turn of inco me was f il ed b y i t o nl y on 31-03-201 5 in res ponse to no tice u/s 148 issued on 27/28-05-2014. Hence, Le arned Assess i ng Of f icer h as r i gh tl y hel d th at n o assess men t was pend ing on the d ate of reg is tr atio n u/s 12AA, i. e. , on 07-11 2012 and the 1 s t prov is o to sec tion 12A( 2) was no t appl ic abl e in the c ase o f the appel l an t.
( iv ) Ano ther pl e a taken by the app el l an t dur ing appe al is th at i ts c ase was al so c overed under the 2 n d Proviso to se c tion 12A( 2) of th e Ac t. It h as been argued th at the 2 n d proviso b ars the Assess in g Of f icer f ro m in i ti ating ac tion u/s 147 of the Ac t in c ase of such trus t or ins ti tu tion to wh ic h reg is tr ation h as been gr an ted f or an y assess men t ye ar preced ing the assess men t ye ar f or wh ic h reg is tr ation h as been gr an ted u/ s 12AA of the Ac t onl y f or non- regis tr ation f or the s aid assess men t ye ar. In th is c as e, Le arned Asse ss ing Of f icer h as recorded re asons u/s 147 by me n tion ing onl y the ref usal of approv al u/s 10( 23C)( v i). No men tion h as been made of the gr an t of regis tr ation u/s 12AA of the Ac t on 07-11 -2012 w. e.f . 01. 04. 2012 and f ro m Assess men t Ye ar 2013-14. It h as been argued th at in v ie w of the 2 n d prov iso of the Ac t, Le arned Assess ing Of f icer was no t jus tif ied to in i ti ate proceed ings u/s 147/148 of the A c t f or Assess men t Ye ar 2012-13.
I h ave cons idere d the above con ten tion of the appel l an t and f ind th at i t is no t ten abl e. T he prov is ions of sec tion 11, 12, 12 A, 12AA and 13 govern ing inco me f ro m pro per ty h el d f or char i tabl e or rel ig ious pur poses mus t be re ad as a wh ol e such th at no prov is ion of an y s ec tion beco mes redund an t. T he 1 s t and 2 n d pr ov isos to sec tion 12A( 2) h ave be en inser ted to al l o w benef it of reg is tr ation to such trus ts/soc i e ties wh ich are gr an ted reg is tr ation u/s 12AA at an y p ar ticul ar po in t of ti me i n res pec t of the ir pend ing or co mpl e ted or un- o pened assess men ts as we l l . T he man d ate of the 1 s t prov iso is th at such benef it of reg is tr ation wil l al so be g iven in al l assess men ts pend ing co mpl e ti on on the d ate of reg is tr ation. T he in ten t beh ind 2 n d proviso is onl y to b ar the 6 ITA No.238/Chd/2018 A.Y.2012-13 assess ing of f icer f ro m tak ing recou rse to prov is ions of section 147 /148 to make the inco me of th e preced ing ye ars tax abl e in c ase of trus ts / soc ie ties wh ich h ave been gr an ted reg is tr ation. As per the 3 r d pro v iso, the above benef its are n o t av ail abl e in the c ase of an y tr us t or ins ti tu tio n wh ic h is ref used reg is tr ation or wh e re reg is tr atio n in c ancel l ed at an y ti me u /s 1 2AA of the Ac t. Ho we ver, the 2 n d prov iso c anno t be cons trued to i mp l y th at Le arn ed Assessing Of f icer is b arred i n an y manner f rom even c al l ing f or the re turn o f inco me u/s 147 wh e re no re turn o f inco me h as bee n f urnished b y the assessee u/s 139 of the Ac t. It onl y b ars the as sess ing of f icer f ro m assess ing the sur pl us as tax abl e inco me of the trus t wh ere i t h as been gr an ted reg i s tr ation u/s 12A f or a subsequen t assess men t ye ar bu t i t h ad no r eg is tr ation in th e preced ing assess me n t ye ars thoug h its ob jec ts and ac tiv i ties we re th e s ame.
In the presen t c ase, as no re tur n of inco me h ad been f il ed by the appel l an t u/s 139 f or Assess men t Ye ar 2012-13, Le arned Assess ing Of f icer was jus tif ied to issue a n o tice u/s 148 on 27/28-05-2014 cal l ing f or the re tu rn of inco me. T he s aid re turn was f il ed on 31. 03. 2015 decl ar ing N i l inco me u/s 1 1 / 12 of the I. T . Act. Ho we ver, sec tion 11 and sec tion 1 2 sh al l no t appl y in rel ation to th e inco me of an y trus t or ins ti tu tion unl es s th e cond itions of th e cl auses ( aa) and ( b ) of sectio n 12A( 1) of the A c t are cu mul ativ el y me t. Sec tion 12A( 2) and the th ree prov isos to th is sec tio n f urther govern the cond ition l aid do wn in cl ause ( aa) onl y. T he condition as l aid do wn b y cl ause ( b ) o per ate s in i ts o wn r igh t and h as to be me t se p ar atel y. As per cl ause ( b ), where the to tal inc o me of the trus t o r ins ti tu tion as c o mpu ted under th is Ac t wi th ou t g iv ing ef f ect to the prov is ions o f section 11 and sec tion 12 excee ds the max i mu m amoun t wh ich i s no t ch arge abl e to Inco me T ax in any prev ious ye ar, the accoun ts of the trus t or ins ti tu tions f or th at ye ar h ave to be aud i ted and th e re por t of such aud i t in the pre scr ibed f or m h as to be f urnished al ong wi th the r e turn of inco me f or the rel ev an t assess men t ye ar. T he return of inco me f or Assess men t Ye ar 2012-13 coul d be f il ed by th e appel l an t onl y u p to 31. 03. 20 13. Ho we ver, ne i ther the re turn of in co me nor the aud it re por t was f urnished up to 3 1. 03. 2013. In v i e w of above, the appel l an t was no t en ti tl e to cl ai m benef it of sec tion 11/12 of the Ac t in res pec t of Assess men t Ye ar 2012-13 as it d i d no t mee t the c ond ition of sectio n 12A( 1)( b ). Sec ti on 12A( 1) beg ins wi th ' th e prov is ions of section 11 and sec tion 12 sh al l no t appl y in rel ati on to. . . . . unl es s the f ol l o wing 7 ITA No.238/Chd/2018 A.Y.2012-13 cond itions are f ulf il l ed... . ' and thus h as an overr id ing ef f ect. In v ie w of the above, i t is hel d th at the sur pl us of Rs. 54, 02, 845/- ( Rs. 1, 42, 21, 000 min us Rs. 88, 18, 1 60/- as per the r ec tif ic ation order d ated 08. 08. 201 6) was tax abl e inco me of the appel l an t f or the Assess men t Ye ar 2012-1 3. Grounds of appe al 1 & 2 are d is mi ssed.
As men tioned b y the appel l an t in its wr i tten sub miss ions, L e arned Assess i ng Of f icer has al re ad y p assed the rec tif ic ation o rder u/s 154 on
08. 08. 2016 and assessed the inco me at Rs . 54, 02, 845/- b y reduc ing the adv ance f ees of Rs. 88, 18, 160/- rece ived dur ing A ssess men t Ye ar 2011-12. Ground of appe al -3 bec o mes inf ructuous . Ground of appe al 4 is gener al in n ature. No add i tion/ al ter ati on to grounds h as been made dur ing appe al . "
5. Before us, the so l e contenti on rai sed by the Ld. Co unsel for the assessee was that the reo peni ng coul d not have been resorted to on account of the speci fi c provi si on of the second provi so to Secti on 12A( 2) of the Act, debarri ng resort to the same for the year precedi ng the assessment year for whi ch regi strati on u/s 12A of the Ac t i s granted. Ou r attenti on was dra wn to the rel evant proviso and the CBDT Ci rcul ar No.01 of 2015, F.No. 142/13/2014- TPL cont ai ni ng the e xpl anator y notes to the i ntroducti on to the rel evant provi si ons by wa y of Fi nance Act ( 2) ( 2014) as under:
"12A [(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.] Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year:"8 ITA No.238/Chd/2018
A.Y.2012-13 CBDT Circular No.01 of 2015,F.No. 142/13/2014-TPL " In order to prov ide rel ief and re mo ve h ardsh ip i n genu ine c ases s ec tion 12A of th e Inco me- tax Ac t h as been ame nde d to prov ide th at in a c ase wh ere a trus t or ins ti tu tion h as been gr an ted reg is tr atio n under sec tion 1 2AA of the Inc o me- tax Ac t, th e benef it of section s 11 and 12 of the s aid Ac t sh al l be av ail abl e in res pec t of an y inc o me der ived f ro m pro per ty hel d under trus t in an y assess me n t proceed ing f or an e arl ier assess men t ye ar wh ich is pend ing bef ore the Assess ing Of f icer as on the d ate of such reg is tr ation, if the ob jec ts and ac tiv i ties of such trus t or ins ti tu tions in the rel ev an t e arl ier Assess men t Ye ar are the s ame as those on the b as is of wh ic h such reg is tr ation h as been gr an ted.
Fur ther, it h as been prov ided th at no ac tion f or reo pen ing of an assess men t unde r sec tion 147 of the Inco me- tax A c t sh al l be taken by the Assess in g Of f icer in the c ase of such trus t or ins ti tu tion f or an y assess men t ye ar prece d ing the f irs t assess men t ye ar f or wh ich the reg is tr ation appl ies, me rel y f or the re ason th at such tr us t or ins ti tu tion h as no t ob taine d the reg is tr ati on under sectio n 12AA f or the s aid assess men t ye ar . "
6. Ld. D.R. on the other hand rel i e d on the order o f the CI T( Appeal s) stati ng that no benefi t can be deri ved by the assessee from the Second provi so to secti on 12A( 2) ,si nce i n the present case the assessee was i nel i gi bl e to cl aim e xempti on not on account of absence of regi stration u/s 12A of the Act, but because of t he fact that ass essee had fai l ed to fi l e i ts return of i ncome and report of audi t, as requi red under the provi si ons of Secti on 12A( b) of the Act.
7. We have heard the contenti on of both the parti es and perused the order of the authori ti es bel o w. Admi ttedl y the reopeni ng i n the present case was resorted to for the reason that the assessee had been refused approval u/s 10( 23C) ( vi ) of the Act and h ad not fi l ed i ts r eturn of i ncome .I t i s not 9 ITA No.238/Chd/2018 A.Y.2012-13 di sputed that the assessee had been granted regi strati on u/s 12AA for the subsequent assessment year i .e. A.Y 2013-14. The contenti on o f the assessee chal l engi ng the reopeni ng i s that the second provi so to secti on 12A( 2) of the Act, debars resorti ng to reopeni ng u/s 147 of the Act, for subjecti ng to ta x the i ncome for the i mpugned year merel y on account of absence of regi strati on u/s 12A.
8. The contenti on of the Revenue on the other hand i s that si nce the assessee fai l ed to ful fi l l the condi ti on sti pul ated for cl ai mi ng e xempti on u/s 11 &12 of the Act of f i li ng return of i ncome al ong w i th report of audi t, u/s 12A( 1) ( b) of the Act, i ts i ncome for the i mpugned y ear was ta xabl e and the reopeni ng therefore was val i d.
9. Evi dentl y i t i s not the case of the Revenue that the reopeni ng was val i d on the ground of absence of regi strati on u/s 12A of the Act for the i mpu gned year and t herefore i ts i ncome becomi ng ta xabl e. I n fact, we fi nd, that the CI T( A) has accepted that reopeni ng coul d not have been resorted to on account of absence of regi strati on u/s 12A for the i mpugned year on account of the second provi so to secti on 12A( 2) of the Act. Therefore the contenti on of the assessee on thi s count, w e fi nd, stands ac cepted by the Re venue. But the argument of the Revenue we fi nd i s that, because the assessee fai l ed to compl y wi th the condi ti ons of secti on 12A( 1) ( b) of the Act, whi ch wa s necessar y for cl ai mi ng e xempti on u/s 11 & 12 of the Act, i ts i ncome for the i mpugned year was ta xabl e, whi ch had thus escaped 10 ITA No.238/Chd/2018 A.Y.2012-13 assessment and therefore the reopeni ng was val i d. The sai d condi ti ons, as poi nted out by the Ld.CI T( A) , are the fi l i ng of return of i ncome accompani ed wi th the report of an audi tor in the prescri b ed form. It is rel evant to repr oduce the provi si ons of secti on 12A( 1) ( a) &( b) of the Act at thi s juncture.
"12A (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:-
(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Principal Commissioner or] Commissioner before the 1st day of July, 1973 , or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, [whichever is later and such trust or institution is registered under section 12AA]:
[Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,-
(b) where the total income of the trust or 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 as 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 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.]"
10. Undoubtedl y the requi rement of fi l i ng of return of i ncome and the report of audi t have been speci fi ed for bei ng el i gi bl e for cl ai mi ng e xempti on u/s 11 & 12 of the Act, alongwith the grant of registration u/s 12AA of the Act. In the case of the assessee, we find, that the return of income has been 11 ITA No.238/Chd/2018 A.Y.2012-13 fi l ed i n response to noti ce u/s 148 of the Act. Therefore the condi ti on of fi l i ng of return of i n come stands ful fi l l ed. The secti on, we fi nd, no where prescri bes the fi l i ng of return by any due date, therefore the fi ndi ngs of the CI T( A) that the assessee havi ng not fi l ed i ts ret urn wi thi n the prescri bed ti me i t had fai l ed to compl y wi th the requi rement prescri bed, i s not tenabl e. As for the requi rement of fi l i ng report of audi t i n the prescri bed form, the sai d condi ti on has been hel d by courts to be merel y procedural and therefore director y i n nature and not mandator y for the purpose of cl ai mi ng e xempti on u/s 11 & 12 of the Act. The Hon'bl e Jur i sdi cti onal Hi gh Court i n t he case of CI T vs Shahzadanan d Charit y Trust reported i n 228 I TR 292,h as categori cal l y held so i n para 10-14 of i ts order as under:
"10. Calcutta High Court in Rai Bahadur Bissesswarlal's case (supra) while interpreting s. 12A(b) held that the provision was directory in nature and the AO could allow the assessee to file the audit report, at any time before the completion of the assessment. In this case the assessee, a charitable trust registered with the CIT filed its return on 17th Sept., 1984, declaring a deficit of Rs. 1,61,452. The return so filed was not accompanied by audited accounts and audit report in Form No. 10B as required under s. 12A of the Act. The audit report dt. 12th Nov., 1984 was, however, filed by the assessee in the prescribed form on 6th March, 19897, before the completion of the assessment. The ITO while completing the assessment refused to allow the benefit of exemption under s. 11 of the Act to the assessee on the ground that audit report in Form No. 10B was not filed along with the return. Income of the assessee was put to tax. Order of the ITO was upheld by the CIT(A) against which assessee filed further appeal before the Tribunal which was accepted. On these facts, it was held that the IT authority had taken hyper-technical view of the matter where the assessee has complied with the provisions of the Act in the course of assessment by curing the defect in the return by filing an audit report. The ITO cannot ignore such audit report or the return in completing the assessment. The delay in getting the account audited and in filing the return (sic-report) in Form No. 10B did not defeat any object of the 12 ITA No.238/Chd/2018 A.Y.2012-13 Act and, therefore, the provision was directory in nature. It also referred to the circular of the Board dt. 9th Feb., 1978.
11. Gujarat High Court in Gujarat Oil & Allied Industries' case (supra) was considering s. 80J(6A). Gujarat High Court took the view put by this Court in Jaideep Industries' case (supra).
It was held that the provision about furnishing of the auditor's report along with the return has to be treated as procedural provision and, therefore, directory in nature.
12. Provisions of s. 80J(6A) and s. 12A of the Act are para materia. The ratio of the law laid down in Jaideep Industries' case (supra) would have been applicable to the facts of the present case as well had the CBDT not issued the Circular dt. 9th Feb., 1978, reproduced in the earlier part of the judgment. As per this circular, it is not mandatory under. s. 12A(b) to file the audit report along with return of income. Normally, a charitable religious trust or institution is expected to file auditor's report along with the return but in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report, the ITO, for reasons to be recorded, has been authorised to condone the delay in furnishing the auditor's report and accepting the same at a belated stage. It has been clarified that the exemption available to the trust under s. 11 may not be denied merely on account of delay in furnishing the auditor's report. The word "shall" occurring in s. 12A cannot, under the circumstances, be read as a "must" making it mandatory for the trust to furnish the auditor's report along with the filing of the return. If for certain unavoidable circumstances, the assessee is unable to furnish the auditor's report along with the return then the same can be furnished at a later date with the permission of the AO who may permit the assessee to do so after recording its reasons for so doing."
13. Counsel appearing for the Revenue then argued that as per this circular, the auditor's report could only be furnished upto the stage of framing of assessment as the power to condone the delay for accepting the auditor's report at a later date has only been given to the ITO and not thereafter, i.e., at the appellate stage. We find no merit in this submission. The CBDT by issuing the Circular dt. 9th Feb., 1978 has treated the provision regarding furnishing of auditor's report along with the return to be procedural and, therefore, directory in nature. By showing sufficient cause, the auditor's report could be produced at any later stage either before the ITO or before the appellate authority.
14. In view of the Board's Circular dt. 9th Feb., 1978, the requirement of filing auditor's report in Form 10B as provided in s. 12A(b) r/w r. 17B of the Rules, the ratio of the law laid down by this Court in Jaideep Industries' case (supra) would not apply to the present case."
13 ITA No.238/Chd/2018
A.Y.2012-13
11. I n vi e w of the above therefore we fi nd no meri t in the argument of the Revenue that the assessee was not el i gi bl e for e xempti on u/s 11 &12 on account of not havi ng compl i ed wi th the requi rements of secti on 12A( 1) ( b) of the Act. Si nce thi s was the sol e basi s for uphol di ng the val idi t y of the reassessment proceedi ngs resorted to, we hol d that the reassessment resorted to i n the present case was inval i d, on account of the second provi so to secti on 12A( 2) of the Act, whi ch speci fi cal l y debarred reso rt to the same i n vi e w of regi strati on havi ng been granted from the i mmedi atel y succeedi ng assessment year. Th e reassessment framed i s therefore set aside. As a consequence the addi ti on made is del eted.
12. I n t he r e s u l t , the a p p e a l o f t h e a s s e s s e e i s a ll o w e d i n a b o v e t e rm s .
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 20 t h August, 2018
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh