TMI Blog2011 (6) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... igibility of exemption u/s 11A as clearly stated in section 12A (b) of the IT Act read with Rule 17B of the IT Rules. The assessee was, therefore, asked to show cause why exemption claimed u/s 11 of the IT Act should not be disallowed vide showcause notice dated 5-12-2008, which has been reproduced in the assessment order. In the show cause notice, the AO pointed out to the assessee that since the company is registered u/s 25 of Companies Act, having charitable and religious object, Rule No. 12(1) (c) applies to it and accordingly the assessee should have filed return of income in Form No. 3 A as per IT Rules, 1962. Further the assessee was asked to show cause as to why its return of income should not be considered as one for a company other than that incorporated for charitable purposes and accordingly, the exemption claimed by it u/s 11 of the IT Act should not be disallowed and its total income of ₹ 7,68,43,040/- should not be considered as taxable income. The AO further stated that the assessee had not fulfilled both the conditions of Sec. 12A of the IT Act required for claiming exemption u/s 11 and 12 of the I.T. Act and the assessee has fulfilled only the first conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le opportunity to explain its failure, the assessee utilized the opportunity to furnish an unsubstantiated claim without an iota of evidence and it furnished a plain handwritten letter without any proof whatsoever which showed casual approach of the assessee. The AO, therefore, denied the claim of assessee made u/s 11 of the I.T. Act. 3. The assessment order was challenged before the learned CIT(A) and the assessee submitted that that e-filing for companies, for assessment year 2006-07 was first year and therefore, nobody was clear about the correct procedure and further stated that when the learned Counsel for the assessee approached the dispatch clerk of circle-8, he refused to accept the form No. 3 A on the ground that the same was for charitable trust and that Circle 8 accepts the returns for companies and e-filing in the case of companies is mandatory from assessment year 2006-07. Further on approaching the dispatch clerk of ADIT (E), he also refused to accept the return on the ground that though the return is in form No. 3 A, the PAN is of a company and hence the assessee filed Form No. 1 out of helplessness and the learned Counsel for the assessee also presented Form No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 201 ITR 325(Guj) that if the audit report in the prescribed form is furnished before the assessment is over, it is sufficient compliance . It was submitted that decision of Zenith Processing Mills has been relied by the Gujarat High Court in a recent decision in the case of ITO Vs. VXL India Ltd. 219 CTR 242 (Guj). The assessee also relied upon various other decisions in support of its contentions and stated that the income of. The Xavier Kelavani Mandal P. Ltd. is exempt under sec. 10(23C)(v) as per Notification No. SO-2591 dated 25-7-1978. The learned Counsel for the assessee further placed reliance on the decisions of CIT vs. Shahzedanand Charity Trust, 228 ITR 292 (P H); CIT vs. Jayant Patel, 248 ITR 199 (Mad) and CIT vs. Magnum Exports Pvt. Ltd., 262 ITR 10 (Kol) and submitted that the Form No. 10B can be submitted before the appellate authority and it is sufficient compliance since the requirement is directory and not mandatory. In this connection, the assessee also relied upon the decision in the case of CIT vs. Hardeodas Agrawal Trust, 198 ITR 511 (Cal). During the appellate proceedings, the AO was asked vide letter dated 17-03-2009 to send his comments on the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. is exempt under section 10(23C) (v). The audit report in form 10 BB was submitted before me as part of the paper book. The learned Counsel for the assessee vide his letter dated 9-4-2009 has raised an additional ground and has submitted that the assessment order dated 15-12-2008 passed under sec. 143(3) based on ITR 1 which is e-filed as admitted by the AO in the show cause notice dated 5-12-2008 is invalid and bad in law in as much as the assessee is a charitable trust and the correct income tax return is Form No. 3A and, therefore, the AO should have called for the I.T. return in Form No. 3A and in the absence of return in Form No. 3 A, the entire assessment is bad in law. The learned Counsel for the assessee has placed reliance on the judgment in the case of CIT vs. Harjinder Kaur, 310 ITR 71 (P H) and recent Gujarat High court judgment, wherein it was held that the return which was neither signed by the assessee nor verified in terms of mandate of Sec. 140 was an absolutely invalid ret urn as the inherent defect could not be cured in spite of the deeming effect of Sec. 292B and, therefore, no assessment could be made on an invalid return. The learned Counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority can do what the A.O. can do and direct him to do what he has failed to do. In these decisions it has been held that requirement of filing audit report is directory and not mandatory. The A.O. in his remand report has strongly contended that the appellant has failed to file the audit report and it has not proved that there was sufficient cause which prevented it from filing the same within the due date. As against the said observation the appellant has strongly contended that it has filed the audit report by physically handing over before the A.O. at the time of filing the return of income and when there was difference of opinion about filing of audit report the A.O. should have given opportunity to the appellant to file the same at the time of assessment proceedings. The facts as they stand now the audit report is not available in the records. Considering the fact that the appellant has filed the audit report in all these years in the past along with return of income and also in subsequent years along with return of income and only for the year in appeal the dispute has arisen because of first year of e-filing of return of income, I would hold that as the audit report has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below and referred to PB-4, affidavit of Mohamad Iqbal Vohra who explained the facts of filing of the audit report and the return in form No.3A personally before the ACIT. He has submitted that since the assessee was a Charitable Company, return was filed in proper form, but as e-filing was not possible and due to procedural problems as noted above, the assessee was prevented from filing the audit report on time. He has stated that the learned CIT(A) rightly condoned the delay in filing the audit report. He has submitted that form No.3A and Form No.10B report was filed at the assessment stage as well as before the appellate stage, therefore, the learned CIT(A) rightly directed the AO to grant exemption to the assessee u/s 11 of the IT Act. 7. We have considered the rival submissions and the material available on record. The facts noted above are not in dispute. The affidavit of the concern person Mohamad Iqbal Vohra (PB-4) filed before the learned CIT(A) in support of the contention of filing of the prescribed return of income. It is explained in the affidavit that dispatch clerk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless the two conditions provided in clauses (a) and (b) of section 12A are fulfilled. Section 12A lays down that the trust or institution has to furnish an auditor s report duly signed and verified by the chartered accountant with the return of income. According to circular dated February 9, 1978 of the Central Board of Direct Taxes, it is not mandatory under section 12A (b) to file the audit report along with the return of income. Normally, a charitable or religious trust or institution is expected to file the 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 Income-tax Officer, for reasons to be recorded, has been authorized to condone the delay in furnishing the auditor s report and accept the same at a belated stage. It has been clarified that the exemption available to the trust under section 11 may not be denied merely on account of delay in furnishing the auditor s report. The word shall occurring in section 12A cannot, under the circumstances, be read as must making it mandatory for the trust to furnish the auditor s report along with the filing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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