TMI Blog1997 (8) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... ng income of the public charitable trust. The assessee had been allowed the benefit of exemption in respect of its income in the past years regularly ; however, for the assessment year 1977-78 which is in issue, it was found by the Income-tax Officer that its income was not liable to be treated as exempt under section 11 of the Act. It was further held by the Income-tax Officer that the assessee was not entitled to the exemption as it had failed to furnish the auditor's report which was required to be done mandatorily under section 12A(b) of the Act. The assessee carried an appeal before the Appellate Assistant Commissioner who after hearing counsel for the assessee was satisfied that the first objection of the Income-tax Officer did not have any merit. The appellate authority found substance in the second objection taken by the Income-tax Officer. According to him, the provisions contained in section 12A(b) made it mandatory for the assessee to furnish the auditor's report duly signed and verified by the chartered accountant with the return of income. Failure to furnish the auditor's report disentitles the assessee to claim the exemption under sections 11 and 12 of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law stated to be arising from the order of the Tribunal. The Tribunal was of the opinion that only one question arose from the order of the Tribunal and referred the same to the jurisdictional High Court for its opinion. The note of the auditor, balance-sheet and income and expenditure account which had been furnished by the assessee along with the return were not made a part of the paper book. As the Tribunal had recorded a finding that there was substantial compliance by the assessee with the provisions of clause (b) of section 12A of the Act, during the course of arguments, it was deemed appropriate to direct counsel appearing for the Department to produce the auditor's note along with the annexures which had been appended with the return filed by the assessee. The original file of assessment containing the note of the auditor, balance-sheet and income and expenditure account were produced in compliance with the aforesaid directions issued by the court. They have been perused. Under section 11, subject to certain provisions of the Act, and on fulfilling of certain conditions provided under section 12A, income from property held for charitable or religious purpose has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this court in CIT v. Jaideep Industries [1989] 180 ITR 81. Counsel for the assessee has controverted the argument raised by counsel for the Revenue. It has been contended by him that furnishing of report along with the filing of the return was directory in nature in view of the circular of the Central Board of Direct Taxes issued on February 9, 1978, which provides as under : Charitable trust--Requirement of filing audit report in Form 10B--- 12A(b). Instructions regarding.--- The Board have considered whether the requirement under section 12A(b) of filing audit report ' along with the return of income ' is mandatory so as to disentitle the trust from claiming exemption under sections 11 and 12 in case of omission to furnish such report in the prescribed form along with the return. Normally, it should be possible for a charitable or religious trust or institution to file the auditor's report along with the return of total income, where such trust or institution claims exemption under sections 11 and 12. However, in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report the exemption as available to such trust under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of exemption under section 11 of the Act to the assessee on the ground that the audit report in Form No. 10B was not filed along with the return. The income of the assessee was put to tax. The order of the Income-tax Officer was upheld by the Commissioner of Income-tax (Appeals) against which the assessee filed further appeal before the Tribunal which was accepted. On these facts, it was held that the income-tax authority had taken a hypertechnical view of the matter where the assessee has complied with the provisions of the Act in the course of the assessment by curing the defect in the return by filing an audit report. The Income-tax Officer cannot ignore such audit report or the return in completing the assessment. The delay in getting the accounts audited and in filing the return in Form No. 10B did not defeat any object of the Act and, therefore, the provision was directory in nature. It also referred to the circular of the Board dated February 9, 1978. The Gujarat High Court in CIT v. Gujarat Oil and Allied Industries [1993] 201 ITR 325 was considering section 80J(6A). The Gujarat High Court took the view put by this court in CIT v. Jaideep Industries [1989] 180 ITR 81. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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