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TMI Blog2024 (6) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... of first-appeal? 4. Apropos to this issue, the precise facts are: The assessee is a charitable trust engaged in imparting education. It is registered u/s 12A of the Income-tax Act, 1961 and entitled for exemption u/s 11/12; accordingly it claimed exemption u/s 11/12 in the return of income filed for AY 2018-19 on 31.08.2018 on the basis of audited accounts signed by auditors on 14.08.2018. When the AO processed intimation u/s 143(1) on 26.09.2019, he did not allow exemption u/s 11/12 for the reason that the audit report (Form No. 10B) was not filed by assessee with return. The assessee then filed two successive applications u/s 154 dated 26.12.2019 and 20.01.2023 requesting for rectification of aforesaid intimation passed by AO so as to allow exemption u/s 11/12 but the AO rejected both applications vide orders dated 12.02.2020 and 17.05.2023 respectively. Getting no success at the level of AO, the assessee went in first-appeal to CIT(A). But even at that stage, the assessee did not get any relief. Now, the assessee has come in next appeal before us. 5. At first, we would like to extract the impugned order passed by CIT(A) in first-appeal: "5. Denial of exemption claimed u/s 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CPC has rightly determined the total income on the basis of available data from the tax return at Rs. 1,35,70,404/-. If it is a debatable issue, the appellant ought to have challenged the intimation u/s 143(1) of the Act dated 26.09.2019. In the present case, the appellant filed rectification application twice and both were dismissed by CPC. Later appeal was filed. In this case, appeal cannot be a solution as the appellate authorities are also bound to act as per statute. The appellant ought to have filed a revised return with their claim of deduction instead of filing a rectification application. If not, at least, they could have followed the CBDT Circular discussed above. The appellant neither filed a revised return nor filed any petition for condoning the delay. Hence, grounds of appeal taken by the appellant are dismissed." 6. Thus, the CIT(A) has rejected first-appeal precisely for three-fold reasons, namely (i) Filing of audit report (Form No. 10B) is mandatory to claim the benefit of exemption, (ii) In CBDT Circular No. 10/2019 dated 22.05.2019, power has been given to the Commissioner of Income-tax for condoning the delay in filing audit report (Form No. 10B) but the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to AO, the exemption u/s 11/12 can't be denied. Ld. AR relied upon a few decisions holding such proposition: (a) ITAT, Indore - Indore Contract Bridge Association Vs. CPC, Bangalore in ITA No. 403/Ind/2022 order dated 18.04.2023 (b) ITAT, Indore - Navratna Sukrat Foundation Vs. CPC, Bangalore, ITA No. 390/Ind/2022 dated 21.04.2023 (c) ITAT, Indore - DCIT Vs. Shri Vaishnav Polytechnic College, Indore ITA No. 469/Ind/2018 order dated 06.11.2020 (d) ITAT, Jodhpur - ITO, Exemption Ward Vs. Society for Education Conscietisation Awareness & Training, ITA No. 461/Jodh/2018 dated 06.05.2019 (e) ITAT, Ahmedabad - Puravanchal Lokhit Mandal Vs. ITO, Exemption Ward, Vadodara, ITA No. 966/Ahd/2019, dated 30.11.2022 (f) ITAT, Ahmedabad - Hari Gyan Pracharak Trust Vs. DCIT, CPC, Bangalore in ITA No. 245/Ahd/2021 order dated 16.06.2023 (g) Hon'ble Gujrat High Court - Sarvodaya Charitable Trust Vs. ITO, Exemption (2021) 125 taxmann.com 75 (Gujrat) (h) Hon'ble Gujrat High Court - Indian Panel Board Manufacturer Vs. DCIT Tax Appeal No. 655 of 2022 dated 21.03.2023. 8. So far as the modus adopted by assessee for filing rectification applications u/s 154 and thereafter filing appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the assessee was engaged in charitable activities; that the registration granted to it by tax authorities u/s 12A was in force; that the assessee had been granted benefit of section 11/12 in preceding assessment-years as well as subsequent assessment-years. He further submitted that the assessee filed return of income on 03.08.2017 and prior to such filing, the accounts of assessee were duly audited on 08.06.2017, a copy of the audited-accounts is placed in the Paper-Book. However, the auditors of assessee failed to upload the audit-report alongwith the return of income. But, post-processing of return u/s 143(1) and before filing of first-appeal, the assessee arranged to get the audit-report e-filed/uploaded on 03.04.2019 / 04.05.2019. Ld. AR submitted that the CIT(A) has, without appreciating these facts, dismissed the appeal of assessee merely on a technical defect that the audit-report was not filed alongwith the return of income. Ld. AR submitted that except such technical defect, there is no other reason to deny the benefit of section 11/12 to assessee. Ld. AR submitted that the e-filing/uploading of audit-report is done by auditors and not by assessee; therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of Hon'ble Mumbai High Court in CIT vs. Mumbai Metropolitan Regional Iron & Steel Market Committee 378 ITR 103 has observed and held thus: "4. Submissions made by rival sides heard, orders of authorities below examined and the case law on which the ld. Authorized Representative of the assessee placed reliance considered. The assessee is a charitable trust registered under section 12AA of the Act and has been purportedly enjoying the benefits of section 11 since 2011. In the impugned assessment year, the benefit of exemption under section 11 of the Act has been denied to the assessee for the reason that assessee has failed to furnish audit report along with return of income. The contention of the ld. Authorized Representative of the assessee is that the audit report was available with the assessee at the time of filing of return of income however due to inadvertent error the assessee failed to upload Audit Report in Form 10B along with e-filing of return of income. Non-filing of Audit Report is a bonafide error. The assessee has placed on record Audit Report dated 19/10/2018 in the prescribed Form 10B at page 15 of the Paper Book. The assessee after receiving the intimatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 whereas the Form 10B of the audit report was filed/uploaded dated 25th December 2017 which evidences that the audit report in Form 10B was filed subsequent to the appellate order by the learned CIT-A. At this juncture it is also pertinent to note that the audit report in the prescribed form was prepared and signed by the qualified chartered accountant dated 5th September 2014 much before the date of filing the return of income by the assessee. Thus, it appears that report for the audit in the prescribed form was prepared well in time but it was filed belatedly. 12.1 Now the controversy arises whether the assessee can claim the benefit of exemption under section 11 of the Act in a situation where the audit report in the prescribed form was not filed along with return of income. In this context we note that act of the assessee to file the audit report duly signed by the qualified chartered accountant is a procedural requirement and the courts have held that the assessee cannot be denied the benefit for which it is entitled in the event of any procedural contravention specified under the provisions of the Act. In holding so we draw support and guidance from the judgment of Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of Hon'ble Gujarat High Court in case of CIT vs. Mayur Foundation reported in 274 ITR 562, wherein it was held as under: "Thus, the proceedings before the Tribunal are meant to correctly assess the tax liability of an assessee: If this be so, it follows that the assessment proceeding cannot be said to be complete and is pending till the appeal is heard and disposed of by the Tribunal and the order of the Tribunal is given effect to by the assessing authority by computing the correct tax liability of an assessee. In other words, whether an assessee is required to pay tax or becomes entitled to a refund, would be ascertained by the assessing authority after giving effect to the order of the Tribunal." 12.3 Admittedly, the appeal was pending before the ITAT at the time when the audit report in form 10B was filed which transpires that the assessment has not reached to the finality and therefore principle laid down by the Hon'ble High Court of Gujarat in the case of CIT vs. Gujarat Oil & Allied Industries (Supra), that the requirement for filing the audit report is a procedural requirement, can be applied in the given facts and circumstances. Therefore, the benefit for whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the said deposits were made prior to filing of return of income u/s 139(1) of the Act. 6.1 Of course, it is a case in point that the assessee did not file any appeal against the intimations passed us 143(1) of the Act and the Ld. Sr. DR is right to the extent that the assessee cannot be given relief for that reason. However, it is also a settled law that the assessee cannot be taxed on an amount on which tax is not legally imposable. Although, the assessee might have chosen a wrong channel for redressal of his grievance, all the same, it is incumbent upon the Tax authorities to burden the assessee only with correct amount of tax and not to unjustly benefit at the cost of tax payer. Therefore, in the interest of substantial justice, we deem it expedient to restore the issue to the file of the Assessing officer with a direction to pass appropriate orders deleting the addition / disallowance after duly considering the settled judicial position in this regard, which have been decided in the three cases as enumerated above in Para 5." 11. Therefore, we find that in present case, the assessee cannot be denied benefit of exemption u/s 11/12 as claimed in return for mere delay in fili ..... 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