Exemption under section 11 could not be denied on the ground that the audit report was not filed online along with the return.
Short Overview The claim of exemption under section 11 could not be denied to assessee society on the ground that the audit report was not filed online along with the return as the requirement of law that the assessee shall have its account audited, had been complied with within the time prescribed by the statute.
Assessee society filed its return of income as ‘nil’ after claiming the exemption under section 11. AO on the ground that along with the return of income, the audit report in Form 10B was not filed online disallowed the claim of exemption.
It is held that Assessee had obtained the audit report in Form No. 10B before the return was filed, and suo motu uploaded the audit report in Form No. 10B. Thus, the requirement of law that the assessee shall have its account audited, has been complied with within the time prescribed by the statute and therefore, the claim for exemption under section 11 could not be denied on the ground that the audit report was not filed online along with the return.
Decision: In favour of assessee.
IN THE ITAT, JODHPUR BENCH
N.K. SAINI, V.P. & A.T. VARKEY, J.M.
ITO v. Society for Education Conscietisation Awareness & Training
ITA No. 461/Jd/2018
A.Y. 2014-15
6 May, 2019
Appellant by: P.K. Singl
Respondent by: O.P. Batheja
ORDER
A.T. Varkey, J.M.
This is an appeal preferred by the Revenue against the order of learned Commissioner (Appeals), Ajmer, dated 4-7-2018 for assessment year 2014-15 on the following sole ground of appeal :–
“1. On the facts and the circumstances of the case and in law the learned Commissioner (Appeals) has erred in deleting the disallowance made by assessing officer of the claim for exemption of Rs. 94,98,048 made by the assessee under section 11 of the Income Tax Act, 1961 despite the fact that the assessee failed to file audit report in Form 10B along-with return of income as per the provisions of section 12A(l)(b) of the Act.”
2. Brief facts of the case as noted by the learned Commissioner (Appeals) are that the assessee society for education has filed its return of income on 13-9-2014 declaring total income as ‘nil’ after claiming the exemption of Rs. 14,98,048 under section 11 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’). Along with the return of income, the audit report in the Form 10B was not filed online (electronically updated) as required under section 12A(b) read with rule 17B of the Income Tax Rules, 1962 (hereinafter referred to as the ‘Rules’). Therefore, while processing the return of income under section 143(3), the assessing officer vide intimation, dated 16-3-2016 issued under section 143(1) of the Act disallowed the claim of the assessee for exemption of Rs. 94,98,048 claimed by the assessee under section 11 of the Act. The assessee after having learned about the disallowance of the exemption, filed an application under section 154 of the Act online on 9-9-2017 with CPC, Bangalore requesting the assessing officer to allow the exemption as claimed by the assessee in return of income filed by it. The assessing officer (Dy. CIT, CPC, Bangalore) rejected the request for rectification filed by the assessee vide Order, dated 15-9-2017 by observing as under :–
“Subject : Rejection of request for rectification under section 154 of the Income Tax Act, 1961-Reg.
Please refer to the rectification request filed by you for the assessment year 2014-15 in respect of abovementioned order and received at centralised processing centre on 9-9-2017.
On verification, it is seen that there is no prima facie error in the order which you have sought to be rectified. Therefore, your application for rectification under section 154 is rejected, for the following reasons (if any).
As seen from the return of income filed, the assessee has claimed exemption under section 11 of Income Tax Act, 1961 but Form 10B in audit report is e-filed after the date of filing the return. Hence, deduction/exemption under section 11 is not allowed.
In view of the above, this rectification request is rejected and Return stands transferred to the assessing officer.
Kindly contact our jurisdictional assessing officer for further details.”
3. Aggrieved by the aforesaid action of the Deputy Commissioner, CPC, Bangalore the assessee preferred an appeal before the learned Commissioner (Appeals), who gave relief to the assessee taking note that the assessee had obtained the audit report in Form 10B on 13-8-2014 and return of income was filed by the assessee on 30-9-2014. Thus, according to learned Commissioner (Appeals), at the time of making the claim of exemption under section 11 of the Act in the return of income filed by the assessee, the compliance as required by the law i.e. of obtaining the audit report at the time of claiming exemption under section 11 has been complied with by the assessee. Therefore, the learned Commissioner (Appeals) relying on the decision of the Hon’ble jurisdictional High Court in the case of CIT v. Dr. Sh. L.M. Singhvi (2007) 289 ITR 425 (Raj) : 2007 TaxPub(DT) 0104 (Raj-HC) was pleased to give relief to the assessee. Aggrieved, the Revenue is before us.
4. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee obtained the copy of the audit report in Form No. 10B on 13-8-2014 and the return of income was filed by the assessee on 30-9-2014. It was also brought to our notice that the assessee had suo motu uploaded the audit report in Form No. 10B on 15-6-2015 which was successfully uploaded and the CPC, Bangalore has processed the return of income of the assessee only on 16-3-2016. Thus, the requirement of law that the assessee shall have its account audited has been complied within the time prescribed by the statute since the assessee has obtained the audit report in Form No. 10B on 13-8-2014 before the return of income was filed thereafter only on 30-9-2014. We note that the assessee has audited its account as per law and obtained copy of the audit report in Form 10B and also taking note the Hon’ble jurisdictional High Court High Courts held that the filing of furnishing the audit report along with the return of income is directory and not mandatory in the following cases :–
(i) CIT v. Garment Exporters Association of Rajasthan (2016) 386 ITR 20 (Raj) : 2016 TaxPub(DT) 3627 (Raj-HC),
(ii) CIT v. Bhawani Plywood (P) Ltd. (2010) 1 taxmann.com 250 (P&H),
(iii) ITO v. Smt. Mandira D. Vakharia (2001) 250 ITR 432 (Kar) : 2001 TaxPub(DT) 0806 (Karn-HC),
(iv) CIT v. Krishi Upaj Mandi Samity (IT Appeal No. 168 of 2018, dated 7-1-2019 (Raj)).
Respectfully relying on the ratio decidendi by the Hon’ble jurisdictional High Court and other Hon’ble High Courts and taking note that learned Commissioner (Appeals) has also relied on the order of the Hon’ble jurisdictional High Court, we confirm the order of the learned Commissioner (Appeals) and dismiss the appeal of the Revenue.
5. In the result, appeal of the Revenue is dismissed.
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