2023 (5) TMI 313 - AT - Income Tax

Tribunal grants appeal, allows delay, remands for fresh assessment based on audit report. Assessee entitled to exemption.

Indore Contract Bridge Association Versus CPC, Bangalore

The Tribunal allowed the appeal, condoning the delay in filing the first appeal and remanding the matter for fresh assessment considering the audit ... Condonation of delay of 107 days filling appeal before CIT-A - CIT-A not condoning the delay in filing first-appeal before him - Rectification u/s 154 - HELD THAT:- From a reading of section 154(8) that the AO was having a time-limit of 6 months to pass order on such application of assessee. Assessee was justified in waiting for about 5 months and certain days for the outcome of rectification and thereafter filing first-appeal when there was no response from AO. Thus, there was certainly a reasonable cause on the part of assessee in filing-appeal belatedly. DR does not have any reason to negate/contradict this. Although the CIT(A) has taken a view to dismiss the first appeal of assessee; but in the very same order he has also decided the first appeal on merit at length. Assessee has a strong case for condonation of delay in filing first-appeal before Ld. CIT(A). We accept assessee’s submissions and reverse the decision of dismissal taken by Ld. CIT(A). The assessee succeeds in this ground. Exemption u/s 11/12 - Entitlement of exemption as claimed in the return of income, when the audit-report (Form No. 10B) was filed belatedly after processing of return u/s 143(1)? - HELD THAT:- We are convinced that the controversy is directly settled in favour of assessee by decision in Savitri Foundation [2022 (8) TMI 1372 - ITAT MUMBAI] where as following the decision of Mumbai Metropolitan Regional Iron & Steel Market Committee[2015 (4) TMI 512 - BOMBAY HIGH COURT] held that late filing of required documents would not disentitle the assessee from availing benefit of section 11 of the Act. We are of the view that in the present case, the assessee can’t be denied the benefit of exemption u/s 11 as claimed in the return of income for mere delay in filing of audit-report. We, therefore, deem it fit to remand this matter back to the file of AO for a fresh assessment after considering the audit-report filed by assessee, in accordance with law. These grounds are accordingly allowed. Issues Involved:1. Condonation of delay in filing the first appeal.2. Entitlement to exemption under Section 11/12 despite the late filing of the audit report (Form No. 10B).3. Assessment of taxable income on the basis of net income versus gross receipts (alternative ground).Summary:Ground No. 1: Condonation of Delay in Filing the First AppealThe assessee claimed that the CIT(A) erred in not condoning the delay of 107 days in filing the first appeal. The delay was due to the pendency of a rectification application under Section 154 before the AO, which was filed immediately after receiving the intimation under Section 143(1). The Tribunal found the delay reasonable, noting that the AO had a six-month period to respond to the rectification application, and the assessee waited for about five months before filing the appeal. The Tribunal reversed the CIT(A)'s decision and condoned the delay, allowing the assessee's appeal on this ground.Grounds No. 2 and 3: Entitlement to Exemption under Section 11/12The controversy was whether the assessee was entitled to exemption under Section 11/12 despite the late filing of the audit report (Form No. 10B). The Tribunal noted that the assessee, a charitable society registered under Section 12A, had filed the audit report after the processing of the return but before the first appeal. The Tribunal relied on the ITAT's decision in Savitri Foundation and the Bombay High Court's decision in Mumbai Metropolitan Regional Iron & Steel Market Committee, which held that late filing of the audit report is a procedural defect and does not disentitle the assessee from exemption. The Tribunal remanded the matter back to the AO for fresh assessment, considering the audit report, and allowed the assessee's appeal on these grounds.Grounds No. 4 and 5: Assessment of Taxable Income on Net Income BasisThese grounds were alternative and would need adjudication only if the assessee failed in Grounds No. 2 and 3. Since the Tribunal allowed Grounds No. 2 and 3, these grounds were not adjudicated and were kept open.Ground No. 6: General in NatureThis ground was general and did not require any adjudication.Conclusion:The appeal of the assessee was allowed, with the Tribunal condoning the delay in filing the first appeal and remanding the matter back to the AO for fresh assessment considering the audit report. The alternative grounds were kept open without adjudication.