TaxTMI 
TaxTMI 
2010 (9) TMI 716
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....the fact that the conduct of audit under section 12A(1)(b) being the mandatory condition for allowance of exemption under section 11 of the I.T. Act, the assessee was not eligible for exemption under section 11 of the I.T. Act. 2. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A), Mumbai erred in ignoring the fact that the statement under section 131 of the Trustee Shri Madhav V. shah recorded on 13-10-2008 was a voluntary statement without any threat, coercion or undue influence and is admissible as evidence against the truest in the assessment proceedings. 3. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A), Mumbai, eared in ignoring the fact that the affidavit of the retraction filed by the trustee Shri Madhav V. Shah dated 10-12-2008 is not admissible evidence in favour of the assessee in view of the detailed discussion in Para 3.9 of the assessment order and in view of the judgment in the case of Dr. S.C.Gupta v. CIT [2001] 248 ITR 782 (All.) and V. Kunhambu & Sons v. CIT (Ker.) 219 ITR 235. 4. On the facts and in the circumstances of the case, and in law, the ld. CIT(A), Mumbai, erred in ignoring the fact that ....
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....he form of return of income, the assessee has not filed Audit Report in Form No. 10B with the return of income. In para 39 i.e. "List of documents/statements attached" of the first page of the return of income, in front of para 39(b) i.e. Audit Report in No. 10B, it was stated as '-' According to the Assessing Officer in the absence of audit report in Form No. 10B the assessee was not eligible for exemption under section 11 of the Act. Section 12A(1)(b) of the Act, provides as follows: "Where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed." Rule 17B of the Income-tax Rules, 1962, lays d....
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....ed. Q.No.8. Do you wish to say anything else ? Ans. : No." 6. We have already seen that on 3-10-2008 the Assessing Officer had issued two notices, one under section 143(2) and the other under section 142(1) along with common annexure to the said notices. We have also seen that the Assessing Officer had made enquiries regarding the absence for Form 10B in the said annexure. In response to the same the assessee had on 24-10-2008 filed a reply. Along with the said reply audit report in Form 10B dated 11-10-2006 was also filed. 7. On 3-12-2008 the Assessing Officer issued a notice under section 142(1) of the Act. In the annexure to the aforesaid notice the Assessing Officer called upon the assessee to show cause as to why exemption claimed under section 11 should not be denied to the assessee because of the failure of the assessee to file the Audit report in Form No. 10B along with the return of income and the admission of the Madhav V. Shah that no audit of the accounts of the Trust had been done. In the said notice, the Assessing Officer has referred to the fact that in Column No. 39(b) of the return of income there was no mention about the audit report in Form 10B having....
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....and started recording his statement. It has further been affirmed that question and answers were entered in a Laptop (kept on the table of the Assessing Officer) personally by the Assessing Officer. Since the screen of the Laptop was facing the Assessing Officer Shri Madhav V. Shah could not see what was being entered in the form of question and answers. It was further been affirmed that after completing the statements the Assessing Officer obtained the print out of the statement and asked for Shri Madhav V. Shah's signature at two places and without reading the contents the same was signed by Mr. Madhav V. Shah. 10. The assessee also filed affidavit of Shri K.P. Mehta, C.A. and A.R. of the assessee. In his affidavit he had affirmed that he had conducted audit of account for the financial year 2005-06 of the assessee as required by the provisions of section 12A(1)(b) of the Act and issued audit report dated 11-10-2006 in the prescribed Form No. 10B on the same day i.e. 11-10-2006 for assessment year 2006-07. He has also further affirmed that while preparing and filing the return of income of the assessee, through oversight omitted to attach audit report in Form No. 10B along wit....
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....t in the event of Form No. 10B not having been filed along with return of income, the return of income ought to have been considered as defective and a notice under section 139(9) of the Act ought to have been issued to the assessee to rectify the defect. The assessee further relied on certain judicial pronouncements and submitted that the requirement of filing Form No. 10B along with return of income is not a mandatory requirement and that the said form even if filed in the course of assessment proceedings should be treated as sufficient compliance. Further reliance was also placed on the decision of Hon'ble Supreme Court in the case of CIT v. Nagpur Hotel Owners, Association [2001] 247 ITR 2011, wherein the Hon'ble Supreme Court held that filing of Form No. 10 as required under section 11(2) read with rule 17 is mandatory and the same can be filed during the course of assessment proceedings. Specific reference was made to decision of the Hon'ble Calcutta High Court in the case of CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust [1992] 195 ITR 8252 and CIT v. Hardeodas Agarwalla Trust [1992] 198 ITR 511 (Cal.), wherein it was held that audit report filed in Form No. 10B in ....
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..... Before us the ld. D.R relied on the order of the Assessing Officer. He reiterated the stand of the Assessing Officer on the affidavits of Shri Madhav V. Shah and Shri K.P.Mehta. He also highlighted the fact that only after 11 days after recording of statement of Shri Madhav V. Shah, the audit report in Form No. 10B was filed before the Assessing Officer. According to him the above circumstances throw doubts on the claim of the assessee that its books of account were duly audited as required by the Act. 18. The ld. counsel for the assessee reiterated the stand of the assessee as put forth before the revenue authorities. 19. We have considered the rival submissions. Under section 12A of the Income-tax Act, 1961, exemption from income-tax in respect of income derived from property held under trust or by way of voluntary contribution received from other charitable or religious trusts or institutions will be available only if the conditions mentioned in clauses (a) and (b) of that section are satisfied. Sub-clause (b) provides that, where the total income of the trust or institution (without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which ....
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....tory. Reliance was placed on certain decisions of the High Courts and the Tribunal. The Tribunal set aside the orders of the lower authorities and restored the matter to the file of the Income-tax Officer with a direction to accept the auditor's report in Form No. 10B and process the assessee's claim for exemption under section 11 of the Act, and frame a fresh assessment as per law after giving the assessee a reasonable opportunity of being heard. On further appeal by the Revenue, the question of law considered by the Hon'ble High Court was as follows: "Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 12A(b) of the Income-tax Act, the Tribunal is justified in law in setting aside the orders of the Commissioner of Income-tax (Appeals) and the Income-tax Officer and in directing the Income-tax Officer to accept the auditor's report in Form No. 10B and to process the assessee's claim for exemption under section 11 of the Income-tax Act afresh?" The Hon'ble Court held as follows: "The question whether a statute is mandatory or directory depends upon the intent of the Legislature and upon the language in which the intent ....
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....sheet and the income and expenditure statement. It is now well-settled that a procedural provision, ordinarily, should not be construed as mandatory, if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage. Having regard to the object of section 12A, it cannot be said that the Legislature intended that, even where the trust has got its accounts audited and the certificate obtained in Form No. 10B before the assessment is completed, merely because such report could not be filed in the course of the assessment proceedings, it would deprive a trust from getting the exemption if it is otherwise entitled to it in law. The direction that the audit report should accompany the return is not mandatory as the omission to do it may be rectified by filing the report at a later stage before the assessment is completed. The appellate authority has plenary powers in disposing of an appeal and the scope of his power is coterminous and co-extensive with that of the Assessing Officer. He may, therefore, consider and decide any matter arising out of the proceedings in which the order appealed against is passed....