TaxTMI 
TaxTMI 
2010 (9) TMI 817
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....tion for allowance of exemption u/s.11 of the I.T. Act, the assessee was not eligible for exemption U/s. 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 U/s. 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 vs. CIT (2001) 248 ITR 782 (All) and V. Kunhambu and sons vs. CIT(Kerala) 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 the mandatory Audit Report u/s. 10B was not annexed with the return of income which disentitle exem....
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....rt 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 u/s. 11 of the Act. Sec.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 down that the report of audit of the trust or....
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....sp; : 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 u/s. 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 u/s. 142(1) of the Act. In the annexure to the aforesaid notice the Assessing Officer called upon the assessee to show case as to why exemption claimed u/s. 11 should not be denied to the assessee because of the failure of the Assessee to file the Audit report in Form No.10-B 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 inc....
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....hearing before the Assessing Officer on 13/10/2008 along with Authorised Representative (A.R) of the Trust, Mr. Kirit P. Mehta ,C.A. The A.O asked Shri Kirit Mehta to leave Shri Madhav V. Shah alone in his office 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 repo....
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....e assessee, donation received by the assessee, sundry income and dividend income to tax after allowing expenses debited in the P&L Account. 12. Aggrieved by the order of the Assessing Officer the assessee preferred an appeal before CIT(A). Before CIT(A) the assessee reiterated the stand as taken before the AO. The assessee further contended that in the event of Form No.10B not having been field along with return of income, the return of income ought to have been considered as defective and a notice u/s. 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 vs. Nagpur Hotel Owners Association, 247 ITR 201, wherein the Hon'ble Supreme Court held that filing of Form No.10 a....
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....tion to the Assessee u/s.11 of the Act, treated all the items of income as Income from other sources. It is the plea of the Assessee that even assuming the exemption u/s.11 is denied to an Assessee, total income has to be computed by the AO in accordance with the provisions of the Act and not in the manner as was done by the AO. 17. Before us the ld. D.R relied on the order of the AO. He reiterated the stand of the AO 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 field before the AO. According to him the above circumstances throw doubts on the claim of the assessee that its books of accounts 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 oth....
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....s income was not entitled to exemption provided under sections 11 and 12 for the assessment year under consideration. Against this finding of the Commissioner of Income-tax (Appeals), the assessee took the matter to the Tribunal. In the appeal before the Tribunal, it was argued by the assessee that the filing of the auditor's report in Form No. 10B along with the return was not mandatory but it was only directory. 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 Co....
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....sheet and income and expenditure statement. The Assessing Officer can rely on the certificate for allowing the benefit of exemption. This is a procedural matter for the purpose of enabling the Assessing Officer to complete the assessment on the basis of the certificate of the auditor without even asking the assessee to furnish supporting documents in support of the claims and contentions made in the return based on the balance-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 re....