2009 (1) TMI 276 - HC - Income Tax

Original return filed late claiming exemption u/s 10(23C) under bonafide belief revised return claiming exemption u./s 11 - we are of the view that the Assessing Officer has treated the revised return as non est wrongly for the reason that the Assessing Officer himself has passed the order under section 143(3) on the basis of the original return where the assessee was legally entitled for the exemption under section 11, if not under section 10 (23C). The Department should not take advantage of the ignorance of the assessee as per the Central Board of Direct Taxes Circular No. 14 (XL-35)/1955 dated April 11, 1955, quoted in Parekh Brothers v. CIT. Hence, it was the duty of the Assessing Officer to ask information from the assessee at the time of scrutiny but he has not asked any information before completing the assessment under section 143(3) of the Act.

Summary

Issues:
1. Exemption under section 11 of the Income-tax Act claimed by the appellant without complying with the filing requirements.
2. Treatment of belated revised return and its impact on the exemption claimed under section 11.
3. Deletion of addition of surplus income by the Income-tax Appellate Tribunal.

Analysis:
1. The appellant, a registered society, filed an original return claiming exemption under section 10(23C) but later realized the exemption was not available. A revised return was filed under section 139(4) claiming exemption under section 11, supported by necessary documents. The Assessing Officer treated the original return as belated and the revised return as "non est," making an addition of surplus income. The first appellate authority and the Income-tax Appellate Tribunal deleted the addition, emphasizing the appellant's entitlement to exemption under section 11.

2. The appellant's counsel argued that the revised return was invalid as the original return was not filed under section 139(1) or (2). However, the court held that the Assessing Officer erred in treating the revised return as invalid. The court cited precedents to support that the audit report with the return is not mandatory and can be furnished before completing assessment. The Assessing Officer's failure to request information from the appellant during scrutiny was noted, emphasizing the procedural nature of furnishing the audit report for claiming exemption under section 11.

3. The court rejected the appellant's reliance on a specific case law regarding the imposition of penalties, stating that the facts of the present case were different. It was emphasized that the appellant was entitled to the statutory exemption under section 11, and the Assessing Officer should have provided an opportunity to rectify any discrepancies. The court upheld the Tribunal's order, dismissing the appeal due to the lack of substantial legal questions and affirming the appellant's entitlement to exemption under section 11.