2018 (10) TMI 1450 - HC - Income Tax

Exemption under Section 11 denied - assessee did not maintain books of account as stipulated under the Income Tax Act, 1961 which was stated by the auditor itself and the assessee therefore not satisfying the necessary conditions - Held that - Since the assessee categorically submits that books of accounts have been duly maintained and can be produced for verification along with the audit reports and also the arguments of the Ld. DR that if the books are maintained, they are required to be examined by the primary authority i.e. the Assessing Officer for the limited purpose of passing an order denovo with regard to this ground only and with directions to the assessee to produce books of accounts promptly before the Assessing Officer. Thus it would be appropriate to remit the matter back to the AO to decide the same afresh.

Summary

Issues:
1. Eligibility for exemption under Section 11 without maintaining books of account.
2. Error in observing no appeal filed by Revenue against CIT (Appeal) order.

Issue 1: Eligibility for exemption under Section 11 without maintaining books of account:
The appellant contested the eligibility of the assessee for exemption under Section 11 of the Income Tax Act, 1961, citing the non-maintenance of books of account as stipulated by the Act. The appellant argued that the assessee failed to satisfy necessary conditions due to the auditor's statement regarding the absence of maintained books of account. The Tribunal had previously remanded the matter back to the Assessing Officer (AO) for reconsideration of the exemption issue. The Tribunal observed that the books of account were claimed to be maintained by the assessee, and directed the AO to examine them for passing a fresh decision.

Issue 2: Error in observing no appeal filed by Revenue against CIT (Appeal) order:
The second issue pertained to the ITAT's alleged error in observing that no appeal had been filed by the Revenue against the CIT (Appeal) order upholding the exemption claimed by the assessee. The appellant contended that the Department had indeed filed an appeal before the High Court on the matter, contradicting the ITAT's observation. The Court acknowledged the ongoing dispute regarding the exemption and directed a remand back to the AO for a fresh decision on the issue without delving further into the specifics.

In summary, the judgment revolved around the eligibility of the assessee for exemption under Section 11 despite issues related to the maintenance of books of account. The Court addressed the discrepancies in the appeal process and remanded the matter back to the Assessing Officer for a fresh decision. The legal intricacies of exemption criteria and procedural errors were thoroughly examined and clarified in the judgment, emphasizing the importance of compliance with statutory requirements in tax matters.