1984 (1) TMI 99 - AT - Income Tax

Summary

Issues:
1. Eligibility for exemption under section 11 of the Income-tax Act, 1961.
2. Compliance with the provisions of section 12A(b) regarding audit report submission.
3. Admissibility of additional ground before the Tribunal.

Analysis:
1. The case involved the Trustees of a Trust appealing against the denial of exemption under section 11 of the Income-tax Act, 1961. The dispute arose from the Trust's income derived from various sources, including business activities. The assessing authorities had rejected the claim for exemption primarily based on the applicability of section 13(1)(bb) of the Act. The Commissioner (Appeals) upheld this decision, emphasizing the relevance of section 13(1)(bb) over section 12A(b) in denying the exemption. The Tribunal was approached with multiple grounds of appeal challenging the denial of exemption under section 11.

2. The issue of compliance with the provisions of section 12A(b) regarding the submission of an audit report was raised during the proceedings. The assessee contended that the requirement of filing the audit report along with the return of income was not mandatory but directory in nature. Citing various Tribunal decisions, the assessee argued that the audit report could be submitted before the final assessment by the assessing authority. The Tribunal considered these arguments and held that while the audit report should ideally accompany the return of income, it could be submitted before the final assessment to enable proper investigation by the assessing officer.

3. The admissibility of an additional ground before the Tribunal was contested by the revenue on the grounds of delay and relevance to the Commissioner (Appeals) order. However, the Tribunal admitted the additional ground, considering it an extension of the primary issue regarding the availability of exemption under section 11. The Tribunal also addressed the revenue's objections on merit, emphasizing the importance of timely submission and consideration of the audit report before finalizing the assessment. Consequently, the Tribunal directed the assessing officer to reconsider the exemption claim under section 11 afresh, taking into account the audit report that had not been adequately considered in the initial assessment.

In conclusion, the Tribunal partially allowed the appeal, setting aside the assessment order and instructing a reassessment based on proper consideration of the audit report for determining the eligibility of the Trust for exemption under section 11.