1986 (10) TMI 81 - AT - Income Tax

Summary

Issues:
1. Denial of exemption under section 11 due to failure to file audit report under section 12A(b) and inability to revise return under section 139(5).
2. Interpretation of provisions regarding filing of returns by charitable trusts under section 139(4A).
3. Requirement of attaching audited balance sheet to the return for claiming exemption under section 11.

Analysis:
1. The main issue in this case was the denial of exemption under section 11 to the assessee due to the failure to file the audit report under section 12A(b) and the inability to revise the return under section 139(5). The Income Tax Officer (ITO) had denied the exemption based on the judgment in O.P. Malhotra v. CIT [1981] 129 ITR 379, stating that the assessee had no right to revise the return. However, the Appellate Tribunal, ITAT Delhi-B, reversed the ITO's decision and allowed the appeal, directing benefits under section 11. The Tribunal held that the return filed by the trust should be treated as under section 139(4A), which could be revised, and since the audit report was submitted with the revised return, the denial of exemption under section 11 was not justified.

2. Another issue raised was the interpretation of provisions regarding filing of returns by charitable trusts under section 139(4A). The respondent argued that the return of a charitable trust is always under section 139(4A) and should be treated as under section 139(1 for all purposes. The Tribunal agreed with this argument, stating that the return filed under section 139(4A) could be revised, and the assessee was entitled to exemption under section 11 since the audit report was submitted with the revised return.

3. The third issue involved the requirement of attaching an audited balance sheet to the return for claiming exemption under section 11. The revenue contended that since the audited balance sheet was not attached to the return filed on 7-9-1983, the assessee was rightly denied exemption under section 11. However, the Tribunal held that there was no legal requirement to attach the audited balance sheet to the return and that it was sufficient compliance if the audit report was submitted before the completion of the assessment proceedings. The Tribunal cited a previous order in support of this view.

In conclusion, the Tribunal dismissed the appeal, upholding the decision to grant exemption under section 11 to the assessee based on multiple grounds, including the statutory provisions regarding filing of returns by charitable trusts, the timing of submission of the audit report, and the interpretation of the Delhi High Court judgment in O.P. Malhotra's case.