2024 (9) TMI 279 - AT - Income Tax

Denial of Benefit of exemption u/s 11 and 12 - assessee has not filed revised return of income for making a new claim which is not raised in the original return of income - in the return of income the assessee claimed exemption u/s 10(23C)(iiiad) of the Act however the gross receipt of the assessee was more than Rs. 5 crores which exceeds monetary limit provided in the Rule 2BC of Income Tax Rules therefore the said claim of the assessee cannot be allowed which was also realized by the assessee while making a fresh claim before the AO HELD THAT - when the registration u/s 12AA was yet to be granted at the time of filing return of income then the assessee was not supposed to make any claim in the original return of income filed u/s 139(1) of the Act. Further the limitation for filing the revised return of income also expired by the time the registration u/s 12AA was granted vide order dated 28.09.2019. Thus it is not a case of non-filing of revised return of income by the assessee despite having an option but the registration was granted after the time limit of filing revised return of income and therefore the question of filing the revised return does not arise for making claim of exemption u/s 11 12 in view of the proviso to section 12A(2) which mandates the applicability of section 11 12 of the Act on the income of the assessee for the assessment year preceding to the assessment year for which the registration was granted but such preceding year is pending assessment before the AO Assessee is entitled for exemption u/s 11 12 for the year under consideration. We find that when there is no change in the objects and activities of the assessee since inception as a certificate to this effect was filed by the assessee before CIT(E) which was duly considered while granting registration u/s 12A therefore the question of verifying the claim does not arise. Further when the claim u/s 11 12 was made only after the registration was granted by the CIT(E) then filing the audit report in 10B at the time of filing the return of income would amount to asking the assessee to make a compliance for non-existing fact at that point of time. Even otherwise filing of tax audit in form 10B is a directory requirement. Therefore the delay in filing the tax audit report is not deliberate but due to the reason of subsequent registration u/s 12A cannot be a ground for denying the claim of exemption u/s 11 12 of the Act as this issue is now settled by the Hon ble High Courts. As decided in Welfare Association for the Disabled 2023 (12) TMI 1346 - ITAT INDORE we find that the assessee can t be denied the benefit of exemption u/s 11/12 as claimed in return of income for mere delay in filing of audit-report (Form No. 10B) when the assessee has in fact filed such report though after filing of return. We therefore deem it fit to remand this matter back to the file of AO for a fresh assessment after considering audit-report (Form No. 10B) filed by assessee. The assessee succeeds in this appeal.

Issues Involved:

1. Denial of exemption under sections 11 and 12 of the Income-tax Act.
2. Requirement to file a revised return for claiming new exemptions.
3. Timely filing of audit report in Form No. 10B.
4. Assessment of the net income subject to tax.

Issue-Wise Detailed Analysis:

1. Denial of exemption under sections 11 and 12 of the Income-tax Act:

The assessee argued that they were wrongly denied the benefit of exemption under sections 11 and 12, despite being granted registration under section 12AA during the assessment proceedings. The Tribunal noted that the assessee had initially claimed exemption under section 10(23C)(iiiad) but later corrected this during the assessment proceedings, citing their registration under section 12AA. The Tribunal emphasized that the provisions of section 11 and 12 should apply to the income derived from the property held under trust for any assessment year preceding the year of registration, provided the assessment proceedings were pending and the objects and activities of the trust remained unchanged.

2. Requirement to file a revised return for claiming new exemptions:

The Assessing Officer (AO) denied the exemption claim because the assessee did not file a revised return. The Tribunal referenced the Supreme Court's decision in Goetze (India) Limited vs. CIT, which mandates filing a revised return for new claims. However, the Tribunal clarified that the registration under section 12AA was granted after the time limit for filing a revised return had expired. Therefore, the assessee could not have made the claim in the original return. The Tribunal held that the AO and CIT(A) should have allowed the exemption claim as the conditions under section 12A(2) were met.

3. Timely filing of audit report in Form No. 10B:

The AO also denied the exemption on the grounds that the audit report in Form No. 10B was not filed within the stipulated time. The Tribunal noted that the audit report was filed during the assessment proceedings and that the delay was not deliberate but due to the subsequent granting of registration under section 12A. The Tribunal cited previous decisions and held that the delay in filing the audit report should not be a ground for denying the exemption, emphasizing that the requirement to file the audit report is directory, not mandatory.

4. Assessment of the net income subject to tax:

The assessee contended that only the net income of Rs. 5,10,38,529/- should be subject to tax, not the gross income. The Tribunal did not specifically address this issue separately, but by allowing the exemption under sections 11 and 12, it implicitly accepted that the net income, after applying the exemptions, would be subject to tax.

Conclusion:

The Tribunal concluded that the assessee was entitled to the exemption under sections 11 and 12 for the assessment year in question. It emphasized that the conditions under section 12A(2) were met, and the delay in filing the audit report should not preclude the exemption. The Tribunal allowed the appeal, directing the AO to grant the exemption as claimed by the assessee.

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