2016 (5) TMI 201 - AT - Income Tax

Eligibility to exemption exemption u/s.80P and 10(23C) - Held that - Despite the expiry of more than 18 months, AO did not respond to the remand order of the CIT (A) and therefore the CIT (A) was left with no option but to decide the appeal of the assessee without having the benefit of the remand report of the AO. We find that there is no justification or explanation by the Department as to why the AO has not submitted the remand report or other report of not submitting the remand report. Therefore it is clear that the AO was not having any explanation or reason for not filing the remand report. Even otherwise, it is not the case of the Revenue that the assessee is not entitled for the relief u/s.80P as well as u/s.10(23C) of the Act. Therefore when the entire income of ₹ 2,52,18,534/- was eligible for exemption, then allowing the claim of the assessee by the CIT (A) is proper and justified In the case on hand, when the CIT (A) has already issued a remand order giving full opportunity to the AO for examination of the claim, then in the absence of any claim of the Revenue that assessee is not entitled for the exemption u/s.80P and 10(23C) of he Act, we do not find any error or reason to interfere with the impugned order of the CIT (A). - Decided against revenue

Summary

Issues:
- Disallowance of income by AO and subsequent appeal by assessee
- Claim of exemption by assessee not reflected in return of income
- Failure of AO to submit remand report leading to CIT (A) decision

Analysis:
1. The appeal pertains to disallowance of income by the Assessing Officer (AO) and subsequent appeal by the assessee. The assessee, a cooperative society, filed its return of income for AY 2010-11, showing nil income. However, the AO added a substantial amount under 'income from business or profession' leading to a demand. The CIT (A) noted a typographical error in the return where income was wrongly mentioned as nil instead of the actual amount. Despite issuing a remand order for verification, the AO failed to respond, prompting the CIT (A) to decide the appeal based on available records and arguments.

2. The Revenue contended that the CIT (A) erroneously allowed the claim of exemption under section 10, which was not initially claimed by the assessee in the return of income. The Revenue argued that the eligibility for exemption should have been examined before granting it. Conversely, the assessee's representative highlighted the inadvertent error in the return and cited a Tribunal decision supporting the allowance of exemption due to a genuine mistake. The CIT (A) issued a remand order to the AO for verification, but the AO failed to respond despite multiple reminders.

3. The Tribunal observed that the AO's failure to submit the remand report for over 18 months left the CIT (A) with no choice but to decide the appeal without it. The Tribunal noted that the entire income was eligible for exemption under sections 80P and 10(23C) of the Act. Citing a Mumbai Tribunal decision on e-filing errors, the Tribunal upheld the CIT (A)'s decision to allow the exemption claim, as the assessee had not admitted any income and the mistake in the return did not justify the addition by the AO.

4. Given the circumstances and the absence of any claim by the Revenue that the assessee was not entitled to the exemptions, the Tribunal found no error in the CIT (A)'s decision. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the CIT (A)'s order in favor of the assessee. The failure of the AO to provide the necessary information despite reminders was a crucial factor in the Tribunal's decision to uphold the exemption claim and dismiss the Revenue's appeal.