2022 (10) TMI 448 - AT - Income Tax

Exemption u/s. 11 - delay in furnishing of auditor's report as required u/s. 12A - HELD THAT - From the perusal of Form No. 10B, we note that assessee has claimed an amount towards application of income for charitable purposes in India during the year under consideration. It has also claimed accumulation or set apart of an amount for application to charitable purposes to the extent it does not exceed 15% of the income of the assessee. Audited financial statements of the assessee are also placed on record in the paper book. We note that, provisions of Section 143(1) deals with processing of return and refers to certain specific adjustments which can be made while processing the return provided that an intimation has been given to the assessee before making such adjustment either in writing or in electronic mode. Nothing is brought on record to demonstrate that an intimation was given to the assessee before resorting to the adjustment made in the processing of return of the assessee which resulted in raising of the demand in the year under consideration. We note that in the case of Rai Bahadur Bissesswarlal Motilal Malwasie Trust 1991 (4) TMI 56 - CALCUTTA HIGH COURT has dealt with this issue under consideration before us and has held that claim of exemption u/s. 11 cannot be denied merely on account of delay in furnishing of auditor's report as required u/s. 12A more particularly when the said audit report in Form 10B was available with the officer before the completion of the assessment. We also note that CBDT has issued circulars vide Circular No. 10 of 2019 dt. 22/05/2019 and Circular No. 03/2020 dt. 03/01/2020 wherein, procedure for condonation of delay in filing Form 10B Form 9A has been prescribed for Assessment Years subsequent to Assessment Years 2016-17 which, in the present case is A.Y. 2017-18 before us. Admittedly, assessment was not completed u/s. 143(3) of the Act and, therefore, there would have been no error had the authorities below had taken up the copy of Form 10B, which was available with the Department. Thus, in our considered opinion, if the assessee was entitled to the statutory benefit, it would be incumbent upon the concerned authority to examine the admissibility of the benefit than to foreclose the assessee on technicalities. This view has been affirmed by the Hon'ble High Court of Madras in the case of Chandra Prabhuji Maharaj Jain 2019 (8) TMI 363 - MADRAS HIGH COURT We accordingly consider it fair and proper to set aside the order/intimation of the authorities below by taking force from the judicial precedents referred above and in the light of the fact that the assessment was not done u/s. 143(3) of the Act, and restore the matter to the file of AO for making a fresh assessment after taking into account the audit report in Form 10B placed on record as well as the claim of the assessee for exemption u/s. 11 - Thus, we set aside the assessment and restore the matter to the file of the AO for making a fresh assessment in accordance with law after giving a reasonable opportunity of being heard to the assessee in support of its claims made. Accordingly, the grounds taken by the assessee are allowed for statistical purposes.

Summary

Issues:
Disallowance of claim made by the assessee u/s. 11 of the Income-tax Act, 1961.

Analysis:

Issue 1: Disallowance of claim u/s. 11 of the Act
The appeal by the assessee challenged the disallowance of a claim made under section 11 of the Income-tax Act. The assessee, a registered company under section 26 of the Indian Companies Act, 1913, had obtained registration under section 12A of the Act, claiming exemption under section 11. The dispute arose from the adjustment made by CPC, Bengaluru, through an intimation under section 143(1) of the Act, resulting in a demand for the year under consideration. The assessee contended that Form 10B, detailing the application of income for charitable purposes and accumulation of income for charitable purposes, was filed before the intimation was issued. The CIT(A) upheld the adjustment made by CPC, leading to the appeal before the Tribunal.

Issue 1.1: Arguments by the Assessee
The assessee argued that the adjustment made by CPC under section 143(1) was restrictive, as per the provisions of the section. The assessee highlighted that Form 10B was filed before the intimation was issued, reporting the application of income for charitable purposes and accumulation of income for charitable purposes. The assessee relied on judicial precedents, including a decision of the Jurisdictional High Court, emphasizing that the delay in filing Form 10B should not deny the assessee the benefit of exemption under section 11.

Issue 1.2: Arguments by the Revenue
The Revenue relied on the order of the CIT(A) to support the disallowance made under section 143(1) of the Act.

Issue 1.3: Tribunal's Decision
The Tribunal observed that Form 10B was filed before the intimation under section 143(1) was issued, detailing the application and accumulation of income for charitable purposes. The Tribunal noted that the provisions of section 143(1) allow for specific adjustments only after giving intimation to the assessee, which was not demonstrated in this case. Referring to judicial precedents and circulars by CBDT, the Tribunal emphasized that the benefit of exemption under section 11 should not be denied due to technicalities. The Tribunal set aside the order/intimation of the authorities below, restoring the matter to the Assessing Officer for a fresh assessment, considering the audit report in Form 10B and the assessee's claim for exemption under section 11.

Issue 1.4: Tribunal's Decision Outcome
The Tribunal allowed the appeal of the assessee for statistical purposes, directing a fresh assessment by the Assessing Officer after providing a reasonable opportunity for the assessee to support its claims. The decision was pronounced in the Court on 12th September 2022 at Kolkata.

This detailed analysis highlights the legal arguments, precedents, and the Tribunal's decision regarding the disallowance of the claim made by the assessee under section 11 of the Income-tax Act, 1961.