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TMI Blog2017 (5) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... 23rd June 1973.Therefore, question (i) framed by the Court is answered in the affirmative i.e. in favour of the Assessee and against the Revenue. Could the Assessee be granted exemption under Section 11 of the Act when there was a failure on its part to comply with the provisions of Section 12A (b) of the Act? - Held that:- The assessment order was passed on 29th February 1996 and the Assessee's audit report was ready on 12th March 1996. Had the AO granted the Assessee two weeks' time, the Assessee would have filed its audit report and the assessment order passed thereafter would still have been within the deadline of 31st March 1996. It would have caused no prejudice to the Revenue. CIT(A) noted that even if there was a non-compliance with Section 12 A (b) of the Act by the Assessee, thus disentitling it to exemption under Sections 11 and 12 thereof, the AO was still not justified in adding the entire corpus of the Assessee to its taxable income. The corpus fund had been present in the earlier years and was a capital receipt. Even as per the original return, the Assessee did not have any excess over expenditure which could have been taxed. The ITAT committed no error in conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer ( AO ) the Assessee pointed out at the hearing on 5th October, 1995 that its accounts that had been seized had only been released recently. Therefore more time was sought to file the return along with the accounts. The AO granted time till 25th October, 1995 for that purpose. However, the accounts could not be finalised. On 1st November 1995, the Assessee filed its return but this was not accompanied by the audit report. The AO gave the Assessee another opportunity on 7th February, 1996. On 19thand 22nd February 1996, written submissions were filed by the Assessee before the AO. Inter alia it was pointed out that the audit report would be prepared and submitted in a short while. 7. Nevertheless, on 29th February 1996, the AO proceeded to pass the assessment order where inter alia the entire corpus of the Assessee was treated as income and brought to tax. On 12th March 1996, the Assessee filed its audited accounts, books of accounts and audit report. It may be noted herein that the last date for finalisation of assessment for the AY in question was 31st March, 1996. 8. At this stage it requires to be noted that for AY 1990-91, the ITAT passed an order on 30th March, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10.12.92 for a period of two years under Section 6 of the Unlawful Activities (Prevention) Act, 1967. 13.By the impugned order dated 30th June 2003, the ITAT dismissed the Revenue s appeal. In para 16 of the impugned order, it was noted by the ITAT as under: 16. During the course of the hearing of the present appeal some arguments were also advanced by the ld. DR about the non-filing of the audited accounts and the audit report by the respondent but in our opinion this issue cannot be raised by the Revenue since the initial ground raised before the Tribunal questions the action of the CIT (A) in allowing the benefit of section 11 although no order u/s 12A(a) had been passed by the Director of Income Tax (E). Moreover, the registration now has been granted and the order relates back to the date of the application. 14. As regards second question, the ITAT observed as under: 19. On a query from the Bench as to how the claim for exemption U/S 11 had been considered by the Revenue in the preceding and succeeding assessment years, the learned counsel for the respondent filed before us a chart covering AYs1974-75 to 200203 contending that in all the preceding assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of dates thereafter the present appeal was directed to be heard along with ITA Nos.145/2001 and 188/2002. Later both the said appeals were decided by this Court. The decisions are reported as Commissioner of Income Tax-XI v. Indian National Congress (I)/All India Congress Committee (2016) 383 ITR 99 (Del.) and Commissioner of Income Tax, Delhi-XI v. Janata Party (2016) 383 ITR 146 (Del.). 19. As faras question No.(i) is concerned, it is seen that Section 12A of the Act, titled Conditions as to registration of trusts, etc. read, at the relevant time i.e. AY 1993-94, as under: Conditions as to registration of trusts, etc. 12A. The provisions of Section 11 and Section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely: (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1stday of July 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution. 20.By an amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn under the Income-tax Act for the assessment year 1993-94. 24. It was submitted by Ms. Vibhooti Malhotra, learned counsel appearing on behalf of the Revenue, that there was no satisfactory explanation for the Assessee not filing the audit report even by the time of finalisation of the assessment order. She submitted that this was the maximum time permissible to any Assessee seeking exemption under Sections 11 and 12 of the Act. She emphasized the mandatory nature of the requirement under Section 11 of the Act read with Section 12A(b) thereof. She relied on the decision of this Court in Commissioner of Income Tax-XI v. Indian National Congress (I)/All India Congress Committee (supra). 25. In reply, it was pointed out by Mr. Krishnan, learned counsel for the Assessee, that in the first instance the question concerning the non-filing of the audit report along with the return was not urged by the Revenue before the ITAT in its memorandum of appeal. It was not even urged at the time of raising an additional ground on 18th July 2002. It was sought to be raised for the first time orally by the Department Representative (DR) during the course of submissions before the ITAT. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g been framed, requires to be examined on its merits. The facts in Commissioner of Income Tax-XI v. Indian National Congress (I)/All India Congress Committee (supra) speak for themselves. There, the Assessee was a major political party. It had not filed the return and along with it the audited accounts for the AY in question i.e. 1994-95. When it ultimately did produce the audited accounts, after an inordinate delay at the appellate stage before the CIT (A), the accounts were found to be unsatisfactory and not presenting a true and fair picture of the financial affairs of the party. The audit report produced too was found to be far from satisfactory. The Court found: The final audited accounts tendered at the appellate stage contained various discrepancies and shortcomings. The auditor s report submitted before the CIT (A) ....is woefully short of the requirement of the law. In the circumstances, this Court held that the INC was not entitled to claim exemption under Section 13 A of the Act from paying income tax for the AY in question. 30. Again in Commissioner of Income Tax, Delhi-XI v. Janata Party (supra), which was a case involving another political party, this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing three accounts are audited at Delhi. As regards Madyanchal, we are enclosing herewith the audited accounts which is already incorporated in the accounts furnished along with the return which is before your good self and it tallies. Similarly, we are also contacting Sanskriti Raksha Yojana Office at Mumbai for expeditiously sending the audited accounts. We are expecting these at any time and as soon as these are received, it will be compared with the existing consolidated accounts and furnished to your good self in the proper form. Therefore, we need time to do the above before giving it to you. We may kindly be given time till 5.3.1996. 32. The assessment order was passed on 29th February 1996 and the Assessee's audit report was ready on 12th March 1996. Had the AO granted the Assessee two weeks' time, the Assessee would have filed its audit report and the assessment order passed thereafter would still have been within the deadline of 31st March 1996. It would have caused no prejudice to the Revenue. 33.The CIT(A) noted that even if there was a non-compliance with Section 12 A (b) of the Act by the Assessee, thus disentitling it to exemption under Sections ..... X X X X Extracts X X X X X X X X Extracts X X X X
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