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1991 (7) TMI 22

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..... iture account along with the return. The auditor's certificate was not furnished even at the time of hearing. The accounts of the trust have been audited on February 20, 1985, and the report of such audit in the statutory Form No. 10B had been signed by the chartered accountant on February 20, 1985. The Income-tax Officer completed the assessment denying exemption under section 11 of the Income-tax Act, on March 5, 1985, on the ground that the certificate in Form No. 10B had not been filed as required by the law. The assessee, being aggrieved, preferred an appeal before the Commissioner of Income-tax (Appeals). At the hearing of the appeal before the Commissioner of Income-tax (Appeals), the assessee submitted two copies of the audited accounts and the report of the auditor in Form No. 10B. The Commissioner of Income-tax (Appeals) held that the trust had not fulfilled the conditions laid down in section 12A(b) and, consequently, its income was not entitled to exemption provided under sections 11 and 12 for the assessment year under consideration. Against this finding of the Commissioner of Income-tax (Appeals), the assessee took the matter to the Tribunal. In the appeal before .....

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..... the balance-sheet and the profit and loss account, subsequently the Income-tax Officer called for and obtained the copies of the balance-sheet and the profit and loss account and completed the assessment. Although copies of the balance-sheet and the profit and loss account might have been submitted subsequently, the return was none the less valid. Learned counsel relied on a decision of the Madhya Pradesh High Court in the case of CIT v. Ganga Engineering Works [1987] 165 ITR 795. In that case, the Income-tax Officer did not allow any deduction under section 80J of the Income-tax Act, 1961, as the assessee had not made claim for such deduction. The Commissioner (Appeals) allowed the claim of the assessee on the ground that though no formal claim was made at the assessment stage, necessary data was available with the Income-tax Officer. The Tribunal held that there was material on record on the basis of which deduction under section 80J could be allowed to the assessee. On a reference, it was held that since there was material on record to justify the allowance under section 80J, the assessee was entitled to the deduction. Our attention has also been drawn to the decision of th .....

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..... was competent. Our attention has also been drawn to a decision of the Allahabad High Court in the case of Addl. CIT v. Murlidhar Mathura Prasad [1979] 118 ITR 392. In that case, the assessee, a partnership firm, for the assessment year 1965-66, on August 3, 1965, filed a return showing an income of Rs. 28,918. On February 5, 1970, the Income-tax Officer noticed that the said return was not accompanied by the declaration under section 184(7) of the Income-tax Act, 1961, and that there has been no change in the constitution of the firm or the shares of its partners. The Incometax Officer refused renewal of registration on the ground that the firm had not been granted continuation of registration in the last two preceding years and the declaration in Form No. 12 ought to have been filed along with the return. He assessed the firm in the status of an association of persons. On appeal, the Appellate Assistant Commissioner held that the return which was filed on March 6, 1970, was not a valid one. It could not be treated as a revised return, because it had not been filed due to discovery of any omission or wrong statement in the original return. The declaration in Form No. 12 ought to .....

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..... om other charitable or religious trusts or institutions will be available only if the conditions mentioned in clauses (a) and (b) of that section are satisfied. Sub-clause (b) with which we are concerned provides that, where the total income of the trust or institution (without giving effect to the provisions of sections 11 and 12) exceeds Rs. 25,000 in any previous year, "the accounts of the trust or institution for that year have been audited by the accountant " and " the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars " as may be prescribed. For very many reasons, the audit report may not be available before the return is filed. Rule 17B of the Income-tax Rules, 1962, lays down that the report of audit of the trust or the institution should be in Form No. 10B. The annexure to Form No. 10B requires the auditor to certify as to the application of income for charitable or religious purposes and the non-application or non-user of income or property for the benefit of the persons referred to in sect .....

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..... swarlal Motilal Malwasie Trust [1992] 195 ITR 825 (Cal)), where the judgment was delivered on April 22, 1991. There, it was held that, if the audit report is not filed with the return, the return becomes defective and the Income-tax Officer should give an opportunity to the assessee to submit the audit report to rectify the defect before completion of the assessment. Where an assessee, in compliance with the provisions of the Act, cures the defect in the return by filing the audit report before the completion of the assessment, the Assessing Officer cannot ignore such audit report or the return in completing the assessment. In our view, the result of ignoring such return or the audit report will be denial of exemption to the trust although the income has been spent for charitable or religious purposes. This was not intended by the legislators. If an assessee fails to obtain the audit report in the prescribed form before the assessment is completed, he may not, ordinarily, be entitled to get the benefit of exemption. In this case, however, as we have indicated, the assessee was not given an opportunity to file the audit report in the prescribed form which was available with the as .....

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