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TMI Blog1991 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... Form No. 10B was not filed "along with the return". He computed the taxable income of the assessee at Rs. 11,24,430 as per assessment order dated March 31, 1987. Certain other objections raised by the Income-tax Officer are no more relevant as these were not upheld by the Commissioner of Income-tax (Appeals). Being aggrieved, the assessee challenged the above order before the Commissioner of Income-tax (Appeals) and contended that, as the audit report was filed before the completion of the assessment, there was sufficient compliance with the requirement of section 12A(b) of the Act. The assessee also contended that there was a defect in the return filed by the assessee and that, therefore, the Income-tax Officer should have allowed opportunity to the assessee to rectify the defect under section 139(9) of the Act. The Commissioner of Income-tax (Appeals) did not find force in the contentions raised by the assessee. According to him, the assessee violated the mandatory provisions of section 12A(b) of the Act and, therefore, was not entitled to exemption under section 11 of the Act. He ordered accordingly. The assessee, ultimately, brought the issue before the Tribunal and contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted exemption under section 11 of the Act. The assessee has been denied the benefit of exemption under section 11 as the audit report in Form No. 10B was not filed along with the return and the filing of the said report later on March 6, 1987, did not satisfy the condition stated in section 12A. The denial of the exemption is supported on the ground that the provisions of section 12A are mandatory. There is no doubt that section 12A specifically states that the provisions of sections 11 and 12 shall not apply in relation to income of any trust if conditions stated therein are not fulfilled and, in the conditions, it is provided that the accounts of the trust should be audited and the report of the auditor (in Form No. 10B) should be furnished "along with the return". If section 12A is read in isolation and the rule of strict and literal construction is applied, the approach of the Revenue in this case has to be held as correct. But we see no justification for applying the rule of strict construction or for considering the provisions of section 12A in isolation. Under certain circumstances, the expression "shall", in its ordinary significance, is mandatory and the court shall or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, for the past several years, was treated as a charitable institution and granted exemption under section 11 of the Act. As we have said, the only ground on which the exemption was denied to the assessee-trust under section 11 of the Act is that the return was not accompanied by the audit report. Section 139(5) of the Act provides that, if any person, having furnished a return, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. The assessee in this case could have filed a revised return annexing copy of the audit report. Had the assessee-trust done so, the exemption under section 11 of the Act could not have been denied to it by the Income-tax Officer. Section 139(9) of the Act is also relevant in this context. It provides that, where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee giving him an opportunity to rectify the defect within a period of 15 days from the date of such intimation or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y restrictions on the power of the Assessing Officer leading to inconvenient consequences and absurd results not intended by the Legislature. We do not see any such fetters on the powers of the Assessing Officer under section 143. The Assessing Officer has power to ask the assessee to remove all defects in the return other than the defects making the return invalid. The view of the lower authorities that the audit report submitted on March 6, 1987, not being filed with the revised return did not satisfy the condition in section 12A and that the provisions of sub-sections (5) and (9) of section 139 were not applicable cannot be sustained. The object of both the sub-sections, in our view, is to get removed and rectified all defects and omissions in the return filed, whether discovered by the assessee or by the Assessing Officer. Both the provisions are enabling provisions inserted to facilitate reflection of correct income in the return and assessment thereof. These provisions can be simultaneously applied. Take for illustration the case of an assessee submitting a valid return but without proof of tax deducted at source which, for several reasons, was not available at the time of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption under sections 11 and 12 In case of omission to furnish such report in the prescribed form along with the return. Normally, it should be possible for a charitable or religious trust or institution to file the auditor's report along with the return of total income, where such trust or institution claims exemption under sections 11 and 12. However, in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report the exemption as available to such trust under sections 11 and 12 may not be denied merely on account of delay in furnishing the auditor's report and the Income-tax Officer should record reasons for accepting a belated audit report. (1/ 1148-CBDT F. No. 267/482/77-IT (Part) dated February 9, 1978 CBDT Bulletin Tech. XXIII/582.)". We may also take note of the fact which has been recorded by the Tribunal that the Gujarat High Court, in a similar case, declined to call for a reference under section 256(2) of the Income-tax Act, 1961, against the decision of the Tribunal. The Department moved the Supreme Court by a special leave petition which was dismissed on August 18, 1989. For the foregoing reasons, we answer the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X
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