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TMI Blog2022 (11) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... rm was prepared well in time but it was filed belatedly. Whether the assessee can claim the benefit of exemption under section 11 of the Act in a situation where the audit report in the prescribed form was not filed along with return of income ? - In this context we note that act of the assessee to file the audit report duly signed by the qualified chartered accountant is a procedural requirement and the courts have held that the assessee cannot be denied the benefit for which it is entitled in the event of any procedural contravention specified under the provisions of the Act. We hold that the assessee cannot be denied the benefit of exemption for which it is entitled merely on the lapse of procedural requirement i.e. delay in filing the audit report in the prescribed form. In the judgment cited above, it was provided that the audit report was filed by the assessee before the completion of the assessment. In other words, the compliance of the law was made by the assessee when the assessment proceedings was pending before the AO whereas in the case on hand the assessee complied the requirement at the stage of appellate proceeding before tribunal. Admittedly, the appeal was pending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 3. At the outset, we note that there was a delay in filing the appeal by the assessee for 252 days. It was explained by the assessee that it was very hopeful of getting the relief by the AO in pursuance to the directions provided by the learned CIT-A. Therefore, the assessee was waiting for the consequential/ appeal giving effect order of the AO after the order of the learned CIT-A. Therefore, the assessee chose not to file any appeal against the order of the learned CIT-A. However, upon receiving the appeal effect order dated 11 September 2018 wherein the benefit of exemption under section 11 of the Act was denied, the assessee immediately preferred an appeal to the ITAT with the delay of 252 days, upon the advice of the tax consultants. However, in this process the delay has occurred. The learned AR in support has also drawn our attention on the affidavit filed by the assessee which is available on record. 4. On the contrary, the learned DR opposed to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, including Ramlal v. Rewa Coalfields Ltd. AIR 1962 SC 361, State of West Bengal v. Administrator, Howrah Municipality AIR 1972 SC 749 and Babutmal Raichand Oswal v. Laxmibai R. Tarte AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt." 5.1 From the above it is revealed that the income of the assessee should not be over assessed even there is a mistake on the part of the assessee. As such the legitimate deduction for which the assessee is entitled should be allowed while determining the taxable income. 5.2 We also note that the Hon'ble Gujarat High Court in the case of Vareli textile industry versus CIT reported in 154 Taxman 33 wherein it was held as under: It is equally well-settled that where a cause is consciously abandoned (as in the present case) the party seeking condonation has to show by cogent evidence sufficient cause in support of its claim of condonation. The onus is greater. One of the propositions of settled legal position is to ensure that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the following direction: A.O is directed to verify whether appellant has its audited and has filed Form 10B alongwith return of income as per the details mentioned in section 12A(1)(b) of the Act. In cash the said condition has not been fulfilled by the appellant, then appellant would not be eligible to claim benefit of section 11 & 12 of the Act even though it is registered entity u/s.12AA of the Act. Subject to these remark and directions, if appellant has filed Audit Report alongwith Return of income, then it would be treated as exempt entity otherwise the income assessed by the A.O at Rs.15,26,210/- would be valid assessed income. The ground of appeal is allowed for statistical purpose subject to verification by A.O the above remarks. 9. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 10. The learned AR before us has filed a paper book running from pages 1 to 28 and contended that all the conditions specified under the provisions of section 11 of the Act have been duly complied with by the assessee except the procedural requirement of filing the audit report along with the return of income despite such audit report was obtaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 325, the relevant extract of the judgment is reproduced as under: In our view, the aforesaid reasoning of the Allahabad High Court and the Patna High Court would squarely apply to the facts of the present case. The provision about furnishing of the auditors' report along with the return has to be treated as a procedural provision, directory in nature, and its substantial compliance should suffice, meaning thereby that such report should be made available by the assessee to the Assessing Officer latest when the question of framing of assessment is taken up by the Income-tax Officer and when he applies his mind to the claim of the assessee and if by that time, the assessee has put his house in order and has furnished the report of the auditor for supporting the return, he can be said to have satisfied the requirement of section 80J(6A) of the Act. 12.2 In view of the above we hold that the assessee cannot be denied the benefit of exemption for which it is entitled merely on the lapse of procedural requirement i.e. delay in filing the audit report in the prescribed form. In the judgment cited above, it was provided that the audit report was filed by the assessee before the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is dehors that there was some reasonable cause which prevented the assessee in filing the prescribed audit report within the time permitted under the provisions of law. The onus lies upon the assessee to justify the reasonable cause for delayed filing the audit report. In this regard, we note that the assessee despite being eligible for the exemption under section 11 of the Act, has paid the taxes of ₹ 3,79,027.00 only. Thus, from the fact of making the payment of tax, it is transpired that the assessee was not properly guided by the tax consultant and this contention was duly raised by the assessee before the learned CIT-A. The relevant extract of the contention of the assessee before the learned CIT-A is reproduced as under: Assessee has filed income tax return with full reliance put on professional person and further such professional person has also not guided properly while filing income tax return hence due to this assessee has paid tax which otherwise not required to pay by them as per provision of income tax Act, 1961. After that assessee is received notice under section 143(2) for scrutiny assessment and on receipt of such notice they have contacted to differen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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