B.M. Biyani ORDER
B.M. Biyani, Member (A)
1. Feeling aggrieved by appeal-order dated 09.01.2023 passed by learned Commissioner of Income-Tax, National Faceless Appeal Centre, Delhi["Ld. CIT(A)"], which in turn arises out of rectification-order dated 01.03.2018 passed by learned CPC, Bangalore["Ld. AO"] u/s 154 of Income-tax Act, 1961 ["the Act"] for Assessment-Year["AY"] 2015-16, the assessee has filed this appeal on various grounds as mentioned in Appeal Memo.
2. Heard the learned Representatives of both sides at length and case-records perused.
3. The exact controversy involved in various grounds of appeal is: Whether or not the assessee was entitled for exemption u/s 11/12 as claimed in the return of income, when the audit-report (Form No. 10B)was filed after filing of return but before processing u/s 143(1)?
4. Apropos to this issue, the precise facts are: The assessee is a charitable/religious trust, engaged in carrying out charitable/religious activities, registered u/s 12A/12AA of the Income-tax Act, 1961 and entitled for exemption u/s 11/12; accordingly it claimed exemption u/s 11/12 in the return of income filed on 31.03.2017. When the AO processed intimation of assessment u/s 143(1) on 03.01.2018, he did not allow exemption u/s 11/12 for the reason that the audit report (Form No. 10B) was not filed by assessee with return of income. Subsequently, the assessee filed application dated 23.01.2018 u/s 154 requesting the AO to rectify the intimation of assessment and allow exemption as claimed in return of income. But the AO rejected assessee's request vide order dated 01.03.2018; thus the exemption is again denied. Getting no success at the level of AO, the assessee went in first-appeal to CIT(A). But even at that stage, the assessee did not get any relief. Now, the assessee has come in this appeal before us.
5. Ld. AR submitted that the assessee is engaged in religious activities; that the registration granted to it by tax authorities u/s 12A/12AA was in force; that the assessee had been granted benefit of section 11/12 in preceding assessment-years as well as subsequent assessment-years. He further submitted that the assessee filed return of income on 31.03.2017 and prior to such filing, the accounts were duly audited on 30.09.2015, a copy of the audited-accounts alongwith audit-report (Form No. 10B) is placed at Page No. 5 to 9in Paper-Book. However, the auditors of assessee failed to e-file/upload the audit-report alongwith the return of income. But subsequently before processing of return by AO u/s 143(1), the assessee arranged to get the audit-report e-filed/uploaded on 02.06.2017. Ld. AR submitted that the CIT(A) has, without appreciating these facts, dismissed the appeal of assessee merely on a technical defect that the audit-report was not filed alongwith the return of income. Ld. AR submitted that except such technical defect, there is no other reason to deny the benefit of section 11/12 to assessee. Ld. AR submitted that the e-filing/uploading of audit- report is done by auditors and not by assessee; therefore the defect is not per se attributable to assessee. Ld. AR submitted that in any case, the defect is due to an inadvertent human error and the assessee should not be denied the legitimate exemption, when the assessee is genuinely doing religious activities for the welfare of public and satisfying all conditions prescribed in income-tax law for being entitled to exemption. Ld. AR submitted that if the audit-report obtained by assessee on 30.09.2015 but filed on 02.06.2017 is accepted, the assessee would be entitled to the benefit of exemption. Ld. AR placed a heavy reliance on the latest decision of ITAT in Savitri Foundation Vs. ITO, ITA No. 1925/Mum/2021 (AY 2018-19) order dated 01.08.2022wherein the AO made processing of return u/s 143(1) denying exemption u/s 11 to assessee for the very same reason of non-uploading of audit report before filing of return but subsequently the assessee uploaded audit-report during the course of first-appeal; when the matter reached ITAT, the Mumbai Bench has allowed exemption to assessee. Ld. AR submitted that the decision taken by ITAT is directly applicable to assessee. Ld. AR also relied upon following decisions in support of the same proposition:
(i) ITAT, Indore Bench in Navratna Sukrat Foundation Vs. CPC, Bangalore, ITA NO. 390/Ind/2022, order dated 21.04.2023
(ii) ITAT, Jodhpur Bench in ITO, Exemption Ward Vs. Society for Education Conscientisation Awareness & Training, ITA No. 461/Jodh/2018 dated 06.05.2019
(iii) ITAT, Ahmedabad Bench in Purvanchal Lokhit Mandal Vs. ITO, Exemption Ward, Vadodara, ITA No. 966/Ahd/2019, dated 30.11.2022
(iv) Hon'ble Gujrat High Court in Sarvodaya Charitable Trust Vs. ITO, Exemption MANU/GJ/1687/2020 : (2021) 125 taxmann.com 75 (Gujrat)
6. Per contra, Ld. DR vehemently defended the orders of lower- authorities and submitted that furnishing of audit-report alongwith return of income is a pre-condition for allowability of exemption u/s 11. Since the assessee has not fulfilled such condition, the lower-authorities have rightly denied the assessee's claim of exemption u/s 11 and there is no infirmity in the action of lower-authorities.
7. We have heard rival contentions of both sides and examined the present controversy in the light of judicial decisions. At first, we are convinced that the controversy is directly settled in favour of assessee by decision in Savitri Foundation (supra) where the Hon'ble Mumbai ITAT, following the decision of Hon'ble Mumbai High Court in CIT vs. Mumbai Metropolitan Regional Iron & Steel Market Committee MANU/MH/0612/2015 : 378 ITR 103 has observed and held thus:
"4. Submissions made by rival sides heard, orders of authorities below examined and the case law on which the ld. Authorized Representative of the assessee placed reliance considered. The assessee is a charitable trust registered under section 12AA of the Act and has been purportedly enjoying the benefits of section 11 since 2011. In the impugned assessment year, the benefit of exemption under section 11 of the Act has been denied to the assessee for the reason that assessee has failed to furnish audit report along with return of income. The contention of the ld. Authorized Representative of the assessee is that the audit report was available with the assessee at the time of filing of return of income however due to inadvertent error the assessee failed to upload Audit Report in Form 10B along with e-filing of return of income. Non-filing of Audit Report is a bonafide error. The assessee has placed on record Audit Report dated 19/10/2018 in the prescribed Form 10B at page 15 of the Paper Book. The assessee after receiving the intimation under section 143(1) of the Act uploaded the Audit Report on 18/04/2020 in First Appellate proceedings.
5. In my considered view non-filing of Audit Report in Form 10B along with Return of Income is merely a procedural defect which is rectifiable. If the Audit Report was available with the assessee at the time of filing of Return of Income and was not filed due to bonafide reasons the benefit of exemption under section 11 cannot be denied if otherwise assessee is eligible to claim the same.
6. The Hon'ble Bombay High Court in the case of CIT vs. Mumbai Metropolitan Regional Iron & Steel Market Committee (supra) has held that late filing of required documents would not disentitle the assessee from availing benefit of section 11 of the Act. Thus, in the facts of the case and in the light of decision of Hon'ble Bombay High Court, I deem it appropriate to restore the file back to Assessing Officer for de novo assessment after considering the audit report field by the assessee, in accordance with law.
7. In the result, impugned order is set aside and appeal by assessee is allowed for statistical purposes."
8. Other decisions relied upon by Ld. AR including the decision of ITAT, Indore Bench cited above have also held the same view. Respectfully following the ratio of all these decisions, we are of the view that in the present case, the assessee can't be denied the benefit of exemption u/s 11 as claimed in the return of income for mere delay in filing of audit-report. We, therefore, deem it fit to remand this matter back to the file of AO for a fresh assessment after considering the audit-report filed by assessee, in accordance with law. The assessee succeeds in this appeal.
9. Resultantly, this appeal of assessee is allowed for statistical purpose in terms indicated above.
Order pronounced in the open court on 23.06.2023.
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