Vildirect: IncomeTax-caselaws-1981-VIL-26-ITAT-CTK

1981-VIL-26-ITAT-CTK

Equivalent Citation: TTJ 012, 394,

Income Tax Appellate Tribunal CUTTACK

Date: 11.06.1981

INCOME TAX OFFICER.

JEEVDAYA KHATA.

BENCH

Member(s) : S. S. Mehra., Egbert Singh.

JUDGMENT

"The AAC erred on facts and in law in setting aside the assessment and directing the ITO to entertain the audit report which was not filed alongwith the return as required under s. 12A(b) of the IT Act, 1961, notwithstanding the fact that there is no provision in the IT Act, 1961, empowering the ITO to condone the delay in filing of the aforesaid audit report and the ITO is not empowered to take cognizance of the audit report after the submission of the return".

2. The contentions raised and submissions made on behalf of the rival parties have been heard and record perused. The assessee is an AOP and the assessment year involved is 1978-79 for which the accounting period is the Diwali 1977. The ITO while framing the assessment order on 21/22nd Dec., 1979 noticed that the audit report was not submitted along with the return in terms of s. 12A(b) of the IT Act, 1961 and r. 17A of the IT Rules, 1962. The return was filed on 5th July, 1978 and the audit report appears to have been received by the ITO's office on 21st Dec., 1979.

3. The ITO considered that the provisions of s. 12A(b) of the Act being mandatory and the audit report not accompanying the return, the expenditure incurred by the assessee Trust for religious purposes was not allowed as the concession of ss. 11 and 12 of the Act was considered to be forfeited.

4. The said order of the ITO was thereafter challenged by the assessee. The ld. AAC considered that there existed a reasonable cause for not filing the audit report along with the return. He also observed that the audit report was before the ITO when the assessment was completed and that the assessee was given no opportunity about refusing concession admissible under ss. 11 and 12, before the assessment was completed. The ITO also did not consider the audit report in his assessment order. In these circumstances, the ld. AAC set aside the assessment with the direction to the ITO that he should give due opportunity of being heard about the admissibility of the concession under ss. 11 and 12 on the basis of the audit report filed and complete the assessment on the basis of the material on record on merits and according to law. Hence, the instant appeal by the Revenue before us on the ground mentioned above.

5. Before us it was contended on behalf of the appellant-revenue that the provisions of law contained in s. 12A(b) of the IT Act being mandatory, the return must have been accompanied by an audit report to get the various benefits under the IT Act.

6. On behalf of the respondent-assessee it was submitted that no doubt the audit report was not filed along with the return which was filed on 5th July, 1978, the audit report in fact was filed on 21st Dec., 1979. It was further contended that the assessment was framed on 22nd Dec., 1979 and that the audit report was available with the ITO at the time of framing the assessment and the ITO for the reasons best known to him completed the assessment without considering the contents of the audit report and thereby refusing various concessions contemplated under s. s 11 & 12 of the Act. The ld. A/R as well contended that the provisions of law contained in s. 12A(b) of the IT Act, 1961, are directory and procedural only and cannot be considered to be mandatory and for assistance he relied upon the ratio of decision in the case of Sitaram Bhagwandas, decided by their Lordships of the Patna High Court and reported in (1976) 102 ITR 560 (Pat) especially the observation of their Lordships at page 566. Our attentions was also drawn to the ratio of decision in the case of Murlidhar Mathuraprasad reported in 1978 CTR (All) 410 : (1979) 118 ITR 392 (All) and decided by their Lordships of the Allahabad High Court for the proposition that the ratio in the case of Sitaram Bhagwandas was subsequently followed by their Lordships of the Allahabad High Court.

7. The return of income was filed by the assessee on 5th July, 1978 and the audit report was filed on 21st Dec., 1979. The assessment was finalised on 22nd Dec., 1979. It is thus clear that no doubt the audit report was not furnished along with the return of income, but the same was sent to the ITO before finalising the assessment. The provisions of law pertaining to the conditions as to registration of Trust etc. contained in s. 12A(b) of the Act provides that where the total income of a Trust, without giving effect to the provisions of ss. 11 and 12 exceeds Rs. 25,000 in any previous year, the accounts of the Trust or Institution for that year had been audited by an accountant as defined in the Expln. to sub-s. (2) of s. 288 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. In pursuance of s. 12A(b) of the Act r. 17A of the IT Rules, 1962 appears to have brought on statute w.e.f. 1st April, 1973 where under application for registration of charitable or religious Trust etc. are contemplated.

8. The provisions contained in s. 12A(b) of the Act about the furnishing of audit report appear to be some sort of a procedural and enabling provision. The requirement appears to be that for finalising the assessment, the audit report should be available to the ITO for properly investigating the whole issue. It is difficult to read therefore that it was mandatory that the return should definitely and positively be accompanied by an audit report. The inference is very much possible that such an audit report could subsequently as well be filed of course before the finalisation of the assessment order. In the case before us the audit report was no doubt not enclosed with the return but the same was definitely available, before finalisation of the assessment order. The ld. AAC after negating the ITO's action has restored the matter once again to the file of the ITO to re-examine the whole issue keeping in view the contents of the audit report. We are not in a position to see any error or commission in the direction of the AAC. For such a conclusion we derive support from the ratio in the case of Sita Ram Bhagawandas and Murlidhar Mathuraprasad. No doubt, the said cases were with respect to s. 184(7) of the IT Act, 1961 but the situation contemplated under the said s. 12A(b), with which we are concerned, appears to be similar and same. No direct case for or against under s. 12A(b) could be available for guidance. In such a situation the cases decided by their Lordships of the Patna High Court and Allahabad High Court appear to be of tangible guidance. In this view of the matter we are of the considered view that the ITO should have considered the contents of the audit report before finalising the assessment order. Since he failed to do so, the ld. AAC correctly set aside the assessment order and directed the ITO to make fresh assessment after considering the report. The impugned order on the point being correct, needs no interference and the same is confirmed, therefore.

9. In the result, the Revenue's appeal is dismissed.

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