1992-VIL-168-ITAT-

Equivalent Citation: ITD 042, 062,

Income Tax Appellate Tribunal CALCUTTA

Date: 24.04.1992

CALCUTTA MANAGEMENT ASSOCIATION.

Vs

INCOME-TAX OFFICER.

BENCH

Member(s)  : D. S. MEENAKSHISUNDARAM., P. PRADHAN.

JUDGMENT

Per Shri D.S. Meenakshisundaram, Vice President--This appeal arises out of the Income-tax assessment of Calcutta Management Association, the appellant herein. The assessment year is 1984-85 for which the previous year ended on 31-3-1984.

2. The main point of dispute in the present appeal is the denial of exemption to the appellant-association under section 11 of the IT Act and further determining its total income assessable to tax at Rs. 5,18,210. The Assessing Officer refused the benefit of exemption under section 11 of the Act for the simple reason that the appellant had violated the provisions of section 12A(b) of the Act as it had not filed the audit report in Form No. 10B along with its return of income filed on 30-9-1986. He computed the income at Rs. 5,81,210 with reference to the figures found in the audited statements submitted with the return of income.

3. The CIT (Appeals) to whom the assessee appealed, agreed with the Assessing Officer and upheld the assessment. According to him. The provisions of section 12A(b) are mandatory and that the assessee's failure to file the audit report in Form No. 10B along with its return of income, disentitled it to the benefit of exemption under section 11 of the Act. The Commissioner (Appeals) was of the view that the assessee, which is a professional body, did not care to observe the requirements of the provisions of law which give it immense benefit, that it was an unpardonable lapse on its part and that, therefore, there was no justification to interfere with the decision of the ITO. He, therefore, confirmed the assessment and dismissed the appeal. Aggrieved by this order, the appellant has come up on further appeal to the Tribunal.

4. We have heard Shri R.N. Bajoria, the learned counsel for the appellant and Shri B. Biswas, the learned Departmental Representative and carefully considered their submissions in the light of the materials contained in the assessee's paper book.

5. In our view, the Departmental Authorities were not justified in refusing the assessee's claim for benefit of exemption under section 11 of the Act for the solitary reason that the audit report in the statutory Form No. 10B was not filed along with the assessee's return of income on 30-9-1986. The question whether the provisions of section 12A(b) are mandatory or directory, came up before Their Lordships of the Calcutta High Court in CIT v. Rai Bahadur Bissessurial Motilal Halwasta Trust [IT Reference No. 26 of 1990]. By their judgment dated 22nd April, 1991, which is still unreported, Their Lordships of the Calcutta High Court have answered the following question referred to them in the affirmative and in favour of the assessee :--

" Whether on the facts and in the circumstances of the case and having regard to the provisions of sections 12A, 139(5), 139(9), 292(B) and the Scheme of Income-tax Act as a whole, was the Tribunal right in law in holding that the lower authorities were not correct in denying exemption under section 10 to the assessee for the assessment year 1984-85 ?"

A copy of this judgment has been filed by the assessee's learned counsel at pages 68 to 79 of the paper book. Their Lordships of the Calcutta High Court have rejected the Revenue's contention for applying the rule of strict and literal construction or for consideration the provisions of section 12A in isolation. Their Lordships have held as follows in the course of their judgment :

" Having regard to the other provisions of the Act regarding filing of the return or revised return or rectifying the defects in the return, we are of the opinion that the provisions of section 12A are directory in the sense that the Assessing Officer is not powerless to allow an assessee to file the audit report, if not filed along with the return, any item before the completion of the assessment. One has to look at the purpose of the provisions. One has to construe the provision to ensure coherence and consistency to avoid undesirable consequences. Where the audit report was made ready after the return was filed, there was no reason why such audit report should not be allowed to be filed before the completion of the assessment."

6. In our view, this judgment of Their Lordships of the Calcutta High Court is squarely applicable to the facts of the present case. We are unable to agree with the Revenue that this decision is distinguishable on facts from the case of the present appellant. We are also of the considered view that the decision of the Bombay High Court in CIT v. Jamnalal Bajaj Sewa Trust [1988] 171 ITR 568 relied on by the Revenue is of no relevance or assistance to the Revenue in the present case. We, therefore, do not consider it necessary to discuss the said decision in great detail.

7. As rightly contended for the appellant by Shri Bajoria, the learned counsel, the powers of the CIT (Appeals) are coterminous with that of ITO. He can do what the ITO can do and can also direct him to do what he has failed to do. This position is now well settled by the decision of the Supreme Court in the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225. The Calcutta High Court had followed this decision of the Supreme Court in CIT v. Ganga Jamuna [1986] 157 ITR 225.

8. A perusal of the facts of the case from the papers in the paper book, shows that the assessee is registered society under the Societies Registration Act, that it had come into existence on the 4th day of August, 1958 and it has been recognised as a charitable institution, as could be seen from the communication received by the assessee from the ITO Refund Circle, 3, Government Place West, Calcutta dated 23-5-1968 at page 17 of the paper book. The assessee-association had also been granted certificate of registration under section 12A of the Act by the CIT, WB-III, Calcutta by his order dated 5-2-1979. The official acknowledgement issued by the Income-tax Department at page 19 of the paper book shows that the assessee has filed its return of income for this year on 30-9-1986 along with Profit & Loss Account and Balance Sheet. The Auditor's report at page 20 shows that the accounts of the appellant-association were finalised on 9-5-1984. The assessee has clearly indicated in its return of income at page 29 of the paper book that it has been registered with the Commissioner of Income-tax under section 12A(a) of the Act, though the column relating to the audit report under section 12A(b) is left blank. It is further noticed from the official acknowledgement at page 36 of the assessee's paper book that it had filed a revised return of income on 30-3-1987 where also it has indicated that it is registered with the Commissioner of Income-tax under section 12A(a) of the Act. In this return also the column relating to the requirement of filing of the audit report under section 12A(b) is left blank. The learned counsel for the appellant pointed out with reference to the auditor's report in Form No. 10B at page 43 of the paper book that it was also signed on 9-5-1984 by the Auditors, but for some reason or other which was not known to the assessee, it was not filed with the original return nor with the revised return. The learned counsel next invited our attention to the letter dated 23-9-1987 at page 47 of the paper book, calling upon the assessee to produce its books of account and other necessary documents, on 28-9-1987. He next pointed out that G. Basu & Co., who are the Chartered Accountants of the appellant-association, had replied on 28-9-1987 that it was not possible for them to furnish all the details called for by the ITO. However, they furnished three items that were available in their records and stated that they were unable to furnish the other particulars as the assessee's office was closed from 26-9-1987 to 6-10-1987. The learned counsel pointed out that this period 26-9-1987 to 6-10-1987 was a period of Puja holidays when the assessee's office was closed and it was for this reason the assessee could not respond to the letter issued by the ITO to it. The learned counsel submitted that the assessee's Auditors had responded to the requisition issued by the ITO, as is clear from the assessment order and that the reasons stated by the ITO for completing the assessment denying the benefit of exemption to the assessee was clearly erroneous. He pointed out that the Assessing Officer had ignored the revised return filed by the assessee on 30-3-1987. Therefore, there was no question of the assessment getting time barred, as stated by the ITO. The learned counsel also invited our attention to paragraphs 4 to 7 of the statement of facts and grounds No. 3 and 7 of the Grounds of Appeal filed before the CIT (Appeals) and pointed out that none of these facts and grounds were considered by the CIT (Appeals). He pleaded that the report in Form No. 10B was not filed with the return through oversight by the assessee's Auditors and for that, the assessee should not be denied the benefit of exemption under section 11 of the Act particularly when the appellant has been recognised as a charitable institution and registered as such under section 12A(a) of the Act.

9. We find considerable force in the above submissions of the assessee's learned counsel. There is no dispute about the fact that the appellant is a charitable institution and that it is also registered by the CIT under section 12A(a) of the Act. Apparently, the Assessing Officer had proceeded under an erroneous impression that the assessment was getting time barred overlooking the revised return filed by the assessee on 30-3-1987. As rightly contended on behalf of the assessee by Shri Bajoria, there is no earthly reason for the failure of the appellant to file the audit report in Form No. 10B along with its return of income or its revised return of income particularly when it has been signed on the same day, viz., 9-5-1984 when the audited statements were also signed. Apparently, the omission on the part of the appellant or its authorised representative seems to be due to some inadvertence or oversight. The Commissioner himself in paragraph 4 of his order recognises that some relaxation is allowed in some exceptional cases to file Form No. 10B at any time before the assessment is made. If this relaxation is permissible at the assessment stage, the same is also equally permissible at the appellate stage when the assessee produced the Auditor's report in Form No. 10B before the CIT (Appeals). In fairness and in the interest of justice, the CIT (A) ought to have exercised his judicial discretion and admitted the audit report in Form No. 10B and directed the ITO to examine the same and also considered the assessee's claim for exemption under section 11 of the Act in the light of the said audit report. He ought to have also considered the assessee's further plea against the disallowance of expenses which had been made by the ITO out of the total expenditure of Rs. 6,37,429 which was specifically raised by the appellant in ground No. 7 before him. In the interest of justice, we, therefore, consider it fair and proper to set aside the orders of the authorities below by respectfully following the judgment of the Calcutta High Court, referred to above, and restore the matter to the file of the Assessing Officer for making a fresh assessment after taking into account the audit report in Form No. 10B, referred to above as well as the assessee's claim for exemption under section 11 of the Act and also its further plea for deduction of expenses as raised in the grounds of appeal. Accordingly, we set aside the assessment and restore the matter to the file of the ITO for making a fresh assessment in accordance with law after giving a reasonable opportunity of being heard to the appellant in support of its claims on various issues.

10. For statistical purposes, the assessee's appeal is treated as partly allowed

 

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