By Jagdish D. Shah
Jagdish T. Punjabi
Chartered Accountants
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New Page 4
Part B :
Unreported Decisions
ITO v. Sir Kikabhai Premchand Trust
ITAT ‘E’ Bench, Mumbai
Before N. V. Vasudevan (JM) and
R. K. Panda (AM)
ITA No. 5308/Mum./2009
A.Y. : 2006-07. Decided on : 22-9-2010
Counsel for revenue/assessee : Hemant Lal/
K. Shivaram and P. N. Shah
8. S. 11 read with S. 12A(1)(b) — Non-filing of Auditor’s
Report in Form 10B — Whether AO’s action of denying exemption justified — Held,
No.
Per N. V. Vasudevan :
Facts :
The assessee was registered as a charitable institution
u/s.12A of the Act. During the year, the assessee had earned capital gain on the
sale of immovable property, interest income, dividend and donation. It filed
return of income declaring total income at Nil. The AO noticed that the assessee
had not filed an Audit Report in Form 10B. The AO issued notices u/s.143(2) and
u/s.142(1) and amongst others, called for a copy of Form 10B. Simultaneously,
the AO also summoned one of the trustees u/s.131. During the interview on
3-10-2008 – to one of the questions viz., ‘Was any Audit Report prepared in Form
No. 10B which could not be filed for any reason ?’ the reply of the trustee was
‘No. Since the same was not applicable, no Audit Report in Form No. 10B was ever
prepared.’
The assessee, in response to the notices issued by the AO,
filed its reply and along with the same, it also filed an audit report in Form
10B dated 11-10-2006.
On 3-12-2008, the AO issued show-cause notice as to why the
exemption claimed u/s.11 should not be denied to the assessee. In reply, the
assessee filed two affidavits — one from the trustee who was interviewed by the
AO and second from the auditor who had audited the accounts. In his affidavit,
the trustee stated that his reply that he was a computer software consultant and
not an expert in the field of accountancy and taxation, and therefore, did not
know about the audit report in Form 10B had not been correctly recorded. He
further affirmed that he could not see what was being recorded by the AO on his
laptop and he had signed the statement without reading the content. While the
auditor in his affidavit confirmed that he had audited the accounts as per S.
12A(1)(b) and had issued his report in Form 10B on 11-10-2006.
However, the AO rejected the assessee’s explanation as
according to him :
- the statement recorded u/s.131 had evidentiary value;
- no explanation was offered in respect of omission to file report along
with the return of income.
Accordingly, applying the provisions of S. 12A(1)(b), the
claim for exemption made u/s.11 was denied.
On appeal, the CIT(A) accepted the contention of the assessee
and allowed the appeal.
Before the Tribunal, the Revenue relied on the order of the
AO and submitted that the circumstances in which the Report was filed throw
doubts on the claim of the assessee that its books were duly audited as required
by the Act.
Held :
The Tribunal relied on the Calcutta High Court decision in
the case of CIT v. Hardeodas Agarwalla Trust, (198 ITR 511) where the audit
report obtained during the course of assessment proceedings was also accepted as
due compliance of law, and dismissed the appeal filed by the Revenue. In coming
to this conclusion, it also relied on the fact that along with the return, the
assessee had also filed the Auditor’s Report obtained under the Bombay Public
Trust Act. Thus, according to it, the plea of the assessee of bonafide omission
to file Form 10B should not be rejected.
