The present appeal under section 260A of the Income Tax Act, 1961 preferred by the Revenue is directed against the order dated 17.06.2011 of the Income Tax Appellate Tribunal, Ahmedabad Bench `C' in ITA No.2050/Ahd/2009 for the assessment year 2006-07. 1.1 The following question is proposed by the appellant as a substantial question of law.
“Whether the Appellate Tribunal is right in law and on facts in directing the Assessing Officer to accept the audit report from the assessee which was not filed during the course of assessment proceeding and to grant exemption u/s.11 of the Act?”
2. We heard learned advocate Ms. Paurami Sheth for the appellant.
3. The issue in narrow compass and is about the Commissioner of Income-tax (Appeals) directing acceptance of audit report from the assessee and granting exemption under section 11 of the Income Tax Act, 1961 (hereinafter referred to as `the Act' for sake of brevity).
3.1 The assessee filed its return of income for the Assessment Year 2006-
07. On verification, the Assessing Officer noticed that the assessee had not furnished audit report in Form No.10B, which was compulsory requirement for eligibility of exemption under section 11A of the Act as stated in section 12A(b) read with Rule 17B of the Income Tax Rules, 1962. Assessee was issued show cause notice as to why exemption claimed by it under section 11 should be disallowed. The Assessing Officer passed order denying the exemption. He taxed gross receipts without granting deduction of expenditure.
3.2 In the appeal preferred by the assessee, the Commissioner of Income- tax (Appeals) permitted the assessee to file the audit report and directed to accept the same by his order dated 16.04.2009 and the exemption under section 11 of the Act allowed. The Department filed appeal which came to be dismissed by the impugned order bringing the Department before this Court by way of present appeal.
4. The question whether it is permissible to the assessee to produce the audit report at the appellate stage, has already been answered by this court in CIT v. Gujarat Oil and Allied Industries Ltd. [(1993) 201 ITR 325], wherein it is held that the provision regarding furnishing of audit report along with the return has to be treated as a procedural provision. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income, but produced before completion of the assessment. The Punjab and Haryana High Court in CIT v. Shahzadanand Charity Trust [228 ITR 292] has reiterated the same principle holding that the benefit of exemption should not be denied merely on account of delay in furnishing the same, and it is permissible for the assessee to produce the audit report at a later stage either before the Income Tax Officer or before the appellate authority by showing a sufficient cause. This decision of Punjab & Haryana High Court has been relied on by the Tribunal.
5. In the above view, the Tribunal is eminently justified both in law and on facts in observing and holding as under:-
“In this case, it is not in dispute that the audit report in prescribed form was obtained prior to filing of the return on 20/12/2006; therefore, there was no reason for the assessee to keep the audit report with it in order to loose the exemption. The assessee in the earlier as well as in the subsequent assessment years filed the audit report and got the exemption. The conduct of the assessee in earlier year and subsequent years would prove that due to the facts stated above there was delay in filing the audit report and the contention of the assessee was supported by the affidavit of Mohmad Iqbal Vohra (PB-4). The learned CIT(A) on proper appreciation of the facts and material on record in the light of the decisions of the Hon'ble Punjab & Haryana High Court and the Hon'ble Calcutta High Court rightly directed the AO to accept the audit report of the assessee and grant exemption u/s.11 of the IT Act.”
6. For the above reasons, the appeal of the Revenue is devoid of merit, raising no question of law much less any substantial question of law.
7. Accordingly the appeal is dismissed.
(V.M. SAHAI, J.) (N.V. ANJARIA, J.)
(SN DEVU PPS)