Granting exemption not claimed in return of income-Reservation of Supreme Court in Goetze India Ltd case is applicable to AO not to appellate authority

In a recent judgment, ITAT Jaipur while allowing assessee’s claim of exemption u/s 11 held that the Supreme Court decision in Goetze India Ltd. vs. CIT  that assessee was not entitled to claim exemption which was not made in the return was applicable to AO and not to the appellate authority.

Case Details:
ITA No. 741/JP/2013 Assessment Year : 2009-10
M/s. Rajasthan State Seeds and Organic Production Certification Agency vs. ACIT
Date of Order/Judgment: 31/03/2016

Brief Facts of the Case:
The assessee was a society registered under the Society Registration Act, 1958. It was established to certify the seeds and carry out such other activities as is prescribed u/s 8 to 10 of the Seeds Act, 1966. For the relevant year, the assessee society was registration u/s 12A.

The assessee filed its return of income on 29-09-2009 declaring income of Rs. 1,93,81,696/-.Thereafter, in the course of assessment proceedings, filed the audit report u/s 12A(b) in Form No. 10B and the revised computation of total income at Rs. 30,71,775/- claiming exemption u/s 11 of the Income Tax Act, 1961 and requested the AO to allow the claim of exemption u/s 11.

AO though accepted the charitable nature of the institution u/s 2(15) and eligibility for exemption u/s 11, refused to allow the exemption u/s 11 on the grounds:

i. Assessee had not complied with the condition of Section 12A as the audit report in Form 10B was not been filed with the return of income.

ii. Claim of exemption u/s 11 was not made in the form of revised return, following Hon’ble Supreme Court judgment in the case of Goetze India Ltd. vs. CIT, 284 ITR 323.

CIT(A) also, in view of the Supreme Court Goetze India Ltd. disallowed the exemption claim.

Contentions of the assessee:
The assessee contendd that assessee’s claim was legal in nature and though the AO may have some handicap in entertaining the assessee’s claim in view of Supreme Court judgement in the case of Goetze India Ltd.; however this judgment itself had held that appellate authority was at liberty to entertain the fresh claim without revised return. Reliance was placed on another Supreme Court judgment in case of CIT vs. G.M. Knitting Industries (P) Ltd. and Anr. where it was held that assessee was entitled to deduction u/s 80IB even though it has not filed the audit report in Form No. 10CCB along with the return but has filed the same before the completion of assessment. 

Excerpts from ITAT Judgment:

It is observed that the assessee society is registered u/s 12A of the Act and enjoys its benefits. In our considered view the ld. CIT(A) being an appellate authority ought to have considered the assessee’s claim which was purely legal in nature and the reservation as contemplated by the Hon’ble Supreme Court in the Goetze India Ltd. vs. CIT (supra) is applicable to AO and not to the appellate authority. We are of the view that assessee’s claim should have been considered and appropriate relief in accordance with law may be provided. In view thereof, we set aside the matter to the file of the ld. AO to consider the assessee’s claim afresh by providing adequate opportunity of being heard. If some compliance is further required, the assessee may be allowed to make the same and decide the grounds of appeal in accordance with law. Thus the appeal of the assessee is allowed for statistical purposes.

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