Dhanpatmal Virmani Education Trust & Management Society,, Delhi v. DIT (E), Delhi

ITA 3640/DEL/2009 | misc
Pronouncement Date: 15-01-2010 | Result: Allowed

Appeal Details

RSA Number 364020114 RSA 2009
Bench Delhi
Appeal Number ITA 3640/DEL/2009
Duration Of Justice 4 month(s) 20 day(s)
Appellant Dhanpatmal Virmani Education Trust & Management Society,, Delhi
Respondent DIT (E), Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 15-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 15-01-2010
Date Of Final Hearing 31-12-2009
Next Hearing Date 31-12-2009
Assessment Year misc
Appeal Filed On 26-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI I.P.BANSAL JM AND SHRI R.C.SHARMA AM ITA NO.3640/DEL/2009 M/S DHANPATMAL VIRMANI EDUCATION TRUST & MANAGEMENT SOCIETY ROOP NAGAR DELHI 110 007. PAN NO.AAATD0142N. VS. THE DIRECTOR OF INCOME TAX (EXEMPTION) DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIRENDER TALWAR. RESPONDENT BY : SHRI B.KISHOR DR. ORDER PER R.C.SHARMA AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF DIT(EXEMPTION) DELHI DATED 20.7.2009 IN THE MATTER OF ORDER PASS ED U/S 80G(5)(VI) OF THE IT ACT READ WITH RULE 11AA. 2. THE ONLY GRIEVANCE OF THE ASSESSEE PERTAINS TO R EJECTING APPLICATION OF ASSESSEE U/S 80G OF THE IT ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PE RUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS A CHARITABLE INSTITUTION WHICH HAS BEEN GRANTED REGISTRATION U/S 12AA OF THE IT ACT. IT APPLIED IN FORM 10G SEEKING CONTINUATION OF EXEMPTION U/S 80G OF THE ACT. THE DIT OBSERVED THAT AS PER AUDIT REPORT IN FORM 10B FILED BY THE ASSESSEE IT IS TRANSPIRED THAT CERTIFICATE GIV EN IN FORM 10B BY THE CHARTERED ACCOUNTANT IS NOT IN THE PRESCRIBED FORMAT AS REQUI RED UNDER RULE 17B OF THE IT RULES 1962. DIT OBSERVED THAT AS PER THE PRESCRIB ED FORM AUDITOR IS REQUIRED TO EXAMINE THE RECORDS AND CERTIFY THAT ASSESSEE HAS A PPLIED ITS INCOME TO CHARITABLE ITA-3640/DEL/2009 2 PURPOSES AND THAT AUDITOR HAS ONLY EXAMINED FEW ENT RIES TO REACH THE CONCLUSION THAT ASSESSEE HAS APPLIED ITS INCOME TO CHARITABLE PURPOSES REJECTED THE APPLICATION FOR CONTINUATION OF EXEMPTION U/S 80G. HE FURTHER STATED THAT BOOKS HAVE BEEN EXAMINED ONLY ON TEST CHECK BASIS NO CORRECT CONCL USION ABOUT APPLICATION OF INCOME FOR CHARITABLE PURPOSES CAN BE DRAWN. BY AL LEGING THAT THERE WAS A DEFECTIVE AUDIT REPORT IN FORM 10B THERE IS NO PRO PER COMPLIANCE OF SECTION 12A(1)(B) OF THE ACT CONSEQUENTLY EXEMPTION U/S 11 CANNOT BE AVAILABLE. ACCORDINGLY APPLICATION U/S 80G WAS DECLINED AGAIN ST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE ORDER OF DIT(EXEMPTION) AND THE RELEVANT DOCUMENTS TO WHICH OUR ATTENTION WAS INVITED AND FOUND THAT AUDIT REPORT FILED IN FORM 10B DULY MENTIONED THE EXAMINATION OF INCOME AND EXPENDITURE ACCOUNT AND ITS BALANCE SHEE T BY THE AUDITOR OF ASSESSEE TRUST AND AN OPINION WAS EXPRESSED BY THE AUDITOR AFTER EXAMINING THE BALANCE SHEET AND INCOME AND EXPENDITURE ACCOUNT TO THE EFF ECT THAT SAME ARE IN AGREEMENT WITH THE BOOKS OF ACCOUNT MAINTAINED WITH THE SAID TRUST (SOCIETY). THE AUDITORS HAVE ALSO CERTIFIED THAT ASSESSEE TRUST WAS MAINTAI NING PROPER BOOKS OF ACCOUNT AND REQUIRED INFORMATION AND EXPLANATION WHICH TO THE B EST OF KNOWLEDGE OF AUDITORS WERE NECESSARY FOR THE PURPOSE OF AUDIT WERE FURNIS HED TO HIM. HOWEVER IN ADDITION TO IT FOLLOWING WAS THE FURTHER OBSERVATI ON OF THE AUDITOR:- THESE FINANCIAL STATEMENTS ARE THE RESPONSIBILITY OF MANAGEMENT. OUR RESPONSIBILITY IS TO EXPRESS AN OPINION ON THES E STATEMENTS BASED ON OUR AUDIT. WE CONDUCTED OUR AUDIT IN ACCORDANCE WITH AUDITING STANDARDS GENERALLY ACCEPTED IN INDIA. THESE STAND ARDS REQUIRE THAT WE PLAN AND PERFORM THE AUDIT TO OBTAIN REASONABLE ASSURANCE ABOUT WHETHER THE FINANCIAL STATEMENTS ARE FREE OF MATERI ALS MISSTATEMENTS. AN AUDIT INCLUDES EXAMINING ON A TEST BASIS EVIDE NCE SUPPORTING THE AMOUNTS AND DISCLOSURES IN THE FINANCIAL STATEMENT. AN AUDIT ALSO INCLUDES ASSESSING ACCOUNTING PRINCIPLES USED AND S IGNIFICANT ESTIMATES MADE BY MANAGEMENT PRESENTATION. WE BELI EVE THAT OUR AUDIT PROVIDES A REASONABLE BASIS FOR OUR OPINION. ITA-3640/DEL/2009 3 WE HAVE OBTAINED ALL THE INFORMATION AND EXPLANATIO NS WHICH TO THE BEST OF OUR KNOWLEDGE AND BELIEF WERE NECESSARY FOR THE PURPOSES OF AUDIT. IN OUR OPINION PROPER BOOKS OF ACCOUNT HAV E BEEN KEPT BY THE SOCIETY SO FAR AS APPEARS FROM OUR EXAMINATION OF T HOSE BOOKS AND PROPER RETURNS ADEQUATE FOR THE PURPOSES OF THE AUD IT HAVE BEEN RECEIVED BY US. 5. WITH REGARD TO ABOVE OBSERVATION OF THE AUDITOR IN FORM 10B THE DIT OBSERVED THAT AUDIT REPORT WAS NOT IN THE PRESCRIBE D FORM THEREFORE CONTINUATION OF REGISTRATION CANNOT BE GRANTED U/S 80G OF THE ACT. IN REPLY TO THE SAME IT WAS SUBMITTED BY THE ASSESSEE VIDE ITS LETTER DATED 1.7 .2009 THAT AUDIT REPORT IN FORM 10B SIGNED BY THE AUDITOR WAS AS PER PRESCRIBED FOR M AND THE ADDITIONAL PARA THEREIN AS OBJECTED BY THE DIT WAS ADDED BY THE A UDITOR AS PER GUIDELINES ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA IN RESPECT OF AUDITORS REPORT ON FINANCIAL STATEMENT. THESE GUIDELINES WERE EFFECTI VE FOR ALL AUDITS RELATING TO THE ACCOUNTING PERIODS BEGINNING ON OR AFTER 1.4.2003. THIS ADDITIONAL PARA WAS AS PER SA 700(AAS 28). COPY OF THE SAME WAS ALSO ENCLOSED WITH THE LETTER OF REPLY. IT WAS FURTHER EXPLAINED THAT AS PER AAS-28 TO EXPLAIN THE METHOD ADOPTED IN AUDIT IT WAS TO CLARIFY THE AUDITING PROCEDURE ADOPTED BY THE AUDITOR. INCORPORATION OF THESE GUIDELINES IN THE AUDIT REPORT IN FORM 10B DO ES NOT AMOUNT TO QUALIFYING THE AUDIT REPORT OR EXPRESSION OF ANY ADVERSE OPINION A GAINST THE ASSESSEE TRUST. WE FOUND THAT THE AUDIT REPORT SO FURNISHED BY THE ASS ESSEE IN FORM 10B WAS AS PER THE PRESCRIBED FORM DULY INCORPORATING THE GUIDELINES I SSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AS PER SA-700 (AAS 2 8). ALL THE OTHER INFORMATION/CLARIFICATION REQUIRED IN THE AUDIT REP ORT WAS VERY MUCH THERE AND NOWHERE THE AUDITOR HAS QUALIFIED THE AUDIT REPORT. EVEN THE DIT COULD NOT POINT OUT ANY MISTAKE EITHER IN THE BALANCE SHEET OR INCO ME AND EXPENDITURE ACCOUNT OR THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE A ND BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE TRUST WHICH SHOWS TRUE A ND CORRECT PICTURE OF THE ACCOUNTS. WITHOUT PIN-POINTING ANY DEFECT EITHER I N THE AUDIT REPORT OR INCOME AND EXPENDITURE ACCOUNT OR BALANCE SHEET THE DIT STATE D THAT AUDITOR HAS PREPARED THE ITA-3640/DEL/2009 4 AUDIT REPORT AFTER CONDUCTING EXAMINATION ON TEST C HECK BASIS THUS HE HAS NOT EXAMINED ALL THE ENTRIES TO REACH THE CONCLUSION TH AT ASSESSEE HAS APPLIED ITS INCOME TO CHARITABLE PURPOSES. THIS OBSERVATION OF THE DIT IS WITHOUT ANY BASIS. UNLESS ANY DEFECT IS POINTED OUT BY THE DIT WHICH R EMAINED UNVERIFIED BY THE AUDITOR AND FOR WHICH ADVERSE OBSERVATION WAS REQUI RED ON HIS PART IT CANNOT BE SAID THAT BALANCE SHEET AND PROFIT & LOSS ACCOUNT D O NOT DISCLOSE TRUE AND CORRECT POSITION. WE ALSO FOUND THAT THE ASSESSEE TRUST HAS ALREADY BEEN GRANTED EXEMPTION U/S 80G FROM 1.4.2006 TO 31.3.2009 VIDE ORDER DATED 11.8.2006. IN VIEW OF THE GUIDELINES ISSUED BY THE INSTITUTE OF CHARTERED ACC OUNTANTS OF INDIA INCORPORATING THE ADDITIONAL PARA IN THE AUDIT REPORT WILL NOT RE NDER THE AUDIT REPORT DEFECTIVE. INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA MAY REQ UIRE AN AUDITOR TO INCLUDE CERTAIN MATTERS IN THE AUDIT REPORT OR PRESCRIBE TH E FORM IN WHICH AUDITOR SHOULD ISSUE HIS REPORT. IN SUCH A CASE THE AUDITOR IS D UTY BOUND TO INCORPORATE IN HIS AUDIT REPORT THE MATTERS SPECIFIED BY THE STATUTE OR REGULATOR AND/OR REPORT IN THE FORM PRESCRIBED BY THEM IN ADDITION TO THE REQUIREM ENT OF THE PRESCRIBED FORMAT OF AUDIT. WE FOUND THAT ADDITIONAL PARA INCORPORATED BY THE AUDITOR IN THE REPORT WAS AS PER THE GUIDELINES OF THE INSTITUTE AND THE SAME WAS AS PER SA 700 (AAS 28) AS PRESCRIBED BY THE INSTITUTE OF CHARTERED ACCOUNTANT S OF INDIA. NOWHERE INTEREST OF REVENUE IS ADVERSELY EFFECTED BY THIS PARA NOR IT A MOUNTS TO ANY QUALIFICATION ON THE CORRECTNESS OF THE BALANCE SHEET AND PROFIT & L OSS ACCOUNT. STANDARD ON AUDITING (SA) AS ISSUED BY THE INSTITUTE OF CHARTE RED ACCOUNTANTS OF INDIA IS TO ESTABLISH STANDARDS ON THE FORM AND CONTENTS OF THE AUDITORS REPORT ISSUED AS A RESULT OF AN AUDIT PERFORMED BY AN AUDITOR OF A FIN ANCIAL STATEMENTS OF AN ENTITY. THE AUDITOR IS REQUIRED TO REVIEW AND ASSESS THE CO NCLUSIONS DRAWN BY THE AUDIT EVIDENCE OBTAINED AS THE BASIS FOR THE EXPRESSION O F OPINION ON THE FINANCIAL STATEMENTS. SUCH REVIEW AND ASSESSMENT INVOLVES CO NSIDERING WHETHER THE FINANCIAL STATEMENTS HAVE BEEN PREPARED IN ACCORDAN CE WITH AN ACCEPTABLE FINANCIAL REPORTING FRAMEWORK APPLICABLE TO THE ENTITY UNDER THE AUDIT. THE AUDITORS REPORT SHOULD CONTAIN A CLEAR WRITTEN EXPRESSION OF THE OP INION ON THE FINANCIAL STATEMENTS TAKEN AS A WHOLE. AS PER THE GUIDELINES SUCH REPO RT OF THE AUDIT SHOULD INCLUDE A ITA-3640/DEL/2009 5 STATEMENT THAT THE FINANCIAL STATEMENTS ARE THE RES PONSIBILITY OF THE ENTITYS MANAGEMENT AND A STATEMENT THAT THE RESPONSIBILITY OF THE AUDITOR IS TO EXPRESS AN OPINION ON THE FINANCIAL STATEMENTS BASED ON THE AU DIT. AS PER THE GUIDELINES THE AUDITORS REPORT SHOULD ALSO DESCRIBE EXAMINING ON TEST CHECK BASIS EVIDENCE TO SUPPORT THE AMOUNTS AND DISCLOSURES IN THE FINANCIA L STATEMENTS. MERE MENTION OF THIS THING WILL NOT INVALIDATE THE AUDIT REPORT NOR IT INDICATE THAT TEST CHECK BASIS WILL NOT GIVE PROPER AND CORRECT RESULTS OF THE STA TEMENT OF ACCOUNTS UNLESS SOME THING IS SHOWN TO THE CONTRARY. 6. IN VIEW OF THE ABOVE WE DO NOT FIND ANY MERIT I N THE ACTION OF THE DIT FOR DECLINING CONTINUATION OF EXEMPTION U/S 80G MERELY BY ALLEGING THAT AUDITOR HAS INCLUDED ADDITIONAL PARA IN HIS AUDIT REPORT WHICH WAS IN TERMS OF THE GUIDELINES ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA IN RESPECT OF STANDARD ON ACCOUNTING (SA) TO BE FOLLOWED BY THE AUDITOR. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 15 TH JANUARY 2010. SD/- SD/- (I.P.BANSAL) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15.01.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT DEPUTY REGISTRAR ITA-3640/DEL/2009 6