AUDIT & FILING OF RETURN
 

REQUIREMENT OF AUDIT REPORT

01 Section 12A states two conditions for availing the exemption available under the Act, the first condition is regarding application for registration and the second condition is regarding audit by an accountant as defined in the Explanation below sub-section (2) of section 288. All organisations are required to apply for registration within one year from the date of their creation. If there is delay in applying for registration then the organisation should submit Audit Reports for the past three years or as may be available.

MONETARY LIMIT

02 As per the Taxation Laws Amendment Act, 2006, w.e.f. 1st April 2006, it is mandatory for every organisation to get its account audited where its income exceeds the minimum exemption limit. (As per the Finance Act 2008, presently the minimum exemption limit is Rs.1,50,000)

03 The implication of section 13(3) is extensive and therefore it may not be possible on the part of the Auditor to make independent inquiries. Therefore the Auditor before certifying the annexure to Form 10B should ensure and also clearly state the scope of his work and the responsibilities owned. It is important that the Auditor should mention in its report that the details of the persons covered under section 13(3) were provided by the Trustees of the Trust or the functionaries of the organisations.

FILING OF RETURN

04 All Charitable Organisations having income exceeding the minimum exemption limit during the previous year are required to file their return of income. The ‘income’ for the purposes of filing the return should be computed without giving effect to the provisions of sections 11 and 12 of the Act. Such returns are to be filed with the Income-Tax Officer or the Assessing Officer under whose local jurisdiction they fall. The return is to be filed as per the provisions of section 139(4A) and (4C) in the manner provided in section 139 of the Act.

FILING OF RETURN MADE MANDATORY

05 The Finance Act, 2002 has inserted sub-section (4C) to section 139 making it mandatory for the organisations registered under section 10(21), 10(22B), 10(23A), 10(23B), 10(23C) etc. to file Annual Returns under section 139(1). Earlier no clear provision for filing of return by these organisations was available, and it was not very clear whether these organisations were required to file returns or not, though Bombay High Court held in a case that returns are required to be filed. Now this controversy seems to be resolved.

FORMS AND DUE DATES

06 All Organisations or Trusts are required to file the return in Form No. 3A by the 30th September of the assessment year. The return must be accompanied by an Audit Report in Form 10B prescribed under Rule 17B of the Income-Tax Rule, 1962.

FILING OF RETURN BY UNREGISTERED ORGANISATIONS

07 Organisations which are not registered under the provisions of the Act, do not enjoy any exemption on their income hence, they are liable to file a return if the voluntary contribution received by them or their income exceeds the minimum exemption limit. Such organisa-tions should file their income-tax return in Form No. 2, if the income includes “business income” or in Form No. 3, if the income does not include “business income”.

DELAYED SUBMISSION OF RETURN OF INCOME

08 An organisation which fails to furnish its return of income within the due date can still submit its return of income any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier. For instance, a return of income for the financial year 2001-2002 can be submitted upto 31st March, 2004.

09 Under section 272A(2)(e), any Voluntary Organisation which fails to furnish the return of income which it is required to furnish under sub-sections (4A) and (4C) of section 139 or fails to furnish it within the time allowed and in the manner required under that sub-section, it shall pay by way of penalty a sum of Rs. 100 for everyday during which the failure continues. Before imposing such penalty, an opportunity of being heard shall be given to the organisation.

DOCUMENTS TO BE ATTACHED WITH THE RETURN

10 One set of the following documents are required to be attached with the return :

(i) Audit Report in Form 10B.

(ii) Balance Sheet.

(iii) Income and Expenditure Account.

(iv) Receipt and Payment Account.

(v) Copy of the Registration Certificate.

(vi) In case the organisation has accumulated income, resolution for accumulation.

(vii) Form 10 in which application for accumulation is made.

REVISION OR CORRECTION OF MISTAKES

11 The concerned organisation can file a revised return at any time before the expiry of one year from the end of the assessment year or completion of the assessment whichever is earlier only if there is any mistake or omission in the return. For instance, if the financial year for which the return is filed is 2001-2002 then a revised return can be submitted any time on or before 31st March, 2004, provided the assessing officer has not completed the assessment in the intervening period.

OVERALL SUMMARY

12 To sum up the discussions

(i) Registration under Income Tax Act, is a mandatory requirement to claim exemptions.

(ii) Registration is only a pre-condition for exemption. But, in order to claim exemptions, compliance of other provisions and conditions is necessary.

(iii) Application in Form 10A, in duplicate is required to be made to Commissioner of Income Tax.

(iv) The time limit for making such application is one year from the date of creation of the organisation.

(v) If the application is filed after the time limit, the C.I.T can condone the delay after satisfying himself that there were sufficient reasons which existed for delay.

(vi) If the delay is not condoned then the organisation will be eligible for exemptions from the first day of the financial year in which the application is filed.

(vii) It has been held in various case laws that an organisation once found eligible for registration should normally qualify for registration from the date of its creation. This issue remains debatable.

(viii) The C.I.T, on receipt of application, shall call for such documents and information as he thinks necessary to determine the genuineness of the organisation.

(ix) The C.I.T has to make an order in writing within six months from the end of the month in which the application is made.

(x) If the C.I.T wants to reject the application for registration, then a reasonable opportunity of being heard should be provided to the applicant.

(xi) Though the time limit of six months for processing an application is prescribed,there is no provision with regard to the delay made in processing the application.

(xii) There is no provision in the Act for withdrawal of registration once granted. Therefore, registration once granted is permanent in nature.

(xiii) If the application for registration is rejected then the aggrieved organisation can file an appeal against such order to the Appellate Tribunal under section 253.

(xiv) The time limit for filing an appeal to the Tribunal is 60 days from the date on which the order is received.

(xv) Under section 12A, all Charitable Organisations have to get their accounts audited if the total income exceeds the minimum exemption limit. Such Audit Report has to be in Form 10B.

(xvi) Further, all Charitable Organisations having total income exceeding the minimum exemption limit during the previous year are required to file their return of income. The return of income is required to be filed in Form 3A, as per the provisionsof section 139(4A) & (4C).

(xvii) Even unregistered organisations which do not enjoy any exemptions are required to file return if their income exceeds the minimum exemption limit. Such return should be filed in Form 2 or in Form 3, if the income does not include business income.

(xviii) An organisation can submit a delayed return under section 139(4), any time before the expiry of one year from the end of the relevant assessment year.

(xix) An organisation can file a revised return at any time before the expiry of one year from the end of the relevant assessment year or completion of the assessment whichever is earlier only if there is mistake or omission in the return.

(xx) One set of the following documents are required to be attached with the return :

(a) Audit Report in Form 10B.

(b) Balance Sheet.

(c) Income and Expenditure Account.

(d) Receipt and Payment Account.

(e) Copy of the Registration Certificate.

(f) In case, the organisation has accumulated income, resolution for accumulation.

(g) Form 10 in which application for accumulation is made.