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2006 (5) TMI 81 - HC - Income TaxDeduction u/s 80J - Provision of section 80J(6A) are directory and not mandatory and in allowing the assessee s claim u/s 80J? - HELD THAT - As is evident from the facts of the case the audit report in the present case was filed on January 18 1979 after the assessment had already taken place on December 19 1978 hence in terms of the discussions and the law laid down by the Gujarat High Court in Gujarat Oil and Allied Industries case 1992 (9) TMI 67 - GUJARAT HIGH COURT and A.N. Arunachalam s case 1994 (1) TMI 65 - MADRAS HIGH COURT which has been approved by a Full Bench of this court in Punjab Financial Corporation s case 2001 (12) TMI 50 - PUNJAB AND HARYANA HIGH COURT we are of the view that the Tribunal was not right in granting relief to the assessee as admittedly the audit report was filed by the assessee after the assessment had already been framed by the Assessing Officer. The reference is answered in the above terms.
Issues Involved:
1. Whether the provisions of section 80J(6A) of the Income-tax Act, 1961, are directory or mandatory. 2. Whether the assessee's claim under section 80J can be allowed despite non-compliance with the requirement of furnishing an audit report along with the return. Issue-wise Detailed Analysis: 1. Directory vs. Mandatory Nature of Section 80J(6A): The primary question addressed by the court was whether the requirements under section 80J(6A) of the Income-tax Act, 1961, are directory or mandatory. Section 80J(6A) mandates that the accounts of an industrial undertaking must be audited, and the audit report must be furnished along with the income tax return to claim deductions under section 80J. The court referred to previous judgments to analyze this issue. Initially, a strict view was taken in CIT v. Jaideep Industries [1989] 180 ITR 81, where it was held that no deduction under section 80J could be claimed unless the audit report was furnished along with the return. However, this view was reconsidered by a Full Bench in CIT v. Punjab Financial Corporation [2002] 254 ITR 6, which held that similar provisions in section 32AB(5) were directory and not mandatory. The court concurred with the views expressed by the Gujarat High Court in CIT v. Gujarat Oil and Allied Industries [1993] 201 ITR 325 and the Madras High Court in CIT v. A.N. Arunachalam [1994] 208 ITR 481, which held that while the requirement to get accounts audited is mandatory, the furnishing of the audit report along with the return is directory, provided it is submitted before the assessment is completed. 2. Allowability of Deduction under Section 80J: The court examined whether the assessee's claim under section 80J could be allowed despite not furnishing the audit report along with the return. The assessee filed the return on August 31, 1977, without the audit report, which was later submitted on January 18, 1979, after the assessment was completed on December 19, 1978. The Tribunal had allowed the deduction, considering section 80J as a beneficial legislation and holding that non-compliance with the procedural requirement of furnishing the audit report along with the return should not affect the right to deduction. The court, however, emphasized that the procedural requirement is directory only to the extent that the audit report can be furnished anytime before the assessment is completed. Since the assessee submitted the audit report after the assessment was completed, it failed to comply even with the directory requirement. Consequently, the court held that the Tribunal was not right in granting relief to the assessee. Conclusion: The court concluded that while the provisions of section 80J(6A) regarding the submission of the audit report along with the return are directory, the audit report must still be submitted before the assessment is completed. Since the assessee in this case submitted the audit report after the assessment, the court held that the assessee was not entitled to the deduction under section 80J. The reference was answered accordingly.
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