2013 (10) TMI 1237 - HC - Income Tax

Deduction u/s 80HH of the Income Tax Act - Non-furnishing of Form-C along with return of income Held that - Reliance has been placed upon the judgment of Hon ble Andhra Pradesh High Court in the case of Commissioner of Income Tax Vs. Hemsons Industries 2001 (7) TMI 109 - ANDHRA PRADESH High Court , wherein it has been held that the mere fact that the assessee failed to enclose the audit report along with the return itself would not disentitle it the benefit under Section 80 HH of the Act, if it files the audit report before the assessment order is passed. If the accounts have not been audited, Form-C, even it is submitted subsequently may not be accepted for benefit. The non-furnishing of Form-C along with return of income where the accounts have been actually audited by filing the return is a technical defect for which the assessee cannot be denied the benefit of deduction under Section 80HH of the Act, if the defect is removed subsequently - In the present case, we find from the assessment order that the audited balance sheet was filed and was relied on by the AO for making assessment. The assessee in response to the notice under Section 154 of the Act, filed Form 10C, in which no defect was found by the AO Decided against the Revenue.

Summary

Issues:
1. Interpretation of Section 80-HH of the Income Tax Act regarding the submission of audit certificate.
2. Whether non-submission of certificate from Chartered Accountant/Audit certificate in the prescribed form 10-C along with the return of income is a mandatory requirement or a technical defect.

Issue 1: Interpretation of Section 80-HH of the Income Tax Act regarding the submission of audit certificate:

The case involved a dispute regarding the interpretation of Section 80-HH of the Income Tax Act, specifically focusing on the requirement for submitting an audit certificate along with the return of income. The Assessing Officer initially sought to withdraw the deduction claimed under Section 80-HH due to the absence of the Auditor's Report in Form 10-C submitted along with the return. However, the first appellate authority deemed the provisions of Section 80-HH as mandatory, leading to the dismissal of the assessee's appeal.

The Income Tax Appellate Tribunal, on the other hand, emphasized that although the assessee failed to file the certificate of the Chartered Accountant in Form 10-C at the time of filing the return, the subsequent submission of the same along with an explanation in response to the notice under Section 154 of the Act should be considered. The Tribunal relied on a judgment from the Delhi Bench, stating that the failure to file the audit certificate in Form 10-C initially was a technical default and did not warrant the denial of the deduction under Section 80-HH. Consequently, the Tribunal allowed the appeal, highlighting the importance of accepting the filed certificate even after the return submission.

Issue 2: Whether non-submission of certificate from Chartered Accountant/Audit certificate in the prescribed form 10-C along with the return of income is a mandatory requirement or a technical defect:

The crux of the matter revolved around determining whether the non-submission of the certificate from the Chartered Accountant or the Audit certificate in the prescribed Form 10-C along with the return of income should be considered a mandatory requirement or a technical defect. The High Court referred to judgments from the Andhra Pradesh High Court and the Jammu and Kashmir High Court to analyze similar scenarios.

The Andhra Pradesh High Court held that the failure to enclose the audit report along with the return did not automatically disentitle the assessee from claiming benefits under Section 80-HH if the audit report was filed before the assessment order. Similarly, the Jammu and Kashmir High Court emphasized that the filing of requisite forms during the assessment proceedings should be deemed as meeting the requirements, allowing the Commissioner of Income-tax (Appeal) to proceed accordingly.

The High Court, in the present case, interpreted Sub Section (5) of Section 80-HH, which outlines the necessity of the audit report being furnished along with the return of income. However, it concluded that the non-furnishing of Form 10-C along with the return, when the accounts were audited, should not automatically disqualify the assessee from claiming the deduction under Section 80-HH. The Court highlighted that the defect could be rectified subsequently, especially if the audit report was filed in response to a notice, as in the instant case.

In summary, the judgment by the High Court of Allahabad addressed the conflicting interpretations of Section 80-HH of the Income Tax Act, emphasizing the importance of allowing the submission of audit certificates even after the initial return filing. The decision favored the assessee, highlighting that technical defects such as the non-submission of Form 10-C should not automatically lead to the denial of deductions under Section 80-HH, especially if the requisite documents are provided subsequently.