2007 (7) TMI 283 - HC - Income Tax

Claim for deduction u/s 80HHC - assessee has failed to attach audit report u/s 44AB along with return but assessee has filed the tax audit report later - Tribunal reversed the view taken by the AO and the CIT (A) by holding that the assessee was not a company nor a co-operative society whose accounts were separately required to be audited under the Act. This is a case of an individual and tax audit is required under clause (BB) of the Explanation to section 44AB which was eventually filed and furnished consequently tribunal rightly held that assessee was entitled to the benefit of deduction u/s 80HHC

Summary

Issues:
Challenge to order of Income-tax Appellate Tribunal regarding deduction under section 80HHC of the Income-tax Act, 1961.

Analysis:
The High Court considered a challenge to the order of the Income-tax Appellate Tribunal regarding the deduction under section 80HHC of the Income-tax Act, 1961. The key question before the court was whether the assessee was entitled to the benefit of deduction under section 80HHC of the Act. The assessee, an individual and exporter, had his accounts audited and obtained reports under relevant sections. The Tribunal noted that the tax audit report was filed after the intimation by the Assessing Officer but before its service to the assessee. The Assessing Officer rejected the application under section 154, leading to subsequent appeals. The Tribunal held that the benefit of deduction under section 80HHC was admissible to the assessee as the tax audit report was eventually filed and furnished.

The court referred to a Full Bench decision in another case, CIT v. Punjab Financial Corporation, which established that the Assessing Officer has the discretion to entertain the audit report later in time for granting the benefit of deduction. This discretion was not limited by the mandatory nature of certain provisions. The court also mentioned a Division Bench decision of the Madras High Court in CIT v. Print Systems and Products, which followed the same principle.

The Revenue's counsel failed to distinguish the present case from the precedent set by the Full Bench decision in Punjab Financial Corporation's case. Consequently, the court held in favor of the assessee, affirming that the Tribunal rightly concluded that the assessee was entitled to the benefit of deductions under section 80HHC of the Act. Therefore, the court answered the question referred in favor of the assessee and against the Revenue, disposing of the reference accordingly.