1990 (10) TMI 105 - AT - Income Tax

Summary

Issues:
Admissibility of assessee's claim for deduction u/s 80HH of the IT Act, 1961 based on the filing of audit report along with the return.

Analysis:
The appeal before the Appellate Tribunal ITAT Ahmedabad-C involved the admissibility of the assessee's claim for deduction under section 80HH of the Income Tax Act, 1961. The Income Tax Officer (ITO) had rejected the claim due to the non-filing of the audit report along with the return, as mandated by section 80HH(5). However, the Commissioner of Income Tax (Appeals) accepted the claim, stating that the audit report had been submitted before the completion of the assessment. The key contention was whether the requirement of filing the audit report along with the return was mandatory under section 80HH(5) or merely directory.

Section 80HH(5) stipulates that for a deduction under section 80HH to be admissible, the accounts of the industrial undertaking must be audited by an accountant, and the audit report must be furnished along with the return of income. The Tribunal opined that the emphasis of the provision is on proving the audit of accounts by an accountant through a signed and verified report. The Tribunal highlighted that the admissibility of the claim under section 80HH should be considered at the assessment stage, making the requirement of filing the audit report along with the return as desirable rather than mandatory.

The Tribunal referred to various decisions, including Gujarat Oil & Allied Industries v. ITO, Rathi Gum Industries v. ITO, and Madhu Krimps v. Fourth ITO, to support the view that section 80HH(5) is procedural and should be interpreted with fairness and justice. The Tribunal emphasized that compliance with the audit report requirement is essential for the admissibility of the claim under section 80HH, and the timing of filing the report is not determinative of the claim's validity.

Regarding the Punjab & Haryana High Court decision cited by the Departmental Representative, the Tribunal distinguished it by asserting that the approach of the Supreme Court and the Gujarat High Court in interpreting procedural provisions in fiscal statutes should prevail. In the present case, the audit report was filed after the return but before the assessment, and the Tribunal found no defect in the report, leading to the conclusion that the assessee's claim for deduction under section 80HH was admissible at the time of assessment. Consequently, the Tribunal upheld the order of the Commissioner of Income Tax (Appeals) and dismissed the appeal.