1994 (3) TMI 152 - AT - Income Tax

Summary

Issues:
1. Disallowance of deduction under sections 80HHA and 80J due to non-filing of audit report.
2. Violation of principles of natural justice by Assessing Officer.
3. Requirement of opportunity of being heard before disposing of application under section 154.

Analysis:
1. The appeal was against the disallowance of deduction under sections 80HHA and 80J by the Assessing Officer due to the non-filing of the audit report along with the return of income. The assessee claimed to have submitted the audit report with the return, supported by an affidavit from the Chartered Accountant. However, the CIT(A) rejected the appeal, stating that the audit report was not mentioned in the acknowledgement issued for the return of income. The Tribunal held that the Assessing Officer should have provided an opportunity to the assessee to substantiate the claim before disallowing the deduction solely based on the absence of the audit report. The order of the CIT(A) and Assessing Officer was set aside, and the issue was remanded for fresh determination.

2. The assessee contended that the Assessing Officer's decision without providing an opportunity to be heard violated the principles of natural justice. The Tribunal agreed, citing the requirement of an opportunity of being heard before the disposal of an application under section 154. Referring to a previous case, the Tribunal emphasized the necessity of allowing the assessee to support their claim. The failure to provide this opportunity rendered the Assessing Officer's decision invalid. Consequently, the Tribunal set aside the orders and directed a fresh determination by the Assessing Officer.

3. The Tribunal highlighted that the filing of an audit report along with the return of income, though statutory, is procedural and not mandatory. Therefore, even if the audit report was not initially filed, the assessee should have been given an opportunity to submit it during the assessment stage. The Assessing Officer's error in not allowing this opportunity could be rectified under section 154, provided other conditions for the deduction under sections 80HHA and 80J were met. The Tribunal directed the Assessing Officer to reconsider the assessee's application under section 154 in line with their directions and legal requirements.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of procedural fairness and the need for opportunities to be heard in tax assessment proceedings.