1996 (8) TMI 148 - AT - Income Tax

Summary

Issues Involved:
1. Deduction under Section 32AB
2. Submission of audit report and Form No. 3AA
3. Applicability of proviso to sub-section (5) of Section 32AB
4. Timeliness of submission of audit documents
5. Continuation of assessment proceedings through appellate stages

Issue-wise Detailed Analysis:

1. Deduction under Section 32AB:
The assessee, a Government company, claimed a deduction of Rs. 10,72,812 under Section 32AB. The Assessing Officer (AO) denied this deduction on the grounds that the required audit reports were not submitted with the return. The CIT(A) upheld the AO's decision, leading to the present appeal.

2. Submission of audit report and Form No. 3AA:
The AO rejected the deduction claim because the assessee did not submit the audit report in Form No. 3AA along with the return, as mandated by Section 32AB(5). The assessee argued that the statutory audit report and Form No. 3AA were furnished later, during reassessment proceedings initiated under Section 148.

3. Applicability of proviso to sub-section (5) of Section 32AB:
The assessee contended that as a Government company, its accounts were audited by auditors appointed by the Comptroller and Auditor General (C. & A.G.), and thus, under the proviso to Section 32AB(5), it was not required to submit the audit report along with the return. The Tribunal noted that the proviso to sub-section (5) allows compliance if the audit is conducted under any other law and the necessary reports are furnished.

4. Timeliness of submission of audit documents:
The assessee submitted the audit report and Form No. 3AA after the original assessment and first appellate order. The Tribunal considered whether these documents could be accepted at the appellate stage. It was observed that the statutory audit report was received on 31-3-1994 and the Form No. 3AA on 28-5-1994, both after the initial assessment and CIT(A) order.

5. Continuation of assessment proceedings through appellate stages:
The Tribunal highlighted that appellate proceedings are a continuation of the assessment process. Citing various judicial precedents, it was established that the assessment process does not conclude with the AO's order but continues through appeals. Therefore, the submission of the audit report and Form No. 3AA at the appellate stage was permissible.

Conclusion:
The Tribunal concluded that the rejection of the assessee's claim for deduction under Section 32AB was unjustified. It directed the AO to reconsider the deduction claim, provided the conditions under sub-section (1) of Section 32AB were met. The appeal was allowed, emphasizing that the process of assessment includes all stages up to the final appellate decision.