9911796707
TMI Blog1993 (9) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1977-78. This claim of the assessee was allowed by the Income-tax Officer for both the assessment years. However, on a perusal of the records of assessment, the Commissioner of Income-tax ("the Commissioner"), being of the opinion that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue in so far as it related to the allowance of deduction under section 80J of the Act, initiated suo motu revision proceedings under section 263 of the Act and on hearing the assessee, set aside the orders of the Income-tax Officer for both the assessment years in so far as they pertained to the allowance of the claim of the assessee under section 80J. Against the order of the Commissioner, the assessee appealed to the Income-tax Appellate Tribunal ("the Tribunal"). The Tribunal considered the contentions of the assessee in regard to its claim for deduction under section 80J from various angles. The Tribunal took note of the admitted position that no audit report in Form No. 10-D, as required by section 80J(6A) of the Act, bad been filed by the assessee. It was, however, of the opinion that if an assessee fails to file an audit report as re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the face of it, is mandatory, i.e., unless the accounts are audited by an accountant as defined in this sub-section, no deduction under sub-section (1) would be admissible. Difficulty, however, does arise in deciding the true nature of the second condition which requires the assessee to furnish such audit report in the prescribed form "along with the return of income". The question that falls for determination is whether it is mandatory or directory. We have carefully considered the controversy. The legislative intention appears to be clear. It was the desire of the Legislature that the audit report should be filed along with the return of income. There is no doubt in that regard. But no consequence of non-filing of the same along with the return in the prescribed manner has been specified. The question that arises is whether non-filing of the audit report along with the return is fatal to the claim of the assessee for deduction or whether the audit report can be filed even after filing of the return and accepted by the Income-tax Officer for the purpose of consideration of the claim of the assessee for deduction under section 80J(1) of the Act. It is well-settled that the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determining whether it is mandatory or directory, it can be further sub-divided into two: (i) The assessee should furnish to the Income-tax Officer a report of the accountant who had audited the accounts in the prescribed form, duly signed and verified by such accountant; (ii) such report should be filed along with the return of income. The first requirement of filing of the report again appears to be mandatory. Failure to file the same is fatal. But that is not so in so far as the requirement of filing it along with the return is concerned. If, in a given case, an assessee fails to file such report along with the return and files it subsequently but before completion of the assessment, it would not be fatal to the claim of the assessee and the Income-tax Officer will have the power to accept the same if he is satisfied that the delay in filing the same was for good and sufficient reasons. This, however, does not mean that an assessee, as a matter of right, can submit such report at any time before the completion of assessment and if it is so submitted, the Income-tax Officer is bound to accept the same. Such an interpretation, in our opinion, will amount to substituting the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate under section 80J of the Act by the Income-tax Officer was patently wrong and in complete disregard of the requirements of sub-section (6A) of section 80J of the Act. The Tribunal was, therefore, not justified in such a case in interfering with the order of the Commissioner and sending the matter back to the Commissioner with a direction to give an opportunity to the assessee to file the audit report in the name of the principles of natural justice. Learned counsel for the assessee submits that if the assessee had failed to submit the audit report, it was only a mistake on his part and it was the duty of the Income-tax Officer to point out the same to the assessee and give him an opportunity of rectifying it by filing the same which the Income tax Officer failed to do. In such a case, the Commissioner, acting in exercise of the powers under section 263 of the Act, while setting aside the order should have directed the Income-tax Officer to give such an opportunity to the assessee. According to counsel for the assessee, in such a situation, the Tribunal was justified in directing the Commissioner to do so. Reliance is placed in support of this contention on the decisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee not before the Income-tax Officer but before the appellate authority, who refused to admit the same. But, on further appeal, the Tribunal directed that the same be considered as an additional evidence. The ratio of the above decision has no application to the facts of the present case. Here there is nothing on record even to show that the accounts of the assessee were audited. Learned counsel for the Revenue, Mr. Jetley, relied on a decision of the High Court of Punjab and Haryana in CIT v. Jaideep Industries [1989] 180 ITR 81, in support of his contention that the requirement is mandatory and non-filing of the audit report along with the return will be fatal to the claim of the assessee. For the reasons set out above, we respectfully disagree with the above decision. In the result, we answer the question referred to us as follows: The requirement of filing the audit report "along with the return of income" is directory and if the assessee complies with the same before completion of the assessment and offers a satisfactory explanation for his failure to submit the same in time, the Income-tax Officer may consider the same and examine the claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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