2004 (12) TMI 33 - HC - Income Tax

Deduction under section 80HHA - Whether Tribunal is right in law in deleting the addition of Rs. 17, 876 made on account of disallowance of the assessee s claim for deduction under section 80HHA on the basis of a revised return which was not filed along with the original return? - The core issue before us is whether sub-section (4) of section 80HHA of the Act is mandatory and non-compliance therewith results in depriving the assessee of the benefit of deduction in terms of sub-section (1) thereof. - The facts of the case in hand show that the assessee had not filed the audited accounts along with the original return but had done the needful with the revised return filed in pursuance of the notice issued by the Assessing Officer u/s 143(2)(b). This means that it had substantially complied with the provisions of section 80HHA(4). We therefore hold that the Tribunal did not commit any error by deleting the addition

Summary

Issues involved:
Interpretation of section 80HHA of the Income-tax Act regarding deduction for profits from small-scale industrial undertakings. Compliance with the requirement of filing audited accounts along with the return. Determining if non-compliance with section 80HHA(4) can result in denial of deduction under section 80HHA(1).

Detailed Analysis:
The case involved a question of law referred by the Income-tax Appellate Tribunal regarding the deletion of an addition made on account of disallowance of the assessee's claim for deduction under section 80HHA. The assessee, engaged in the business of manufacturing rice, had filed a revised return with audited accounts after the original assessment was reopened. The Assessing Officer rejected the deduction claim under section 80HHA due to the absence of audited accounts with the original return.

The Tribunal held that the delay in filing audited accounts was inconsequential and should not deprive the assessee of the deduction under section 80HHA. The court analyzed section 80HHA, which provides for a deduction in profits from small-scale industrial undertakings, and specifically focused on sub-section (4) which mandates filing audited accounts with the return to claim the deduction.

Referring to a previous judgment, the court clarified that while sub-section (4) of section 80HHA is not mandatory, non-compliance should not automatically result in denying the deduction benefit if audited accounts are filed before assessment and a reasonable explanation is provided for the delay. In this case, the assessee had filed audited accounts with the revised return after the notice under section 143(2)(b), indicating substantial compliance with the requirements of section 80HHA(4).

Based on the analysis, the court held that the Tribunal's decision to delete the addition made on the deduction claim was correct. The judgment favored the assessee and ruled against the Revenue, emphasizing that non-compliance with section 80HHA(4) does not automatically lead to denial of the deduction under section 80HHA(1).

In conclusion, the court's interpretation of the provisions of section 80HHA, the application of previous judgments, and the specific circumstances of the case led to the decision in favor of the assessee regarding the deduction claim under section 80HHA.