TMI Blog2006 (5) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the above terms. - HON'BLE ADARSH KUMAR GOEL AND RAJESH BINDAL, JJ. JUDGMENT 1. In terms of the direction given by this court in I.T.C. No. 1 of 1984 vide order dated August 24, 1988, the following question of law arising out of Tribunal's order dated August 22, 1983, in I.T.A. No. 429 of 1980, for the assessment year 1977-78, was referred to this court for its opinion: Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the provisions of section 80J(6A) of the Income-tax Act, 1961, are directory and not mandatory and in allowing the assessee's claim under section 80J in that view? 2. The assessee, which is a registered firm, filed its return of income on August 31, 1977, declaring net income of Rs. 81,190/-. Though, as per provisions, it was required to be filed on or before July 31, 1977. In the return, a claim of deduction under section 80J of the Income-tax Act (for short the Act ) was made. Along with the return, the assessee did not furnish any audit report. The claim of the assessee with regard to deduction under section 80J of the Act was disallowed by the Assessing Officer with the observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the profits and gains derived by an assessee, being a company, from an industrial undertaking which begins to manufacture or produce articles or to operate its cold storage plant or plants after the 31st day of March, 1976, or from a ship which is first brought into use after that date, or from the business of a hotel which starts functioning after that date, the provisions of this sub-section shall have effect as if for the words six per cent , the words seven and a half per cent had been substituted. (2) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning (such assessment year being hereafter, in this section, referred to as the initial assessment year) and each of the four assessment years immediately succeeding the initial assessment year: Provided that in the case of an assessee, being a co-operative society, the provisions of this sub-section shall have effect as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urth assessment year', the words 'sixth assessment year' had been substituted. (4) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces articles, or operates one or more cold storage plant or plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of thirty-three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking manufacturers or produces articles, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power: Provided that the condition in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... territorial waters by a person resident in India; and (iii) it is brought into use by the Indian company at any time within a period of thirty-three years next following the 1st day of April, 1948. (6) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely:- (a) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose; (b) the business of the hotel is owned and carried on by a company registered in India with a paid-up capital of not less than five hundred thousand rupees; (c) [Omitted by the Finance Act, 1973, with effect from April 1, 1974]; (d) the hotel is for the time being approved for the purposes of this sub-section by the Central Government; (e) the business of the hotel starts functioning on or after the 1st day of April, 1961, but before the 1st day of April, 1981. Explanation.- Where in the case of the business of a hotel, any building, or any part thereof, previously used as a hotel, or any machinery or plant, or any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant: Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business or profession audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section. While considering the matter, a Full Bench of this court in CIT v. Punjab Financial Corporation [2002] 254 ITR 6 concurred with the views expressed by the Gujarat High Court in CIT v. Gujarat Oil and Allied Industries [1993] 201 ITR 325 and the Madras High Court in CIT v. A.N. Arunachalam [1994] 208 ITR 481 and held that section 32AB(5) of the Act is not mandatory in character and overruled the view expressed by a Division Bench of this court in Jaideep Industries' case [1989] 180 ITR 81 which held that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee who is not prompt enough may not file the return at the first opportunity. In such a contingency, a prompt assessee who files the return in time would stand to suffer only because the auditor's report has not physically accompanied the return while another assessee who waits till the end of the expiry of the period and files the return with the report will stand to gain, as he would get the benefit of section 80J(1) while the assessee who files the return at the first opportunity would stand to suffer though, in both the cases, at the time when the assessments are framed, the audited reports are made available by both the assessees to the Income-tax Officer. This would result in absurdity. Hence, in our view, the Tribunal was right when it took the view that the second part of the provision regarding furnishing of the report of the auditor along with the return is not a mandatory provision and it requires substantial compliance in the sense that it should be made available to the Income-tax Officer before the assessment is framed and, by that time, if the assessee puts his house in order, the Income-tax Officer will be required to consider the case of the assessee for deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y delay the filing of the return itself so that it is accompanied by the audit report. In such an event, the Income-tax Officer cannot deny the claim for relief since the purpose of the section would have been fulfilled even though the return itself is filed beyond the prescribed time. The stress laid by section 80J(6A) is only to have the accounts audited and to make the audit report available to the Income-tax Officer to make a proper assessment. Hence, the audit report can be made available before the assessment is made. The objective of section 80J(6A) should be carried out by granting the relief rather than picking out a venial fault for denying the relief intended to be given by the statute. (Emphasis, italicised in print, supplied) 11. A perusal of dictum of law as referred to above clearly shows that though the provisions of section 80J(6A) of the Act have been held to be directory in nature to the extent that audit report, in case not filed along with the return is not fatal for grant of deduction. However, the provisions have been held to be directory only to the extent that in case the audit report is not filed along with return, the same can be filed any time before the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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