TMI Blog1992 (9) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... the audit report was not filed. However, before the Income-tax Officer could frame the assessment after processing the return, the audit report was already filed by the assessee before him and thereafter the Income-tax Officer framed the assessment on March 7, 1979. Amongst others, the Income-tax Officer, relying upon these circumstances, took the view that the assessee was not entitled to the benefit of section 80J, subsection (2), on account of non-compliance with the provisions of section 80J(6A). The said view of the Income-tax Officer was confirmed by the income-tax appellate authority, Commissioner of Income-tax, in the appeal of the assessee. The assessee thereafter carried the matter in second appeal before the Tribunal at Ahmedabad which took the view that the words employed by the said provisions that the audit report should be filed along with the return would mean that the audit report should also be furnished and should be made available to the Income-tax Officer at the time of assessment and, as that was done by the assessee, the assessee's claim for getting reliefs under section 80J(1) could not have been denied. The Tribunal, therefore, directed this matter to be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial undertaking shall not be admissible unless the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the deduction 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. " When section 80J, sub-section (1), is read in juxtaposition with sub section (6A) thereof, it becomes clear that the benefit of this provision is available to new undertakings or ships or hotel business. It is no doubt a beneficial provision for giving incentives to such new establishments. It is of course true that this benefit will be subject to what is provided by sub-section (6A). When we turn to the first part of subsection (6A), we find that there is a mandate to the assessing authority that the deductions under sub-section (1) from profits and gains shall not be admissible unless the accounts for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant. That part of the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s procedural in nature and requires the assessee to submit a report of the audit along with the return is merely directory in nature and it calls for only substantial compliance. The reasons are obvious. It is possible that at the time when the returns of income are filed, by some mischance or negligence of the clerk or for any other reason, even though the audited report is available, it might not have been annexed to the return and on such mistake being found out, the report may be tendered on the next day or even a few days thereafter to the Income-tax Officer. If any literal compliance with the words " assessee furnishes report along with his return of income " is insisted upon, then, in such an unforeseen contingency, the assessee would be denied benefit of section 801 of the Act. One other illustration can be considered to highlight the position. As per section 139(1) read with section 139(5) of the Act, the assessee can file return within the period permitted thereunder and even during the extended period or can file a revised return as per this provision, of course, after following the procedure laid down therein. If the assessee is prompt, he may file the return in time, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been complied with. The Revenue thereby would not stand to lose or suffer anything while, on the other hand, if only on the ground that along with the return the auditors' report was not filed but subsequently it was made available, the Income-tax Officer refuses to look into the merits of the claim, such new concern or establishment for whose benefit the provisions of section 80J(1) have been enacted would stand to suffer only on a technicality without any substantial benefit to any one. It is also necessary to keep in view that, at the time of framing the assessment, the assessing authority is vested with full powers under the Civil Procedure Code as laid down by section 131(1) of the Act. He can also ask for production of books of account and other documents. That shows that the stage which is relevant for considering the merits of the claim of the party is the stage when the assessing authority sits down to assess the income for the purpose of computing income-tax after framing appropriate assessment and it is at that stage that the requirements of section 80J(1) of the Act read with sub-section (6A) thereof can be taken into consideration. It is, therefore, not possibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rule, the court must read the rule in such a manner as to avoid manifest absurdity, apparent injustice and irrational or absurd conclusion, so that the object and purpose of the main enactment can be effectuated fully." It is obvious that the main purpose and object of section 80J(1) is to give incentive and development benefit to the new industries covered by the provisions of the Act. Consequently, while considering it, care has to be taken to see that the relevant purpose underlying section 80J is augmented and fortified and not frustrated by a construction put upon the said provision. Even assuming that another view is possible on the construction of the second part of sub-section (6A) of section 80J, as that view is likely to frustrate the very object and purpose of the scheme underlying section 80J(1) and would result in absurdity as indicated earlier, the other view by which the beneficial provision of section 801(1) is made fully operative should be preferred and even in that view of the matter also, we endorse the interpretation put upon these provisions by the Tribunal. It is true that, as submitted by learned counsel for the Revenue, a Division Bench of the Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erable force in the submission of Mr. Kaji, learned counsel for the assessee. Once it is held, as we have done, that the second part which is procedural is directory in nature, its substantial compliance should be considered to be sufficient for the purpose of getting the benefit of deduction under section 80J(1) and to that extent, the word shall " as employed by the Legislature in the second part of sub-section (6A) of section 80J(1) will have to be read as "may". In the case of Director of Inspection of Income-tax (Investigation v. Pooran Mall and Sons [1974] 96 ITR 390, the Supreme Court, while considering the provisions of section 132, sub-section (5) of the Act, speaking through Alagiriswamy J., laid down as under (headnote) : " It is not every provision of a taxing statute that will fall under the rule of strict interpretation. The question whether a certain provision of law is directory does not fall to be decided on different standards because it is found in a taxing statute. There is no rule that every provision in taxing statute is mandatory. The strict construction that a citizen does not become liable to tax unless he comes within the specific words of a statute is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer hearing the appeal and it is proved to his satisfaction that payment of the tax has been duly made in time. Rule 66 is only directory and provides only one of the modes of proving that the tax has been duly paid. If the challan was lost, the dealer should produce a copy of the challan from the treasury or obtain a certificate from the Treasury Officer or he could obtain from the bank the discharged cheque by which the amount of cheque was deposited by him and produce it. A certificate from the Sales Tax Officer is as good a proof as the challan from the treasury. All these means of proof will be equally irrefutable. Interpreting the word " entertain " in the proviso, it was observed that it meant the first occasion on which the court takes up the matter for consideration, it may be at the admission stage or if, by the rules of that Tribunal, the appeals are automatically admitted, it will be the time of hearing of the appeal. The words " no appeal ... shall be entertained " in the proviso to section 9 do not denote the filing of the memorandum of appeal but refers to the point of time when the appeal is being considered. Therefore, though the memorandum of appeal filed within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J., laid down as under (headnote): "The essence of section 184(7) of the Income-tax Act. 1961, is that once registration has been granted to a firm, it is to have effect for every subsequent year in case there has been no change in the Constitution of the firm or in the shares of its partners. The other requirements are merely to evidence this fact. The requirement that a firm shall furnish a declaration in Form No. 12 is merely to prove the facts in a particular way. The requirement that the declaration shall be filed along with the return of income is a procedural requirement. The legislative intent appears to be that while dealing with the assessment of a firm, the Income-tax Officer should have clear-cut evidence that the essential fact that there has been no change in the constitution of the firm or in the shares of the partners, has been proved satisfactorily in the required manner. Hence, the procedural requirements are to be treated as directory. If there is some defect in the declaration form, the assessee is to be given an opportunity for rectifying it under section 185(2). It cannot be ignored or rejected straightaway. Similarly, the requirement that the declaration s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the return had been duly filed and that there has been no change in the constitution of the firm and no change in the shares of the partners and the firm was registered during the previous year, then the necessary advantage of renewal conferred by sub-section (7) of section 184 must undoubtedly follow to the assessee-firm. The declaration could not be held to be invalid for the reason that it was not filed along with the return." In our view, the aforesaid reasoning of the Allahabad High Court and the Patna High Court would squarely apply to the facts of the present case. The provision about furnishing of the auditors' report along with the return has to be treated as a procedural provision, directory in nature, and its substantial compliance should suffice, meaning thereby that such report should be made available by the assessee to the Assessing Officer latest when the question of framing of assessment is taken up by the Incometax Officer and when he applies his mind to the claim of the assessee and if by that time, the assessee has put his house in order and has furnished the report of the auditor for supporting the return, he can be said to have satisfied the requirement o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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