ORDER
D.R. Singh, J.M.
1. The Revenue is in appeal against the order of the CIT(A), Jalandhar in appeal No. 569/92-93/CIT(A)/Jal, dt. 19th March, 1993, on the following effective ground :
“That, on the facts and in the circumstances of the case, the learned CIT(A) has erred in allowing deduction under s. 80HHC by treating the unsigned Audit Report as a valid report. Reliance is placed on the Board’s Circular No. 581, dt. 28th September, 1990.”
2. Stated briefly, the facts pertaining to this ground are that the case was processed under s. 143(1)(a) of the Act on 2nd November, 1992. While processing this case adjustment to the extent of Rs. 1,55,73,426 was made observing, “No audit report in support of deduction under s. 80HHC for claiming deduction at Rs. 1,55,73,426 is furnished along with the return as required under s. 80HHC(4). Hence, no such deduction is admissible and as such the same is disallowed and added back.” Thereafter an application under s. 154 of the Act was moved by the assessee pointing out that audit report in Form No. 10CCAC was furnished along with the return. Due to inadvertent mistake unsigned copy was attached with the return which was filed on 30th October, 1992. Thereafter, copy of the said report was filed on 2nd November, 1992. Therefore, there was mistake apparent from record in not allowing the deduction claimed which needs rectification. The AO did not accept these contentions and rejected the application under s. 154 of the Act holding that filing of the audit report for claiming the said deduction was the statutory requirement and this requirement had not been complied with by the assessee. According to him the unsigned report could not be treated as valid audit report. Thus, after detailed discussion in the impugned order he rejected the application made under s. 154 of the Act.
3. Aggrieved with this order, the assessee filed an appeal before the CIT(A), who made the following observations in his order :
“1.3 I have carefully considered the rival submissions. The issue which emerges is that whether audit report in prescribed proforma which was filed along with the return of income and was unsigned could be treated as a valid report or not. A reference to the records shows that the report in Form No. 10CCAC in accordance with r. 18BBA(2) of the IT Rules, was attached with the return of income. Particulars in all the columns have duly been filled in. The said report is dated. However, it is not signed. In my view in such circumstances it cannot be held that it was an invalid report. No doubt this was defective report but the defect was of such a nature which could have been removed. Once the report attached with the return of income is treated as a valid report, not allowing deduction under s. 80HHC of the Act while processing the case under s. 143(1)(a) of the Act tantamounts mistake apparent from the records which require rectification. The AO rejected the rectification application which, in my view, was not justified. As regards reference to my decision in some other case, it is observed that facts of that case were different. With these observations, the application under s. 154 of the Act is held to be maintainable and the AO is directed to amend the intimation under s. 143(1)(a) of the Act treating the report filed along with the return as a valid report and also after taking into account the report submitted later on.”
4. Aggrieved with this order of the CIT(A), now the Revenue is in appeal before us for setting aside the order of the CIT(A) and for restoring the order of the AO.
5. We have heard the authorised representatives of the parties, considered the rival contentions, perused the records and carefully gone through the orders of the lower authorities.
6. In order to dispose of this ground, we are required to settle the issue whether the deduction under s. 80HHC can be allowed to the assessee when he has not filed any audit report along with the return as required under s. 80HHC(4) of the IT Act, 1961, made in support of claiming the deduction under s. 80HHC. It has been argued by the learned Departmental Representative for the Revenue that as per CBDT’s Circular No. 581, dt. 28th September, 1990, the unsigned report furnished along with the return cannot be treated as a valid report by subsequent furnishing of the unsigned audit report for claiming deduction under s. 80HHC of the IT Act, 1961.
7. On the other hand, the learned counsel for the assessee has brought to our notice CBDT’s Circular No. 669, dt. 25th October, 1993 and Circular No. 689, dt. 24th August, 1994 on the basis of which if evidence is subsequently furnished, rectification under s. 154 should be carried out no prima facie disallowance shall, however, be made, if any evidence required to be filed along with the return of income is not so filed. In order to appreciate this argument of the representative of the parties, we hereby reproduce the relevant portion of cl. 3 of the CBDT’s Circular No. 581 dt. 28th September, 1990 relied upon by the Departmental Representative :
“3. Similarly, filing of evidence in support of an exemption/deduction at the time of furnishing the return of income has been prescribed as a necessary condition in certain other sections of the IT Act, such as ss. 32AB(5), 32AB(2), 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 35D(4), 35E(6), 80HHB(3), 80HHC(4), 80HHD(6), 80-I(7), etc. In such cases, also where the exemption/deduction claimed is disallowed as prima facie inadmissible for want of evidence in support thereof under s. 143(1)(a), it cannot be subsequently allowed by a rectification order under s. 154 if the assessee later on furnishes evidence in support thereof.”
8. This clause of the circular hereby indicates that if evidence in support of exemption/deduction claimed under s. 80HHC(4) of the IT Act, 1961 has not been filed along with the return then such exemption/deduction is to be disallowed as prima facie inadmissible for want of evidence in support thereof under s. 143(1)(a) of the IT Act. It means that in case for claiming the deduction under s. 80HHC, no audit report has been filed along with the return by the assessee then the AO can, prima facie disallow this deduction if inadmissible under s. 143(1)(a). In subsequent portion of this very clause of the circular, it has further been laid down that even this deduction cannot be allowed subsequently by rectification order under s. 154 by the AO even if the assessee/later on furnished evidence in support thereof.
9. In this case, the undisputed facts are that the assessee has furnished unsigned audit report which is no report in the eyes of law and hence the AO was fully justified on the basis of circular and prima facie disallowed this deduction claimed by the assessee under s. 143(1)(a) because the assessee has not furnished any evidence in support of the claim as the unsigned audit report furnished by the assessee was no report in the eyes of law. On further reading of this circular, it is clear that subsequent furnishing of a signed report along with rectification application under s. 154 filed by the assessee he cannot be allowed deduction subsequently even if he has furnished a signed report as a token of evidence in respect of his claim of deduction.
10. Whereas, on the other hand, the assessee has relied upon the Circular No. 689 dt. 24th August, 1994, sub-cl. (b), along with example for ready reference is reproduced below :
“(b) any claim in respect of which there is an omission of information which is required, under the specific provisions of the Act or the Rules, to be furnished along with the return to substantiate such claim.
Example :
If the audit report specified under s. 80HHC(4), which is required to be filed along with the return of income is not so filed, the deduction claimed under that section can be disallowed as a prima facie adjustment. Some more examples in this regard are the non-filing of audit report or other evidence along with the return of income as required under s. 12A(b), 33AB(2), 35E(6), 43B(first proviso), 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 80HHB(3), 80HHD(6), 80HHE(4), 80-I(7), 80-IA(8) and the like. But if evidence is subsequently furnished, rectification under s. 154 should be carried out to the extent permitted by the Board’s Circular No. 669 dt. 25th October, 1993. No prima facie disallowance shall, however, be made, if any evidence required to be filed along with the return of income only in pursuance of the non-statutory guidance notes for filing in the return of income, is not so filed.”
11. However, this sub-clause lays down certain proviso by referring to Circular No. 669, dt. 25th October, 1993, by mentioning that rectification under s. 154 should be carried out to the extent permitted by the Board’s Circular No. 669, dt. 25th October, 1993.
12. For ready reference, cls. (2) and (3) of Circular No. 669, dt. 25th October, 1993 are also reproduced as below :
“(2) The Board have reconsidered the matter and are of the opinion that where the sums referred to in the first proviso under s. 43B had in fact been paid on or before the due dates mentioned therein, but the evidence therefore had been omitted to be furnished along with the return, the AOs can entertain applications under s. 154 for rectification of the intimation under s. 143(1)(a) or orders under s. 143(3), as the case may be, and decide the same on merits.
3. Circular No. 581, dt. 28th September, 1990, stands modified to the above extent.”
13. Now, on reading of these Circulars simultaneously, we find that Circular No. 581, dt. 28th August, 1990, clearly lays down that in case the assessee claims deduction/exemption in a particular provision of law (as specified in detail in that circular) but does not file any evidence in support thereof then the AO can prima facie disallow the same as inadmissible under s. 143(1)(a) of the IT Act, 1961, and the same, later on, cannot be allowed by the AO by passing an order under s. 154 even if the assessee subsequently furnished the evidence in support thereof. However, by Circular No. 669 dt. 25th October, 1993, this above Circular No. 581, dt. 28th September, 1990 was modified to the extent that where the sums referred to in the first proviso to s. 43B had, in fact, been paid on or before the due dates mentioned therein, but the evidence therefore, had been omitted to be furnished along with the return, the AO can entertain applications under s. 154 for rectification of the intimation under s. 143(1)(a) or orders under s. 143(3), as the case may be, and decide the same on merits. It means that by this circular, the earlier Circular No. 581 stood modified because the AO was given power to rectify under s. 154 in case the assessee furnished proof of payment on or before the due date as required under s. 43B of the Act and so the same could be taken into consideration by the AO at the time of considering the application under s. 154 whereas due to previous Circular No. 581, he could not do so.
14. Therefore, by this circular No. 669, the power of the AO to rectify under s. 154 was only limited to the exemption/deduction relating to the first proviso to s. 43B of the IT Act. However, this provision of rectification was further broadened in the subsequent Circular No. 689, dt. 24th August, 1994, wherein even deduction/exemption claimed under s. 80HHC(4), 12A(b), etc., and the like could be rectified by the AO under s. 154 of the IT Act, 1961. In case the assessee later on furnishes evidence in support thereof if he did not furnish the same, which was required to be furnished by him along with the return of income. Hence, we are of the opinion that when Circular No. 581 is only considered in isolation then the AO was justified in refusing rectification under s. 154 of the IT Act, 1961, because an unsigned audit report filed along with the return of the assessee for claiming exemption was not audit report in the eyes of law and so the AO was fully within his right not to consider the signed audit report subsequently furnished by the assessee while passing order under s. 154 but due to the subsequent Circular Nos. 669, dt. 25th October, 1993, and 689, dt. 24th August, 1994, issued by the CBDT which clearly laid down that if the audit report specified under s. 80HHC(4), required to be filed along with the return of income for claiming deduction has not been filed by the assessee along with the return of income, the deduction/claimed under that section can be disallowed as a prima facie adjustment by the AO but if such report/evidence is subsequently furnished then the rectification under s. 154 should be carried out by the AO in the light of that evidence subsequently furnished by the assessee in support thereof.
15. Hence, we conclude that considering these subsequent Circular Nos. 669 and 689, the AO was not justified in refusing the rectification by not considering the subsequently signed audit report filed by the assessee.
16. The net result of our above discussion leads us to the conclusion that ground of appeal taken by the Revenue has no merits and the same is rejected and the order of the CIT(A) wherein he held that the application made by the assessee before the AO under s. 154 of the IT Act, is maintaining, is sustained, though, of course, on a different reasoning as hereinabove given in our order. We further direct the AO to amend the intimation under s. 143(1)(a) of the IT Act, 1961, by considering the signed audit report filed by the assessee in support of his application under s. 154 of the IT Act, 1961.
17. In the result, the appeal of the Revenue fails and the same is dismissed.