ORDER
NATHURAM, A. M. :
The appeal preferred by the assessee against the order of the CIT(A) for asst. yr. 1989-90 raises the only following ground :
“The learned CIT(A) erred in not allowing the deduction claimed by the assessee in the sum of Rs. 1,36,000 under s. 32AB which was denied by the Assessing Officer (AO) merely for the reason that the necessary audit report in Form No. 3AA was not annexed with the original return of income filed by the assessee. The learned CIT(A) failed to appreciate that the photo copy of the receipt for investing the funds in IDBI was duly annexed with the original return and before completion of the assessment, the necessary audit report in Form No. 3AA, which though obtained but remained to be filed earlier, was also filed along with the revised return.”
2. The assessee-company was engaged in the business of transportation of tobacco and processing. The assessee filed a return declaring total income at Rs. 12,19,770 on 21st Dec., 1989. The assessee made a deposit of Rs. 1,36,000 with IDBI and claimed deduction under s. 32AB. The assessee, however, failed to file a copy of the audit report along with the return filed as required in sub-s. (5) of s. 32AB. The assessee consequently filed a revised return showing income as disclosed in the original return but annexing therewith auditors report in the prescribed form. Since the requisite audit report was not filed along with the return originally filed the AO rejected the claim of the assessee following the decision of the Honble Punjab & Haryana High Court in the case of CIT vs. Jaydeep Industries (1989) 180 ITR 81 (P&H) wherein the Honble High Court held the view that the requirement of filing of audit report along with the return of income as required under s. 80J(6A) is mandatory as the provision clearly lays down the deduction claimed shall not be admissible unless the assessee also furnishes alongwith the return the audit report in the prescribed form duly signed and verified by the accountant.
3. On appeal it was claimed that the assessee filed the requisite audit report with the revised return when came to know that the same was not filed with the original return. It was also claimed that the assessee is an old existing assessee and its accounts are regularly audited every year. The audit report was finalised for the current year before the return was filed and auditors report was obtained in Form No. 3AA but inadvertently the same was not attached with the original return. The assessee thus claimed that when the audit report was filed with the revised return before the assessment was completed the claim made should have been allowed and in support reliance was placed on various decisions of the Tribunal and High Courts. The first appellate authority placing reliance on the aforecited decision of the Punjab & Haryana High Court upheld the order of the AO. The assessee is now in appeal before us against the decision so given by the first appellate authority.
4. None appeared on behalf of the assessee. However, written submissions have been made and the same is placed on record. In the written submissions the contentions made before the lower authorities have been reiterated. It has further been submitted that the learned CIT(A) has confirmed the action of the AO while holding when the language of the provisions are clear and unambiguous no intention otherwise than the clear meaning discernible from the wording of the language of the section can be assumed or presumed relying on certain case laws but the said case laws may be applicable for charging provision and not for machinery provision. The decisions cited by the first appellate authority are, therefore, not directly applicable to the facts of the case. On the contrary in the following cases it has been held that auditors report or application for registration can be filed in the course of assessment proceedings :
1. CIT vs. Malayalam Plantations Ltd. (1976) 103 ITR 835 (Ker)
2. CIT vs. Sitaram Bhagwandas (1976) 102 ITR 560 (Pat)
3. Pursottamlal Kishorilal vs. CIT (1978) 115 ITR 377 (Pat)
4. CIT vs. Murlidhar Mathura Prasad (1979) 118 ITR 392 (All)
5. CIT vs. Shri Baldev Ji Maharaj Trust (1983) 142 ITR 584 (All)
6. CIT vs. Western Rolling Mills (Pvt.) Ltd. (1985) 156 ITR 54 (Bom)
7. Billimora Engg. Mart vs. CIT (1985) 156 ITR 153 (Guj)
8. CIT vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust (1992) 195 ITR 825 (Cal)
9. CIT vs. Hardeodas Agarwalla Trust (1992) 198 ITR 511 (Cal)
10. CIT vs. Gujarat Oil & Allied Industries (1993) 201 ITR 325 (Guj)
It has further been submitted that the Honble Supreme Court in the case of CIT vs. Nanjibhai Dungarbhai (1989) 179 ITR (St) 61 rejected the SLP against the order of the Honble Gujarat High Court declining to call for a reference on the question whether the Tribunal correctly directed exemption under s. 11 to the trust and the auditors report in Form No. 10B as required by s. 12A(b) was not filed with the return of income. It is also submitted that the provisions of s. 12A(b) with regard to the filing of audit report along with the return has been held directory in the case of Trustees of Virji Peraj Trust vs. ITO (1984) 19 TTJ (Bom) 538 : (1984) 8 ITD 890 (Bom) and Calcutta Management Association vs. ITO (1992) 42 ITD 62 (Cal). It has also been pointed out that provisions of s. 80J(6A) has also been held directory in the following cases :
1. Laxmi Rice Mills vs. ITO (1982) 2 ITD 39 (Del)
2. Mahalaxmi Rice Factory vs. ITO (1984) 18 TTJ (Chd) 553 : (1983) 5 ITD 238 (Chd)
3. ITO vs. Vijaydurga Offset Printers (1988) 30 TTJ (Hyd) 172
4. Amber Sales Mfg. vs. ITO (1984) 19 TTJ (Chd) 177
5. ITO vs. Mangal Metal Industries (1991) 39 TTJ (Ahd) 426 : (1991) 36 ITD 161 (Ahd).
Further arguing it has been stated that the provisions of s. 32AB(5) about filing of audit report with the return has also been held directory in the cases of Nemco Enterprise vs. Asstt. CIT (1993) 45 ITD 54 (Pune) and Amber Electric Construction P. Ltd. vs. Dy. CIT (1992) 43 ITD 313 (Mad). Similarly, the provisions of s. 80HHC(5) regarding filing of audit report has also been held directory by Delhi Bench of the Tribunal in the case of Sudha Sharma vs. ITO (1993) 46 TTJ 276 (Del). Further, it has been submitted that even otherwise the assessee has filed the audit report along with the revised return and if the requirement is held to be directory the assessee is entitled to deduction as it is not specified in the section that the auditors report must be filed along with the original return. Reliance has been placed on the Tribunal decision in the case of Himson Industries vs. ITO (1987) 23 ITD 364 (Hyd) wherein the assessee-firm which had not filed its audited accounts and auditors report along with the original return but filed it along with the return submitted in pursuance of notice under s. 148 was held to have fulfilled the conditions prescribed under sub-s. (5) of s. 80HH. It has also been submitted that the Honble Gujarat High Court in the case of CIT vs. Gujarat Oil & Allied Industries (supra) has held the view that although charging provisions have to be strictly construed but not the machinery provisions or procedural provisions which can be liberally construed. The assessee thus on the facts and relying upon the ratio of the aforecited decisions has contended that though audit of accounts for the purpose is mandatory but filing of audit report along with the return is directory and since the assessee filed the audit report along with the revised return during the assessment proceedings the requirements of s. 32AB(5) have been substantially fulfilled and the deduction claimed deserves to be granted. The learned Departmental Representative on the other hand relied upon the orders of the lower authorities and submitted that filing of audit report as per the provisions of section is mandatory and the assessee having not filed the audit report along with the original return the lower authorities were justified in rejecting the claim.
5. We have carefully considered the facts and rival submissions. We have also gone through the relevant provisions of the Act and the case laws cited. For claiming the deduction under s. 32AB(1) for the deposit made with the IDBI the assessee was required to have its books of accounts audited and also to furnish a copy of the audit report in the prescribed form along with the return as per sub-s. (5) of s. 32AB. For proper appreciation we reproduce hereunder sub-s. (5) of s. 32AB :
“The deduction under sub-s. (1) shall not be admissible unless the accounts of the business or profession of the assessee 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 Expln. below sub-s. (2) of s. 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.”
It would be seen from the above provisions that to claim the said deduction the assessee is required to satisfy the following two conditions :
1. The books of accounts maintained are to be audited by an accountant.
2. Such audit report in the prescribed form duly signed and verified is required to be furnished along with the return.
While rejecting the claim the lower authorities have relied upon the decision of the Honble Punjab & Haryana High Court in the case of CIT vs. Jaydeep Industries (supra) wherein the claim was made for special deduction under s. 80J. The allowance of claim under s. 80J is also subject to audit of accounts and furnishing of audit report along with the return as per sub-s. (6A) of s. 80J. Sub-s. (6A) of s. 80J reads as under :
“Where the assessee is a person other than a company or a co-operative society, the deduction under sub-s. (1) from profits and gains derived from an industrial 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 Expln. below sub-s. (2) of s. 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.”
The Honble Punjab & Haryana High Court in the aforecited case held the view that filing of audit report under s. 80J(6A) during the assessment proceedings would not satisfy the requirements of the said section, with the following observations :
“Turning now to the other question posed, namely, with regard to the filing of the audit report along with the return of income in terms of s. 80J(6A), there can, indeed be no escape from the conclusion that the requirement of the audit report being filed along with the return of income is rendered mandatory by the provisions thereof. It is pertinent to note in this behalf that this provision clearly lays down that deduction claimed shall not be admissible unless the assessee also furnishes along with the return, the audit report in the prescribed form duly signed and verified by the accountant. This being so, the second question referred has to be answered in the negative, in favour of the Revenue and against the assessee. This reference is disposed of accordingly.”
However, the Honble Gujarat High Court in a recent judgment in the case of CIT vs. Gujarat Oil & Allied Industries (supra) has held the view on the claim made under s. 80J that as per sub-s. (6A) auditing of accounts is mandatory whereas filing of audit report along with the return is directory. The Honble Gujarat High Court also interpreted the word shall as employed by the legislature in sub-s. (6A) of s. 80J to be read as may. The headnotes of the judgment of the Honble Gujarat High Court are extracted hereunder :
“Sec. 80J of the IT Act, 1961, gives special deductions to new industrial undertakings and hotels, provided the conditions laid down therein are fulfilled. The benefit will be subject to the provisions of sub-s. (6A) of s. 80J. The first part of sub-s. (6A) lays down that the deductions under sub-s. (1) from profits and gains shall not be admissible unless the accounts for the previous year relevant to the assessment year for which deduction is claimed have been audited by an accountant. The first part of s. 80J is mandatory in nature but the second part thereof which is procedural in nature and requires the assessee to submit the 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 return of income is 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 ITO. If any literal compliance with the words assessee furnishes report along with his return of income is insisted upon, then, in such an unforseen contingency, the assessee would be denied the benefit of s. 80J. Moreover, while an assessee who waits till the end of the expiry of the period and files return with the report will stand to gain, as he would get the benefit of s. 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, audited reports are made available by both the assessees to the ITO. This would result in absurdity. It has also to be kept in view that by the mere non-filing of the auditors report along with the return of income, the assessee does not stand to gain anything nor does the Revenue stand to lose, as even after the return is filed, it is obvious that it may take time before the ITO applies his mind to the merits of the return, when he sits down to frame the assessment. At the time of framing the assessment, the assessing authority is vested with full powers under the CPC, 1908, as laid down by s. 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 income for the purpose of computing income-tax after framing appropriate assessment and it is at that stage that the requirements of s. 80J(1) r/w sub-s. (6A) thereof can be taken into consideration. It is obvious that the main purpose and object of s. 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 s. 80J is augmented and fortified and not frustrated by construction put upon the said provision. Even assuming that another view is possible on the construction of the second part of sub-s. (6A) of s. 80J, as that view is likely to frustrate the very object and purpose of the scheme underlying s. 80J(1) and would result in absurdity, the other view by which the beneficial provision of s. 80J(1) is made fully operative should be preferred. Hence, the word shall as employed by the legislature in sub-s. (6A) of s. 80J(1) will have to be read as may (See pp. 329B, C 330B – D, F – H, 331A, B, E – G, 332F – H, 333H, 334A).”
While holding so the Honble Gujarat High Court dissented from the decision of the Honble Punjab & Haryana High Court in the case of Jaydeep Industries (supra). Similar view had been held earlier by the Tribunal in respect of deduction under s. 80J in the case of Laxmi Rice Mills vs. ITO (supra) and Mahalaxmi Rice Factory vs. ITO (supra).
5.1 It is mentioned in this regard that sub-s. (5) of s. 32AB is pari materia with sub-s. (6A) of s. 80J. The ratio of decision of the Honble Gujarat High Court is, therefore, applicable to the claim made in the present case under s. 32AB.
5.2 We also find that the Tribunal on similar facts allowed deduction under s. 32AB in its orders in the cases of Amber Electrical Conductors P. Ltd. vs. Asstt. CIT (supra) and Nemo Enterprises vs. Asstt. CIT (supra) where copy of the audit report was not filed along with the return but the same were filed with the application made under s. 154.
5.3 We also note that the Tribunal in the case of ITO vs. Mangal Metal Industries (supra) held similar view about filing of audit report in respect of the claim made under s. 80HH. Likewise in the case of R. D. Ramnath & Co. vs. IAC (1991) 36 ITD 355 (Del) in relation to the claim made under ss. 80H and 80-I the Tribunal held a similar view about filing of audit report. Our attention has also been drawn to the decision of the Honble Allahabad High Court in the case of CIT vs. Shri Baldevji Maharaj Trust (supra) wherein claiming exemption under s. 11 the assessee failed to file the audit report along with the return. The assessee, however, subsequently filed the audit report along with a revised return. It was held therein that there being omission of filing audit report along with the original return the assessee was entitled to file a revised return.
6. In the present case as per the facts given the assessee got the books of account audited before the return was filed but a copy of the report was not furnished along with the return. The assessee, however, filed a revised return along with which a copy of the audit report was furnished. A revised return is filed as per provisions of s. 139(5) and the same being a valid return the assessee complied with the second condition of filing of the audit report along with the return as laid down in sub-s. (5) of s. 32AB. Moreover, such audit report was available before the AO during the course of assessment proceedings and the same has not been found wanting in any respect by the AO. Having regard to these facts and the ratio of the decisions cited supra including that of the Gujarat High Court in the case of Gujarat Oil & Allied Industries (supra) we see no justification for rejecting the claim made under s. 32AB for the deposit made with the IDBI of Rs. 1,36,000. The AO is accordingly directed to allow the claim.
7. The appeal is allowed.