Late audit report under section 12A(b) allowed; exemption under sections 11 and 12 cannot be denied.

The HC upheld the Tribunal's decision permitting the assessee-charitable trust to file the audit report required under section 12A(b) at the appellate stage and not necessarily along with the return. Relying on CBDT's circular treating the requirement as procedural and directory, the HC held that the expression "shall" in section 12A(b) does not make contemporaneous filing with the return mandatory. Where delay in furnishing the audit report is due to reasons beyond the assessee's control, the Assessing Officer or appellate authority may accept it later after recording reasons. Consequently, exemption under sections 11 and 12 could not be denied solely for delayed filing, and the reference was answered in favour of the assessee.

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Issues Involved:
1. Whether the Appellate Tribunal was right in law in setting aside the order of the Appellate Assistant Commissioner regarding the filing of the audit report u/s 12A(b).
2. Whether the audit report can be submitted at the appellate stage if not furnished with the return of income.

Summary:

Issue 1: Setting Aside the Order of the Appellate Assistant Commissioner
The Tribunal set aside the order of the Appellate Assistant Commissioner, which had denied the assessee the exemption u/s 11 and 12 due to the failure to furnish the auditor's report u/s 12A(b) along with the return. The Tribunal held that the law did not provide a specific time limit for the production of the audit report and that the first appellate court erred in refusing to admit the auditor's report, which the assessee could not produce before the Income-tax Officer.

Issue 2: Submission of Audit Report at the Appellate Stage
The Tribunal allowed the assessee to submit the audit report at the appellate stage, noting that the assessee had substantially complied with the provisions of clause (b) of section 12A by furnishing the audited accounts, including the income and expenditure account, balance-sheet, and auditor's note. The court referred to the CBDT circular dated February 9, 1978, which clarified that the requirement of filing the audit report along with the return was directory and not mandatory. The circular allowed for the acceptance of a belated audit report by the Income-tax Officer if reasons for the delay were recorded.

Legal Precedents and Interpretations:
The court distinguished the present case from CIT v. Jaideep Industries [1989] 180 ITR 81, where the filing of the audit report along with the return was deemed mandatory u/s 80J(6A). The court noted that the provisions of section 80J(6A) and section 12A are pari materia, but the CBDT circular made the requirement under section 12A(b) procedural and directory. The court also referred to CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust [1992] 195 ITR 825 (Cal) and CIT v. Gujarat Oil Limited Allied Industries [1993] 201 ITR 325 (Guj), which supported the view that the provision was directory.

Conclusion:
The court answered the question in the affirmative, against the Revenue and in favor of the assessee, allowing the submission of the audit report at the appellate stage and emphasizing the procedural nature of the requirement u/s 12A(b). No costs were awarded.

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