Requirement to file the audit report with the return for claiming deduction under s.80J is directory, not mandatory

HC held that the requirement to file the audit report with the return for claiming deduction under s.80J is directory, not mandatory. An assessee who fails to file the audit report cannot expect the ITO to prompt compliance; the ITO may decide the claim on available material. If the report is furnished before completion of assessment with a satisfactory explanation for delay, the ITO may consider it and examine the deduction. Principles of natural justice do not oblige the ITO to inform the assessee that failure to file the audit report will lead to disallowance.

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Issues Involved:
1. Whether non-compliance with the condition of filing an audit report is fatal to the assessee's claim for relief u/s 80J(6A).
2. Whether the requirement of filing the audit report "along with the return of income" is mandatory or directory.
3. Whether it is the duty of the Income-tax Officer to inform the assessee about the non-filing of the audit report and give an opportunity to file the same.

Summary:

Issue 1: Non-compliance with the condition of filing an audit report u/s 80J(6A)
The court examined whether the failure to file an audit report as required by section 80J(6A) is fatal to the assessee's claim for relief. The assessee, a registered partnership firm, claimed deductions u/s 80J for the assessment years 1976-77 and 1977-78, which were initially allowed by the Income-tax Officer. However, the Commissioner of Income-tax, upon review, found the order erroneous and prejudicial to the interests of the Revenue due to non-compliance with the audit report requirement and initiated revision proceedings u/s 263. The Tribunal remitted the case to the Commissioner to allow the assessee to file the audit report, but the High Court found this approach incorrect, emphasizing that non-compliance with the audit report requirement is indeed fatal to the claim.

Issue 2: Mandatory vs. Directory Requirement of Filing the Audit Report
The court analyzed whether the requirement to file the audit report "along with the return of income" is mandatory or directory. Sub-section (6A) of section 80J stipulates two conditions: (i) the accounts must be audited by an accountant, and (ii) the audit report must be filed along with the return. The court held that the first condition is mandatory, while the second condition, regarding the timing of filing the report, is directory. The court concluded that if the audit report is filed before the completion of the assessment and the delay is satisfactorily explained, the Income-tax Officer may accept it. However, this does not grant the assessee the right to file the report at any time before the assessment's completion.

Issue 3: Duty of the Income-tax Officer
The court addressed whether it is the duty of the Income-tax Officer to inform the assessee about the non-filing of the audit report and provide an opportunity to file it. The court rejected this notion, stating that it is the assessee's responsibility to comply with statutory requirements to claim benefits. The Income-tax Officer is not obligated to remind the assessee to file the audit report. The principles of natural justice do not extend to imposing such a duty on the Officer.

Conclusion:
The court answered the question in favor of the Revenue, stating that the requirement of filing the audit report "along with the return of income" is directory. If the assessee files the report before the completion of the assessment with a satisfactory explanation for the delay, the Income-tax Officer may consider it. However, it is not the Officer's duty to inform the assessee about the non-filing and provide an opportunity to rectify it. The Tribunal's view that the Officer should inform the assessee was not upheld.

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