Requirement to file audit report with return under s.80J(6A) is not mandatory; delayed audit report allows delayed return

HC held that the requirement in s.80J(6A) to file an audit report with the return is not mandatory; where preparation of the audit report was beyond the assessee's control the assessee could delay filing the return until the audit report was available. Denial of deduction because the return was filed earlier and the audit report produced later was improper. The Tribunal's view was upheld, the questions were answered against the Revenue and costs were awarded.

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Issues involved: Interpretation of section 80J of the Income-tax Act regarding the requirement of filing audit report along with the return for claiming deduction.

Summary:
The High Court of Madras considered a case where an assessee, a registered firm, claimed relief under section 80J of the Income-tax Act for their powerloom cloth business. The Income-tax Officer denied the relief as the audit report was not filed along with the return, although it was submitted before the assessment. The Appellate Tribunal held that the requirement of filing the audit report along with the return was directory, not mandatory. The Revenue challenged this decision, leading to the High Court's consideration.

The Revenue argued that section 80J(6A) mandates filing the audit report along with the return to claim the deduction. They cited a decision from the Punjab and Haryana High Court to support the mandatory nature of the provision. On the contrary, the assessee's counsel referred to a different view taken by the Gujarat High Court and other High Courts, emphasizing that the objective of the section should not be frustrated by a strict interpretation.

After considering both sides' arguments, the High Court agreed with the Gujarat High Court's interpretation. They noted that the provision should not discriminate between companies and other assessees, and the objective was to have the accounts audited for a proper assessment. The Court highlighted that the audit report should be available before the assessment, but there was no stipulation on the exact time of filing. They emphasized that the purpose of the section should be fulfilled by granting the relief rather than denying it based on technicalities.

In conclusion, the High Court held that section 80J(6A) was not mandatory but directory in nature. They relied on previous Supreme Court decisions to support their interpretation and answered the questions in favor of the assessee, with costs imposed on the Revenue.

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