1994 (1) TMI 65 - HC - Income Tax

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 ... Interpretation of section 80J - Industrial Undertaking - requirement of filing audit report along with the return for claiming deduction - HELD THAT:- Since there is a provision for extending the time for filing the return, all that the assessee was required to do was to delay the filing of the return until the audit report was made available. As the Tribunal has observed, the preparation of the audit report was beyond the control of the assessee and hence the assessee could justifiably delay the filing of the return itself so that it is accompanied by the audit report. In such an event, the Income-tax Officer could not deny the deduction since the purpose of the section would have been fulfilled even though the return itself was filed beyond the prescribed time. For instance, in the present case, if the assessee had filed the return with the audit report on October 21, 1977, the relief could not have been denied whereas it is sought to be denied only because he filed the return on June 29, 1977, and filed the audit report later on October 21, 1977, when it was made available. The section cannot also be construed to give such an incongruous result. As far as we can see, the stress laid by this provision was only to have the accounts audited and to make the audit report available for the Income-tax Officer to make a proper assessment. Hence, the audit report was to be available before the assessment was made. We agree with the view of the Gujarat High Court that the objective of the section should be carried out by granting the relief rather than pick out a venial fault for denying the relief, intended to be given by the statute. We, therefore, agree with the view of the Tribunal that the provisions of section 80J(6A) of the Income-tax Act were not mandatory and we answer the questions in the affirmative and against the Revenue, with costs. 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.