TaxTMI 
TaxTMI 
2016 (5) TMI 947
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of disallowance under Section 40A(3) made on undisclosed income that was declared in consequence of search. 3. Whether Hon'ble ITAT was justified in dismissing Revenue's appeal by observing that the assessee's claim of deduction under Section is allowable in terms of Section 80IB (13) on subsequent enhancement of income. The relevant facts are that the assessee had furnished a return of income on 18 January 2006 for the assessment year 2005-06 declaring income of Rs. 34,89,935/- after claiming deduction of Rs. 41,83,813/- under Section 80IB of the Act. This claim was allowed by the Assessing Officer by order dated 10 July 2007 under 143 (B) of the Act. However, a search was carried out on the premises of the Company on 6 February 2009 and certain incriminating documents were seized. The revenue found from the seized documents that there was an undisclosed income of Rs. 5,68,80,271/-. Accordingly, the Assessing Officer issued a notice under Section 153-A of the Act on 22 February 2010 pursuant to which the assessee furnished a return declaring income of Rs. 94,91,330/- after claiming a total deduction which included expenses of Rs. 3,99,61,041/- and Rs. 60,27,367/- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding recorded by the Assessing Officer that the claim cannot be allowed as the audit report was not furnished with the return. The Tribunal also found that it was an undisputed position that the audit report for the enhanced claim had been furnished during the course of the assessment proceedings together with the profit and loss account and balance sheet duly verified by the Accountant. In holding that the requirement of filing the audit report was merely directory in nature, the Tribunal relied upon various decisions of High Courts to which reference shall be made. In regard to the disallowance under Section 40A(3), the Tribunal observed that since the disallowance was directly relatable to the profit, benefit of deduction under Section 80IB of the Act was required to be provided. Sri Ashok Kumar learned counsel appearing for the appellant has submitted that the requirement of sub-section (7) of Section 80IA of requiring the assessee to furnish the report of audit in the prescribed from duly signed and verified with return of income is a mandatory requirement and since in the present case admittedly the assessee did not furnish the audit report with the return of income, the CIT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. 80IA(7)-The deduction under sub Section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the 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 Explanation below sub Section (2) of Section 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." Sub-section (7) of Section 80IA provides that the deduction made from the profits and gains derived from undertaking shall not be admissible unless the accounts of the undertaking for the previous year have been audited by an accountant 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 dispute in the present appeal is as to whether furnishing of the audit report along with the return of income is a mandatory requirement or is a directory r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of sub-section (7) of Section 80IA of the Act, examined decisions of various High Courts and observed that the filing of audit report with the return of income is not a mandatory requirement but a directory requirement and that the requirement would stand satisfied if the audit report is filed before the framing of the assessment. Similar view has been expressed by the Madhya Pradesh High Court in Commissioner of Income Tax v. Medicaps Limited [2010] 323 ITR 554 (MP). It would be appropriate to now refer decisions of the High Courts dealing with similar provisions. A Divisions Bench of this Court in Additional Commissioner of Income Tax v. Murlidhar Mathura Prasad [1979] 118 ITR 392 (All) considered whether the requirement contained in sub-section (7) of Section 184 of the Act requiring the firm to furnish with its return of income, a declaration in the prescribed form and verified in the prescribed manner was a mandatory requirement or a directory requirement. Section 184 of the Act deals with registration as also with registration having effect for subsequent years. Sub-section (7) of Section 184 provides that where the registration is granted to any firm for any assessment yea....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as defined in the Explanation below sub-section (2) of Section 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." Similar views have been expressed by the Gujrat High Court in Zenith Processing Mills v. Commissioner of Income Tax [1996] 219 ITR 721 (Guj), the Madras High Court in Commissioner of Income Tax v. A.N. Arunachalam [1994] 208 ITR 481 (Mad), the Bombay High Court in Commissioner of Income Tax v. Shivanand Electronics [1994] 209 ITR 63 (Bom) and the Punjab and Haryana High Court in Commissioner of Income Tax v. Mahalaxmi Rice Factory [2007] 294 ITR 631 (P&H). In Commissioner of Income Tax v. Web Commerce (India) Private Limited [2009] 318 ITR 135 (Del) the Delhi High Court examined the provisions of sub-section 10B(5) of the Act, which is similar to the provisions of sub-section 80IA(7) and Section 80J(6A) of the Act and observed, after placing reliance upon its earlier decisions in Contimeters Electricals Private Limited (supra), that the provisions are directory and the requirement of the report of the accountant to be filed with the return of the income would ....