TaxTMI 
TaxTMI 
2006 (5) TMI 81
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....der section 80J of the Income-tax Act (for short "the Act") was made. Along with the return, the assessee did not furnish any audit report. The claim of the assessee with regard to deduction under section 80J of the Act was disallowed by the Assessing Officer with the observations that "relief under section 80J of the Act has not been allowed as the assessee did not get its accounts audited as required under section 80J(6A) of the Act". Accordingly, vide assessment order dated December 19, 1978, the income of the assessee was computed at Rs. 1,09,010/-, as against returned income of Rs. 81,190/-, The assessee went in appeal before the Commissioner of Income-tax (Appeals), who upheld the order passed by the Assessing Officer, holding that the provisions contained in section 80J(6A) are mandatory in character. 3. Further appeal by the assessee before the Tribunal was accepted and it was held that section 80J of the Act is a beneficial piece of legislation giving certain incentives for encouragement of certain types of new industries. It is not mandatory in nature, hence, non-compliance with the provisions will not in any way affect the right of the assessee for deduction merely be....
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.... (such assessment year being hereafter, in this section, referred to as the initial assessment year) and each of the four assessment years immediately succeeding the initial assessment year: Provided that in the case of an assessee, being a co-operative society, the provisions of this sub-section shall have effect as if for the words 'four assessment years', the words 'six assessment years' had been substituted. (3) Where the amount of the profits and gains derived from the industrial undertaking or ship or business of the hotel, as the case may be, included in the total income (as computed without applying the provisions of section 64 and before making any deduction under Chapter VI-A or section 280-O) in respect of the previous year relevant to an assessment year commencing on or after the 1st day of April, 1967 (not being an assessment year prior to the initial assessment year or subsequent to the fourth assessment year as reckoned from the end of the initial assessment year) fall short of the relevant amount of capital employed during the previous year, the amount of such shortfall, or where there are no such profits and gains, an amount equal ....
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....in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking manufacturers or produces articles, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power: Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 338, in the circumstances and within the period specified in that section: Provided further that, where any building or any part thereof previously used for any purpose is transferred to the business of the industrial undertaking, the value of the building or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking. Explanation 1.-For the purpose of clause (ii) of this sub-section, any machinery or plant which was used outside India by any person oth....
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.... India with a paid-up capital of not less than five hundred thousand rupees; (c) [Omitted by the Finance Act, 1973, with effect from April 1, 1974]; (d) the hotel is for the time being approved for the purposes of this sub-section by the Central Government; (e) the business of the hotel starts functioning on or after the 1st day of April, 1961, but before the 1st day of April, 1981. Explanation.- Where in the case of the business of a hotel, any building, or any part thereof, previously used as a hotel, or any machinery or plant, or any part thereof, previously used for any purpose, is transferred to a new business and the total value of the building, machinery or plant or part so transferred does not exceed twenty per cent. of the total value of the building, machinery or plant used in the business, then, for the purposes of clause (a) of this sub-section, the condition specified therein shall be deemed to have been complied with and the total value of the building, machinery or plant or part so transferred shall not be taken into account in computing the capital employed in the business of the hotel. (6A) Where the assessee is a person....
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.... required under such other law and a further report in the form prescribed under this sub-section." While considering the matter, a Full Bench of this court in CIT v. Punjab Financial Corporation [2002] 254 ITR 6 concurred with the views expressed by the Gujarat High Court in CIT v. Gujarat Oil and Allied Industries [1993] 201 ITR 325 and the Madras High Court in CIT v. A.N. Arunachalam [1994] 208 ITR 481 and held that section 32AB(5) of the Act is not mandatory in character and overruled the view expressed by a Division Bench of this court in Jaideep Industries' case [1989] 180 ITR 81 which held that a similar provision contained in section 80J(6A) of the Act are mandatory in character. 8. Before applying the ratio of law laid down by the Full Bench of this court in the facts and circumstances of the case, it would be necessary to refer a few relevant facts here. The return of income for the year in question was required to be filed on or before July 31, 1977, which was filed belatedly on August 31, 1977. The assessment was completed by the assessing authority on December 19, 1978. The audit report dated December 14, 1978, was filed by the assessee on January 18, 1979, i....
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....ssments are framed, the audited reports are made available by both the assessees to the Income-tax Officer. This would result in absurdity. Hence, in our view, the Tribunal was right when it took the view that the second part of the provision regarding furnishing of the report of the auditor along with the return is not a mandatory provision and it requires substantial compliance in the sense that it should be made available to the Income-tax Officer before the assessment is framed and, by that time, if the assessee puts his house in order, the Income-tax Officer will be required to consider the case of the assessee for deductions under section 80J(1) of the Act on the merits. It has also to be kept in view that, by the mere non-filing of the auditor's report along with the return of income, the assessee does not stand to gain anything nor does the Revenue stand to lose as even after the return is filed, it is obvious that it may take time before the Income-tax Officer applies his mind to the merits of the return when he sits down to frame assessment. In fact, that is the relevant stage at which the house of the assessee should be in order. If that stage is missed, obviously, t....