TaxTMI 
TaxTMI 
1995 (8) TMI 4
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....s account as also the auditor's report in respect of general audit of the accounts of the firm. It is also not in dispute that a special audit report known as tax audit was also furnished as required under section 44AB. It is also not in dispute that in the return a separate computation statement was attached showing the claim of 100 per cent. deduction under section 80HHC of the Act being the profit of business being exclusively from export business. However, the additional separate audit certificate as indicated in Form No. 10CCAC was omitted to be enclosed with the return although the audit was carried out and certificate in Form No. 10CCAC was also made out and handed over by the auditor to the firm. The deduction asked for, by the firm was disallowed by the Assessing Officer on the ground that the audit certificates as required to be filed with the return under section 80HHC of the Act were not filed with the return of income. It appears from the intimation issued under section 143(1) of the Act that although, the total income as shown in the return after adjustments of the deduction claimed under section 80HHC of the Act was nil, the Assessing Officer refused to give benef....
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....the Revenue that in the event it is held that the required special audit certificates can be filed subsequently to the filing of the return of income, then the firm will be entitled to a deduction of income under section 80HHC of the Act as the firm is admittedly an exporter within the meaning of section 80HHC of the Act. The assessment year involved in this writ petition is 1991-92. The question therefore is whether the requirement of filing a special audit certificate with the return for claiming deduction of income under section 80HHC of the Act was mandatory or not in view of the words "with the return" being used in section 80HHC of the Act. Chapter VI-A of the Act deals with the deductions to be made in computing the total income., Section 80A makes a general provision for deduction to be made in computing the total income of the assessee. It says that in computing the total income of an assessee, there shall be allowed from his gross total income in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to 80U. Therefore, from a plain reading of section 80A it is clear that an assessee shall be allowed from his gross total inc....
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....e scheme and scope of the Act, I am of the firm opinion that so far as the first part of section 80HHC of the Act is concerned, the said provision is mandatory that is to say, an assessee shall be entitled in computing his total income, to a deduction of the profits earned by the assessee from the export of goods or merchandise. If sub-sections (1) and (4) of section 80HHC are read together it becomes clear that the benefit. of this provision is available to an assessee who is engaged in the business of export of any goods or merchandise out of India. There can be no doubt that this beneficial provision is for giving incentives to such persons who are bringing foreign exchange to our country. It is of course true that the benefit is subject to what is provided by sub-section (4) of section 80HHC of the Act. When I turn to the first part of sub-section (4) of section 80HHC of the Act I find that it is mandatory that the deductions under this sub-section shall not be admissible unless the assessee furnishes in the prescribed form the special audit certificate of an accountant. This part of the provision obviously refers to the section where the Assessing Officer allows the amount on ....
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....udit report along with the return. It is merely directory in nature as it calls for substantial compliance as observed hereinbefore. It is possible as it happened in this case, that at the time the return of income was filed by the firm, due to some negligence of some persons or for any other good reason, even though the special audit certificate was available, it could not be annexed with the return and on such mistake being found out the report could be filed before the Income-tax Officer before the income of the assessee was assessed and, tax was demanded from such assessment of income. If any literal compliance with the words ("the assessee furnished in the prescribed form along with the return of income the report of an accountant certifying that the deduction was correctly claimed") is insisted upon then in such unforeseen contingency as it happened in this case the assessee would be denied benefit of section 80HHC of the Act. In my view, as I have held that the second part of sub-section (4) of section 80HHC regarding furnishing of the special audit certificate along with the return is not a mandatory provision but only a directory one, as it requires only substantial compli....
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....ut discovers any omission or any wrong statement therein in that case he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Therefore from a plain reading of section 139(5) of the Act it is clear that if a person who has furnished a return discovers any omission or wrong statement therein, he may furnish a revised return at any time before the assessment is made. Such revised return should be filed within one year from the end of the relevant assessment year. Section 139(9) of the Act, however, sets out the circumstances in which a return can be deemed to be defective. In such cases, the Assessing Officer must give the assessee an opportunity to rectify the defect. In the Explanation to section 139, sub-section (9), of the Act it has been categorically classified for the purpose of sub-section (9) of section 139 of the Act a return of income shall be regarded as defective unless all the following conditions are ful-filled. (a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of....
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....ompulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme. Section 139(9)(d) of the Act also explains that a return shall be found to be defective if it is not accompanied by copies of the documents mentioned in such Explanation. Section 139(9)(e), however, says that the return shall be found to be defective where the account of the assessee has been audited and the return is not accompanied by copies of the profit and loss account, the balance-sheet and the auditor's report and where the audit of cost accounts of the assessee has been conducted under section 233B of the Companies Act such report is not filed. Therefore, from a plain reading of the Explanation contained in section 139(9) of the Act it is clear that the Legislature has defined what are the defects which should be considered under section 139(9) of the Act to be a defective return. Therefore, the power to rectify the defective return by the Assessing Officer has been clearly conferred on the Assessing Officer by section 139(5) and (9) of the Act. If the defects mentioned in the Explanation to section 139(9) of the Act are covered in any case then there is no doubt that the assessee is t....
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....stage the special audit certificate should be filed. Clause (iii) of the first proviso to section 143(1)(a) of the Act clearly provides that the Assessing Officer, in making an intimation deemed to be a notice of demand, can make an adjustment to the income or loss declared in the return, if on the basis of the information available in the return, accounts or documents accompanying it, the deduction allowance or relief claimed is prima facie inadmissible. The conclusion that the claim of the assessee is inadmissible must in other words flow from the return as filed. No power is given to the Assessing Officer to disallow a claim for the reason that there is no proof in support of the claim made by the assessee. Only where it is evident from the return which is filed along with the documents in support thereof that a claim of the assessee is not admissible can an adjustment be made under clause (iii) to the first proviso to section 143(1)(a). If proof in support of the claim is not furnished by the assessee then for lack of proof no disallowance or adjustment can be unilaterally made. The only option which is open to the Assessing Officer in such a case is to require the assessee to ....