Punjab-Haryana High Court
Commissioner Of Income-Tax vs Shiva Rice And Dal Mills on 14 December, 2004
Equivalent citations: (2005)196CTR(P&H)78, [2005]273ITR265(P&H)
Author: Nirmal Singh
Bench: Nirmal Singh
JUDGMENT G.S. Singhvi, J.
1. The Income-tax Appellate Tribunal, Chandigarh 1 Bench, Chandigarh (for short, "the Tribunal"), has, in compliance with order dated November 20, 1991, passed by this court in I. T. C. No. 14 of 1990, referred the following question of law for its opinion :
"Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in deleting the addition of Rs. 17,876 made on account of disallowance of the assessee's claim for deduction under Section 80HHA on the basis of a revised return which was not filed along with the original return?"
2. The assessee is engaged in the business of manufacturing rice. The original assessment is relation to the assessment year 1983-84 was completed by the Income-tax Officer C- Ward, Ambala (hereinafter described as "the Assessing Officer"), under Section 143(1) of the Income-tax Act, 1961 (for short "the Act"), at Rs. 5,795. The assessment was reopened under Section 143(2)(b). The assessee filed a revised return on September 2, 1985, along with duly audited accounts. Thereafter, vide order dated September 16, 1985, the Assessing Officer assessed the income of the assessee under Section 143(2)(b) at an income of Rs. 66,200. While doing so, the Assessing Officer rejected the assessee's claim of deduction under Section 80HHA on the ground that duly audited accounts had not been filed with the original return. The appeal filed by the assessee was partly allowed by the Appellate Assistant Commissioner of Income-tax, Ambala Range, Ambala, vide his order dated December 10,1985, but he upheld the decision of the Assessing Officer not to allow deduction under Section 80HHA. On further appeal, the Tribunal held that the delay in filing the duly audited accounts was inconsequential and the same should have been accepted by the Assessing Officer for the purpose of granting deduction under Section 80HHA.
3. We have heard Shri Rajesh Bindal and perused the record. Section 80HHA of the Act provides for deduction in respect of profits and gains from newly established small-scale industrial undertakings in certain areas. Sub-section (1) thereof lays down that where the gross total income of an assessee includes any profits and gains derived from a small-scale industrial undertaking to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent. thereof. Sub-section (4) of Section 80HHA declares that where the assessee is a person, other than a company or a co-operative society, the deduction under Sub-section (1) shall not be admissible unless the accounts of the small-scale industrial 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.
4. The core issue before us is whether Sub-section (4) of Section 80HHA of the Act is mandatory and non-compliance therewith results in depriving the assessee of the benefit of deduction in terms of Sub-section (1) thereof.
5. In CIT v. Punjab Financial Corporation [2002] 254 ITR 6, while interpreting Section 32AB(1) and (5), a Full Bench of this court considered Section 32AB(1) and (5) which is pari materia to Section 80HHA(4) and held as under (headnote):
"The conditions embodied in Sub-section (1) of Section 32AB of the Income-tax Act, 1961, the fulfilment of which entitles the assessee to claim deduction on the basis of Investment Deposit Account are mandatory, because the substratum of the claim of deduction is the deposit of the amount in the account maintained by the assessee with the Development Bank or utilisation thereof for purchase of new ship, new aircraft or new machinery or plant, and, therefore, unless the conditions embodied in Sub-section (1) are satisfied the assessee cannot claim deduction. However, this is not true of Sub-Section (5) which only provides for filing the report of audit prepared by the accountant as defined in the Explanation below Section 288(2) along with the return. The assessee's claim for deduction under Section 32AB(1)(a) does not depend on the submission of the audit report along with the return but on deposit of the amount in the account maintained by him with the Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of income, whichever is earlier. The requirement of filing the duly audited report along with the return cannot be treated as mandatory and the assessee cannot be deprived of the benefit of deduction if the same is filed before the finalisation of the assessment.
Sub-section (5) of Section 32AB is not mandatory and the Assessing Officer has discretion to entertain the audit report, even though it has not been filed with the return, and give benefit of the deduction to the assessee in terms of Section 32AB(1)." (underlining1 is ours)
6. By applying the ratio of the aforementioned judgment to this case, we hold that Section 80HHA(4) of the Act is not mandatory and non-compliance therewith cannot be made a basis for denying the benefit of deduction to the assessee in terms of Section 80HHA(1) if duly audited accounts are filed by the assessee before the assessment and a plausible explanation is given for not filing the same along with the return.
7. The facts of the case in hand show that the assessee had not filed the audited accounts along with the original return, but had done the needful with the revised return filed in pursuance of the notice issued by the Assessing Officer under Section 143(2)(b) of the Act. This means that it had substantially complied with the provisions of Section 80HHA(4). We, therefore, hold that the Tribunal did not commit any error by deleting the addition of Rs. 17,876 made on account of disallowance of the assessee's claim for deduction under Section 80HHA(1).
8. In the result, the reference made by the Tribunal is answered in favour of the assessee and against the Revenue.