High Court Of Kerala
CIT vs. Parry Agro Industries Ltd.
K.S. Radhakrishnan & V. Ramkumar, JJ.
Section 33AB(2)
Asst. Year 1994-95
IT Appeal No. 137 of 2001
31st May, 2006
Counsel Appeared
P.K.R. Menon & George K. George, for the Appellant
JUDGMENT
K.S. Radhakrishnan, J. :
Assessee is public limited company engaged in the business of growing and cultivation of tea. For the asst. yr. 1994-95, assessee claimed an amount of Rs. 30,00,000 by way of deduction under s. 33AB of the IT Act. AO disallowed the claim and added back the amount as prima facie adjustment under s. 143(1)(a) on the ground that the audit report in Form 3AC as required under s. 33AB(2) has not been furnished along with the return of income. On appeal by the assessee, the CIT(A) held that claim under s. 33AB cannot be determined in proceedings under s. 143(1)(a) since the issue as to whether the claim has necessarily got to be supported by the audit report or not is a debatable issue and cannot form part of the prima facie adjustment to the returned income in terms of s. 143(1)(a).
2. Revenue aggrieved by the abovementioned order filed appeal before the Tribunal. Tribunal dismissed the appeal holding that the ITO was not justified in drawing an inference adverse to the assessee without giving an opportunity to comply with the statutory provisions before the completion of the assessment. Tribunal also referred to the analogous provisions of s. 80J(6A) under which the assessee had to furnish the prescribed audit report along with the return of income in the light of the decision of the Bombay High Court in CIT vs. Shivanand Electronics (1994) 119 CTR (Bom) 94 : (1994) 209 ITR 63 (Bom) and held that the provision is only directory in nature and therefore audit report could be filed before the assessment was completed. Revenue is aggrieved by the order of the Tribunal and has filed this appeal.
3. Sri P.K. Ravindranatha Menon, senior counsel for the Department submitted that the Tribunal has not properly appreciated the scope of s. 33AB(2). Counsel submitted deduction under sub-s. (1) shall not be admissible unless the return is filed along with the audit report. Counsel submitted Tribunal was not justified in relying upon the provisions of s. 80J(6A) for interpreting s. 33AB(2) and does not call for a debate for a prima facie adjustment by disallowing the claim.
4. Before we examine the contention raised by the counsel, let us extract sub-s. (2) of s. 33AB, which reads as follows : “(2) The deduction under sub-s. (1) shall not be admissible unless the accounts of such business of the assessee 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-s. (2) of s. 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.” Abovementioned provision only says that deduction under sub-s. (1) of s. 33AB shall not be admissible unless the accounts of such business of the assessee for the previous year relevant to the assessment year for which the deduction is claimed 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. We are of the view for claiming deduction necessarily assessee has to comply with the abovementioned provision. In other words, deduction under sub-s. (1) shall be admissible only if the requirement of the above provision is satisfied. Law is well settled that the question whether a statute is mandatory or directory depends upon the language in which the intent is clothed and the intent of the legislature has to be gathered not merely from the words used by the legislature but from a variety of other circumstances and conditions. Therefore, only if the conditions laid down in the statute are satisfied, a person is entitled to get a particular benefit. To that extent that provision is mandatory. But the delay in complying with a condition would not take away the benefit which the party is otherwise entitled to. No time-limit has been prescribed in the statute for production of the audit report. True, the provision says that the audit report has to be furnished along with the return of income. Assessee in a given case could convince the authorities that due to some genuine reasons he could not produce the audit report along with the return but produced it later. There is no reason why such a request be not accepted by the authorities. Production of audit report may be a mandatory requirement for claiming deduction but non-production of report along with the return as such cannot take away the eligible claim for deduction.
5. We may in this connection refer to the decision of the Bombay High Court in Shivanand Electronics’ case (supra) wherein the Court held as follows : “It is well settled that the question whether a statute is mandatory or directory depends upon the intent of the legislature and not upon the language in which the intent is clothed.” The Court held : “The intent of the legislature also has to be gathered not merely from the words used by the legislature but from a variety of other circumstances and conditions. One of the tests often adopted is to ascertain whether the object of the legislature will be defeated or furthered by holding it directory. If the object of the enactment will be defeated by holding it directory, it should be construed as mandatory whereas if by holding it mandatory, serious general inconvenience will be created to innocent persons without very much furthering the object of the enactment, it should be construed as directory.” It has to be tested in each case by looking at the subject-matter, the importance of the provision that has not been strictly complied with etc. In this connection we may also refer to the decision of the Calcutta High Court in Murali Export House & Ors. vs. CIT (2000) 159 CTR (Cal) 427 : (1999) 238 ITR 257 (Cal). That was a case where the ITO refused to allow deduction due to omission to file certificate in Form No. 10CCAC along with the return of income. The Court took the view that furnishing of special audit certificate along with the return is not mandatory but only directory and the officer has power to grant time to rectify the omission.
6. We are of the view, on a plain reading of sub-s. (2) of s. 33AB would show that deduction is admissible only if the assessee produces audit report. But the mere fact that he could not produce it along with the return as such would not be a reason to reject the claim if he is otherwise entitled to the same. The provision only says deduction shall not be admissible. There is no provision in the section which says that deduction is admissible only if the audit report is filed along with the return. The assessee has produced the audit report before the completion of the assessment and the officer should have allowed the claim for deduction under s. 33AB(2) if it is otherwise in order. We therefore find no illegality in the order of the Tribunal and hence dismiss the appeal.
[Citation : 284 ITR 353]
