Madras H.C : Whether the Tribunal was correct in law in holding that s. 80J(6A) are directory and not mandatory and hence the assessee is eligible for relief under s. 80J even though the audit report was not filed along with the return of income as required under s. 80J(6A)

High Court Of Madras

CIT vs. Jayant Patel

Section 80J(6A)

Asst. Year 1979-80

R. Jayasimha Babu & Mrs. A. Subbulakshmy, JJ.

Tax Case No. 1742 of 1986

21st September, 1998

Counsel Appeared

R. Sivaraman, for the Applicant : None, for the Respondent

ORDER

R. JAYASIMHA BABU, J. :

Sec. 80J(6A) of the IT Act requires the audit report to be furnished along with the return. The Tribunal has held that requirement is directory any not mandatory and that production of audit report before the appellate authority was sufficient compliance with the requirements of section. The Tribunal has directed the CIT(A) to consider the audit report that has been filed by the assessee before him and decide the claim under s. 80J of the Act on merits. It is contended by counsel for Revenue that this order is untenable as the audit report had not been enclosed with the return and had in fact, been filed after the assessment before the appellate authority, counsel relied on the decision of the Punjab & Haryana High Court in the case of CIT vs. Jaideep Industries (1989) 180 ITR 81 (P&H) : TC 25R.1186 to content that the requirement of the section is mandatory. This contention of the Revenue is wholly untenable. The Gujarat High Court in the case of CIT vs. Gujarat Oil & Allied Industries (1993) 109 CTR (Guj) 272 : (1993) 201 ITR 325 (Guj) TC 25R.1187 considered s. 80J of the Act and held that the stage which is relevant for considering the merits of the claim of the party is the stage when the assessing authority sits down to assess income for the purpose of computing income-tax after framing appropriate assessment and it is at that stage that the requirements of s. 80J(1) r/w sub-s. (6A) thereof can be taken into consideration. The Court also held that the main purpose and object of s. 80J(1) is to give incentive and development benefit to the new industries covered by the provisions of the Act and consequently, while considering the provision, care has to be taken to see that the relevant purpose underlying s. 80J is augmented and fortified and not frustrated by the construction put upon the said provision.

It is no doubt true that in the case before the Gujarat High Court, the assessee had filed the audit report before the assessment came to be made and in this case, the audit report was produced only before the appellant authority. That fact, however, does not make any difference in so far as the purpose and object of that section are concerned and the manner in which they are to be advanced. The appellate authority under the Act has also the powers of the original authority. It is open to the appellate authority to direct the ITO to receive the audit report or to direct him to consider the audit report filed before the appellate authority on merits or to consider the report himself. The appellate authority, therefore, ought to have considered the report on merits. We answer the question referred to us, namely, “Whether the Tribunal was correct in law in holding that s. 80J(6A) are directory and not mandatory and hence the assessee is eligible for relief under s. 80J even though the audit report was not filed along with the return of income as required under s. 80J(6A)” in favour of the assessee and against the Revenue.

[Citation : 248 ITR 199]

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