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Commissioner of Income Tax v. M/s.Pandian Hotels Ltd - Tax Case(A) No.905 of 2005  RD-TN 750 (26 October 2005)
In the High Court of Judicature at Madras
The Hon'ble Mr.Justice P.D.DINAKARAN
The Hon'ble Mr.Justice N.KANNADASAN
Tax Case(A) No.905 of 2005
Commissioner of Income Tax
Madurai .... Appellant
M/s.Pandian Hotels Ltd.
Race Course, Madurai -2. .... Respondent
Tax Case Appeal under Section 260A of the Income Tax Act 1961 against
the order of the Income Tax Appellate Tribunal, Madras `C' Bench dated
11.03.2005 in ITA No.353/Mds/2000 for the assessment year 1989-90 .
For appellant : Mr.T. RaviKumar
For Respondent : ---
:J U D G M E N T
(The Judgment of the Court was delivered by P.D.DINAKARAN,J.) The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal in ITA.No.353/Mds/2000, dated 11.03.2005.
2. The Revenue is the appellant. The assessment year involved is 1 989-90. The original assessment in the case of the assessee company was completed on 23.3.92 quantifying the total income at Rs.17,80,020/-. This was appealed against and the assessment was revised giving effect to the order of the CIT(Appeals) and the revised total income was quantified at Rs.9,39,070/-. The assessing officer noted that in the original assessment, claim under Section 80HHD of Rs.5,92,979/- was allowed to the assessee, although, it had not filed the required certificate from the Chartered Accountant. As a consequence, the assessing officer found that the income assessable to tax had escaped assessment within the meaning of Section 147 of the Act. Thus to tax the above escaped income, notice was issued under Section 148 of the Act. The assessee filed a reply on 14.9.98 objecting to the reopening of the assessment and also stated that the return filed on 29.12.89 may be treated as a return filed in response to the notice under Section 148 of the Act. In result, the assessing officer disallowed the claim on the ground that the return was filed on 29.12.1989 and with the said return the audit report as required under the statute was not filed.
3. Against the order of the assessing officer, the assesse filed an appeal before the Commissioner of Income Tax(Appeals) contending that the assessing officer ought to have appreciated that the claim for deduction under Section 80HHD of the Income Tax Act would be available to the assessee even though the audit report was not filed with the return. The assessee also stated that it was well settled that the certificate from the Chartered Accountant could be filed at any time before the assessment was completed. The Commissioner of Income-Tax (Appeals) disagreed with the contention raise d by the assessee and confirmed the order of the assessing officer.
4. Aggrieved against the same, the assessee filed an appeal before the Income-tax Appellate Tribunal. The Tribunal allowed the appeal holding that the assessee can file the certificate required under Section 80HHC(4) of the Income Tax Act at any time before the assessment was completed.
5. Against the order of the Income Tax Appellate Tribunal, the present appeal has been preferred by the Revenue raising the following substantial questions of law:
"i. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the deduction under Section 80HHD is allowable where the assessee had failed to file the relevant audit report along its return? ii. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the condition stipulated in the section 8 0HHD(iii) regarding the filing of the audit report along with the return is not a mandatory condition for the purpose of claiming deduction under Section 80HHD?"
6. The issue involved in this appeal is, whether the audit report can be filed at a belated stage but before completion of assessment and whether it is mandatory to file the audit report along with the return.
7. It is fairly conceded by the learned counsel for the appellant that the issue involved in this case is squarely covered by a decision of Punjab and Haryana High Court in 228 ITR 292 (C.I.T., Vs. Shahzedanand Charity Trust).
8. In the above said case, for the assessment year 1977-78, the assesee, which is a charitable trust, claimed that its income was exempt from payment of income tax under Sections 11 and 12 of the Income Tax Act, 1961, being income of the public charitable trust. The Income-Tax officer held that the assessee was not entitled to the exemption as it had failed to furnish the auditor's report, which was required to be done mandatorily under Section 12(A)(b) of the Act, which was also confirmed by the Appellate Assistant Commissioner. On appeal before the Tribunal, the Tribunal found that it was not mandatory to furnish the auditor's report along with the return and the same could be furnished at a later date as well especially when the same was done under a bonafide mistaken view of law.
9. The Punjab and Haryana High Court in the above said case, discussing about the condition of furnishing audit report along with its return, held as follows:
"According to circular dated February 9, 1978, of the Central Board of Direct Taxes, it is not mandatory under Section 12(A)(b) to file the audit report along with the return of income. Normally, a charitable or religious trust or institution is expected to file the auditor's report along with the return, but in cases, where for reasons beyond the control of the assessee, some delay has occurred in filing the said report, the Income Tax Officer, for reasons to be recorded, has been authorised to condone the delay in furnishing the auditor's report and accept the same at a belated stage."
10. In the instant case, it is not in dispute that the assessee filed the auditor's report at a belated stage but before the completion of assessment. As held by the Tribunal, the main purpose behind incorporating Section 80HHC is to encourage exports outside India to earn the foreign exchange for the country and for that purpose the incentive is given to the exporters from income-tax. Hence, we hold that the Tribunal was right in holding that the filing of audit report along with the return is not a mandatory condition for the purpose of claiming deduction under Section 80HHD of the Act. Accordingly, the questions are answered in the affirmative, in favour of the assessee and against the Revenue. The appeal is dismissed. No costs.
1. The Assistant Registrar,
Income-tax Appellate Tribunal,
Rajaji Bhavan, Besant Nagar,
Chennai 600 090 (five copies with records)
2. The Secretary,
Central Board of Direct Taxes, New Delhi (3 copies) 3. The Commissioner of Income-tax (Appeals),
4. The Joint Commissioner of Income-tax,
Spl.Range VIII, Madras.
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