G.S. Singhvi, J. - (1.) THIS case has been placed before the Full Bench along with I. T. A. No. 83 of 2001 -- CIT v. Punjab Financial Corporation, Section 17-B, Chandigarh, for determination of the following question of law : "Whether Section 32AB(5) of the Income-tax Act, 1961, is mandatory or directory and delayed filing of audit report would disentitle an assessee from claiming the benefit of deduction under Section 32AB(1) ?" The background facts : The income-tax returns filed by the assessee -- Punjab Financial Corporation for the years 1988-89 and 1989-90 were accepted by the Assessing Officer under Section 143(1) of the Income-tax Act, 1961 (for short, "the Act"), and deductions claimed under Section 32AB(1) were allowed. Subsequently, he issued notices under Section 154 of the Act proposing withdrawal of the deductions on the ground that the assessee had failed to file the audit report with the returns as required by Section 32AB(5). On receipt of the notices, the assessee furnished the audit report in the prescribed form but the Assessing Officer declined to accept the same and ordered withdrawal of the deductions. The Commissioner of Income-tax (Appeals), (for short "the CIT(A)") dismissed the appeal of the assessee, but the Income-tax Appellate Tribunal (hereinafter described as "the Tribunal"), reversed the orders of the Assessing Officer and the Commissioner of Income-tax (Appeals) and restored the deductions by making the following observations : "We have carefully considered the submissions made by both the parties and have perused the order of the tax authorities. It is observed that the Assessing Officer has mentioned in the order made under Section 154 in relation to both the assessment years that the assessee in its reply stated that the accounts of the Corporation were duly audited by S. C. Dewan and Co., and copy of the audit report was submitted along with the return and that tax audit report was also enclosed therewith. It has also mentioned that the copies of receipts relating to deposits with the Industrial Development Bank of India were also submitted along with the return. It is also mentioned in the order that the assessee-Corporation filed copies of the audit report under Section 32AB along with the reply. It is observed that on the basis of the said information filed by the assessee along with the return, the Assessing Officer allowed deduction under Section 32AB in proceedings under Section 143(1). It is also not controverted by the learned Departmental Representative that no deficiency letter was issued by the Assessing Officer under Section 139(9). The Explanation below Section 139(9) clearly provides in clause (e) that a return of income shall be regarded as defective unless it is accompanied by copies of the audited profit and loss account and balance-sheet and the auditor's report. It is further observed that under the provisions of Section 32AB(1), the assessee is entitled to deduction in relation to the amounts deposited in an account maintained with the Development Bank where the amount is deposited before the expiry of six months from the end of the previous year or before furnishing the return of income, whichever is earlier. The provisions of Section 32AB(5) further impose a condition that the said deduction under Sub-section (1) shall not be admissible unless the accounts 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 the report of such audit in the prescribed form, i.e., Form No. 3AA, duly signed and verified by such accountant. The proviso to Section 32AB(5) stipulates that it shall be sufficient compliance with the above provisions if the assessee gets the accounts audited under any other law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under the sub-section. We may mention that the first proviso is of no help to the assessee as the further report mentioned therein relates to Part III of Form No. 3AA, as prescribed under Section 32AB(5). In view of the above facts, we are required to consider as to whether the provisions of Section 32AB(5) relating to furnishing of the audit report along with the return are mandatory in nature or are directory. As already mentioned above, the main thrust of the provisions of Section 32AB(1) is that the assessee is entitled to deduction in relation to the deposit made under the relevant scheme with the Industrial Development Bank of India subject to the conditions that the accounts are duly audited by an accountant. We feel that the assessee had filed the basic information relating to the audit of accounts along with the auditor's report under Section 44AB and the tax audit report along with receipt showing the deposit of amounts with the Industrial Development Bank of India for credit into Investment Deposit Account No. CHD 75. We feel that the decision in the case of jaideep Industries [1989] 180 ITR 81 (P & H), which relates to the provisions of Section 80J(6A) is not strictly applicable, though the provisions of Section 32AB(5) may be somewhat pari materia with the said provisions. The provisions of Section 32AB(5) have to be construed in the context of the provisions of Section 32AB(1), whereunder deduction is admissible to the assessee on making the deposit with the Industrial Development Bank of India or utilisation of any amount for the purchase of any new machinery or plant. Of course, the provisions of clause (b) of Section 32AB(1) are not relevant in the context of the said provisions. We feel that the observations made by the High Court in the case of Shahzedanand Charity Trust [1997] 228 ITR 292 (P & H), at page 299 that by showing sufficient cause, the auditor's report could be produced at any later stage either before the Income-tax Officer or before the appellate authority, are relevant. In the present case, deduction was allowed by the Assessing Officer under the provisions of Section 143(1) on the basis of the information furnished by the assessee along with the return, which included the abovementioned documents further, during the proceedings under Section 154 the assessee filed copies of the actual audit report and in the context of the provisions of Section 32AB, we feel that such compliance was sufficient to entertain the claim of the assessee."
(2.) THE Revenue filed an appeal under Section 260A and prayed that the Tribunal's order may be set aside because Section 32AB(5) of the Act is mandatory and on account of its failure to file the audit report along with the return, the assessee was not entitled to claim deduction in terms of Section 32AB(1). After considering the arguments of counsel for the appellant and the judgments of this court in CIT v. Jaideep Industries [1989] 180 ITR 81 ; CIT v. Shahzedanand Charity Trust [1997] 228 ITR 292 and of the Gujarat High Court in CIT v. Gujarat Oil and Allied Industries [1993] 201 ITR 325, the Division Bench framed the question of law and referred the same to a larger Bench.
(3.) SHRI R. P. Sawhney argued that Section 32AB(5) of the Act is mandatory in character and, therefore, the assessee's failure to file the audit report along with the return is sufficient to decline the benefit of deduction under Section 32AB(1). He submitted that the use of the expression "shall not be admissible" in Section 32AB(5) is clearly indicative of the Legislature's intention that for the purpose of claiming deduction under Section 32AB(1), the assessee must fulfil the requirement of furnishing the audit report along with the return. SHRI Sawhney relied on the decisions of this court in CIT v. Jaideep Industries [1989] 180 ITR 81 in which Section 80J(6A) was held to be mandatory and argued that as the provision of Section 32AB(5) is pari materia to Section 80J(6A), the same should also be treated mandatory. He pointed out that in Shahzedanand Charity Trust's case [1997] 228 ITR 292 (P & H), the Division Bench had approved the ratio of Jaideep Industries' case [1989] 180 ITR 81 (P&H), but treated the provisions of Section 12A(b) as directory in view of circular dated February 9, 1978, issued by the Central Board of Direct Taxes. He also relied on the decisions of the Supreme Court in Slate of U. P. v. Manbodhan Lal Srivastava, AIR 1957 SC 912 ; Ram Autar Singh Bhadauria v. Ram Gopal Singh, AIR 1975 SC 2182 and Govind Lal Chaggan Ltd Patel v. Agriculture Produce Market Committee, AIR 1976 SC 263.;