BALIA, J. - (1.) HEARD learned counsel for the parties.
(2.) THE substantial question of law which arises for consideration in this case as suggested by the appellant is as under:- " Whether on the facts and circumstances of the case, the ITAT was right in holding that filling of the audit report under Section 32ab (5) during the assessment proceedings and not along with the return of income would satisfy the requirements of the aforesaid section? The brief facts of the case are that the respondent-Assessee had submitted his return declaring total income of Rs. 4,67,010/ -. In the return, the assessee had claimed a relief under Section 32ab of the Act of 1961 in respect of Rs. 1,00,000/- deposited by him with Development Bank during the previous year relevant to the assessment year 1988-89. The assessee's income consisted of profit and gains of his profession. The accounts of the assessee were audited on 25. 9. 1988 prior to filing of the return. The return as noticed above was filed on 2. 2. 1989. However, the said audit report was not furnished along with the return but was furnished later on during the course of assessment proceedings. As the audit report has not been submitted along with the return, the assessee was disallowed the claim to deduction of Rs. 1,00,000/- deposited in Development Bank. On appeal, the CIT (Appeals) relying on the decision in CIT vs. Malayam Plantations ( (1976) 103 ITR 835) which was rendered while considering like provisions under Section 32a regarding deductions in respect of profit and gains from the business of tea and other decisions of the Tribunal, allowed the claim of the assessee for deduction under Section 32ab in respect of deposits made in Development Bank by holding that analogy of the cases under Section 80j and 33a of the Act of 1961 shows that filing of audit report along with the report has been held to be directory and not mandatory and the benefit was allowed even if the report was filed subsequently. Aggrieved with the aforesaid order, the Assistant Commissioner has preferred appeal before the Tribunal and the Tribunal had affirmed the order of the CIT (Appeals), hence, this appeal under Section 260a of the Income Tax Act, 1961. Section 32ab had been inserted in Income tax Act, 1961 vide Finance act, 1966 w. e. f. 1. 4. 1987 and the benefit extended under the said provisions was restricted upto the assessment year 1990-91 and w. e. f. 1. 4. 1991 it has been withdrawn, by inserting second proviso to sub-section (1) and (5) of Section 32ab laid down the procedure for claiming the deduction under Section 32ab which reads as under:- " Sec. 32ab (1) Subject to the other provisions of this section, where an assessee, whose total income includes income chargeable to tax under the head "profits and gains of business of profession", has, out of such income,- (a) deposited any amount in an account (hereinafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six months from the end of the previous year of before furnishing he return of his income, whichever is earlier; or (b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, new machinery or plant, without depositing any amount in the deposit account under clause (a), in accordance with, and for the purposes specified in, a scheme (hereinafter in this section referred to as the scheme) to be framed by the Central Government or if the assessee is carrying on the business of growing and manufacturing tea in India, to be approved in this behalf by the Tea Board, the assessee shall be allowed a deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under Section 72:] of- (i) a sum equal to the amount, or the aggregate of the amount, so deposited and any amount so utilised; or (ii) a sum equal to twenty per cent of the profit of business or profession as computed in the accounts of the assessee audited in accordance with sub-section (5), whichever is less: [provided that where such assessee is a firm, or any association of person or any body of individuals, the deduction under this section shall not be allowed in the computation of the income of any partner, or as the case may be, any member of such firm, association of persons or body of individuals:] [provided further that no such deduction shall be allowed in relation to the assessment year commencing on the 1st day of April, 1991, or any subsequent assessment year. ] 2. . . 3. . . 4. . . (5) The deduction under sub-sec. (1) shall not be admissible unless the accounts of the business or profession 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-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: Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of sub business or profession audited under such law and furnishes the report of the audit as required under such other law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section.
(3.) THESE provisions under Section 32ab are paramateria with the provisions relating to certain benefits extended to assessees under Section 80 and 80hhc of the Income Tax Act. For the present purposes primary requirement of Sec. 32ab (1) is (i) that total income of assessee must include income chargeable under head profit and gains of business or profession. (ii) That the amount must be deposited in deposit accounts maintained for this purpose in a Development Bank and (iii) such amount must be deposited before six months from the end of previous year or before filing return. With alternative to above deposit, utilisation in terms of clause (b) of Sec. 32ab, is not the present concern. The respondent-assessee had fulfilled all these conditions is not in dispute. Procedural requirement is that deduction is not admissible until the accounts of the assessee claiming such deduction of the previous year relevant to assessment year in question are audited and report of such auditor is furnished along with return. The assessee has fulfilled the first condition that accounts of the previous year relevant to Assessment year 1988-89 were audited as required prior to filing of return. The last condition remained to be filled viz. , that the report of such audit to be annexed with return but was furnished during the course of proceedings. The claim to deduction was disallowed for this breach by the Assessing Officer. Whether the last of condition viz. , filing of audit report is mandatory in the sense that mere submission of audit report later on during the course of enquiry renders the claim void ab initio or requirement being procedural is only directory in nature and compliance in substance will be sufficient compliance? In other words where there is any distinction between the nature of substantive condition, procedural condition and technical condition. ;