The Judgment of the Court was delivered by

Dinesh Maheshwari, J.:— This appeal by the Revenue under section 260A of the Income-tax Act, 1961 (“the Act”), is directed against the judgment and order dated June 15, 2007, as passed by the Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur (“the Tribunal”) in I.T.A No. 596.JDPR/2006 in relation to the assessment proceedings concerning the respondent-assessee for the assessment year 2003–04. The question involved in this appeal has been indicated in the order of admission dated January 10, 2008, that may be noticed as under:

“Heard learned counsel for the appellant and perused the impugned order.

Learned Tribunal has passed the impugned order relying upon one judgment of the Calcutta High Court, and another judgment of the Punjab and Haryana High Court, and has held that though the audit report in Form No. 10CCAC was not originally filed along with the return of income but was duly filed during the assessment proceedings, therefore, the assessee is entitled to deduction under section 80HHC to the tune of Rs. 37,08,019.97.

It is contended by the learned counsel for the appellant, that there is no decision on this point, either from this court or from the hon'ble Supreme Court.

In our view, on the basis of the language of section 80HHC(4), the requirement is of filing of the report in the prescribed form ‘along with the return of income’.

The question thus is, as to whether the expression ‘along with the return of income’ can be interpreted to be permitting filing of such report even during assessment proceedings?

Since the appeal involved above the substantial question of law, requiring the detailed hearing and decision by this court the appeal is admitted.

Issue notice.”

2. The relevant background aspects of the matter could be noticed in the following: In its return for the assessment year 2003–04, the respondent-assessee claimed deduction under section 80HHC of the Act to the tune of Rs. 39,86,538. However, a copy of the audit report in Form No. 10CCAC was not filed along with the return. During the course of assessment proceedings, the assessee filed one letter dated November 21, 2005 along with a plain unsigned paper carrying the computation for such deduction of Rs. 39,86,538. Further, during the proceedings, the authorised representative of the assessee submitted, along with his letter dated December 19, 2005, the report in the prescribed Form No. 10CCAC dated May 23, 2003, claiming deduction under section 80HHC at Rs. 37,08,019.97. The Assessing Officer (“the AO”) declined to allow the deduction as claimed by the assessee under section 80HHC of the Act while holding that the requirement of furnishing the audit report in Form No. 10CCAC along with the return was a mandatory one and, for having failed to fulfil this requirement, the assessee was not entitled to the claimed deduction. The Assessing Officer, inter alia, observed and held as under:

“I have considered the submission of the assessee and the facts of the case. Form No. 10CCAC as one of annexures does not find a place in the list of the documents attached with the return of income. The assessee-company has filed the certificate only during assessment proceeding with the plea that it can be filed any time before the assessment. As per the provisions of section 80HHC, it is mandatory to file the chartered accountant's certificate in the prescribed Form No. 10CCAC along with the return of income to claim the deduction…”

“… Therefore, in view of the detailed discussion, I hold that the assessee-company is not eligible for any deduction under section 80HHC since it has failed to fulfil the requirement of filing Form 10CCAC along with the return of income. Therefore, the entire deduction under section 80HHC as claimed by the assessee in the return of income is disallowed.”

3. In appeal before the Commissioner of Income-tax (Appeals), Udaipur (“the CIT(A)”), the assessee relied upon the decision of the hon'ble Punjab and Haryana High Court in CIT v. Gupta Tabs [2005] 274 ITR 620 (P&H) and that of the hon'ble Kerala High Court in The Commissioner Of Income Tax v. G. Krishnan Nair [2003] 259 ITR 727 (Ker) to contend that even if the requirement of filing of the certificate under section 80HHC(4) was mandatory, the time of its filing was directory; and the same could be filed at any time before completion of the assessment. However, the learned Commissioner of Income-tax (Appeals) observed that the referred decisions were not binding for being not of the jurisdictional High Court; and affirmed the decision of the Assessing Officer. In further appeal, the Tribunal, however, held that on principles, the assessee could not be denied the benefit of deduction under section 80HHC because the audit report in Form No. 10CCAC had indeed been filed during the course of assessment proceedings. The Tribunal further proceeded to observe that the assessee in its return claimed the deduction at (about) Rs. 39.86 lakhs whereas this amount, as per the audit report, was (about) Rs. 37.08 lakhs; and that there was no question of granting any deduction for an amount in excess of what had been calculated by the chartered accountant in Form No. 10CCAC. Hence, the Tribunal proceeded to grant the benefit to the assessee to the tune of the amount stated in the audit report, i.e, a sum of Rs. 37,08,019.97. The Tribunal, inter alia, observed and held as under:

“4. We have heard both the sides and perused the relevant material on record. The undisputed fact is that the audit report in Form No. 10CCAC, which was not originally filed along with the return of income was duly filed during the assessment proceedings. A consistent view has been taken by the hon'ble High Courts and the Tribunal that where the audit report in Form No. 10CCAC is filed during the course of assessment proceedings, this factor alone cannot disentitle the assessee to the benefit of deduction under section 80HHC. To cite a few decisions, we can have guidance from Murali Export House & Ors.… v. Commissioner Of Income Tax… [1999] 238 ITR 257 (Cal) and CIT v. Gupta Tabs [2005] 274 ITR 620 (P&H). On principle, we hold that the assessee cannot be denied the benefit of deduction under section 80HHC as the audit report in Form No. 10CCAC was duly filed during the course of assessment proceedings. However, we observe that the amount of deduction claimed by the assessee in its return of income is at Rs. 39.86 lakhs whereas the said amount as per audit report in Form No. 10CCAC furnished during the course of assessment proceedings is at Rs. 37.08 lakhs. There is no question of granting any deduction for an amount in excess of that calculated by the chartered accountant in Form No. 10CCAC. We, therefore, grant the benefit of deduction under section 80HHC at Rs. 37,08,019.97. This ground is, therefore, partly allowed.”

4. Assailing the order aforesaid, it is contended by the learned counsel for the appellant that the Tribunal has failed to consider the matter objectively and in its correct perspective. It is submitted that the assessee not only claimed an excess deduction but also made the claim without getting the amount certified by the chartered accountant and without complying with the mandatory requirement of furnishing the audit report in Form No. 10CCAC with the return. Thus, according to the learned counsel, the Assessing Officer had rightly rejected the claim of deduction under section 80HHC and his order had rightly been affirmed by the Commissioner of Income-tax (Appeals) and the Tribunal had been in error in interfering.

5. Per contra, the learned counsel for the respondent-assessee has supported the order impugned with reference to the decisions in CIT v. Gupta Tabs [2005] 274 ITR 620 (P&H) and CIT v. Dr. L.M Singhvi [2007] 289 ITR 425 (Raj).

6. After having given thoughtful consideration to the rival submissions and having examined the record, we are clearly of the view that the question of law as formulated in the present case deserves to be answered against the Revenue and in favour of the assessee but then, for appropriate orders regarding eligible deduction, the matter is required to be restored to the file of the Assessing Officer.

7. As noticed, the question calling for determination in this case is as to whether the requirement of furnishing of report of an accountant in the prescribed form along with the return of income could be interpreted to mean that the filing of the report even during assessment proceedings is permissible. In our view, the decision of this court in Dr. L.M Singhvi's case [2007] 289 ITR 425 (Raj) on pari materia provisions as contained in section 32AB of the Act read with the decision of the hon'ble Punjab and Haryana High Court in Gupta Fab's case [2005] 274 ITR 620 (P&H) on the provisions contained in section 80HHC, clinches the issue.

8. In Dr. L.M Singhvi's case [2007] 289 ITR 425 (Raj), a Division Bench of this court was concerned with the question as to whether filing 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 aforesaid section. The Division Bench, inter alia, examined the provisions of section 32AB of the Act as also the provisions of section 80HHC, with which we are concerned in the present case; and, after finding these provisions pari materia, held the requirement of furnishing of report along with the return to be that of procedural requirement with reference to several of the cited cases including the one of the Full Bench of the hon'ble Punjab and Haryana High Court in CIT v. Punjab Financial Corporation [2002] 254 ITR 6 (P&H) [FB] wherein a Division Bench decision of the said High Court was reversed and it was held that the provisions relating to filing of audit report along with the return was a part of procedure for adducing evidence in respect of the fact on which the claim for deduction was founded on; and such requirement was directory in nature. The relevant observations of the Division Bench of this court in Dr. L.M Singhvi's case [2007] 289 ITR 425 (Raj) could be noticed in the following (pages 428, 431-32):

“These provisions under section 32AB are in pari materia with the provisions relating to certain benefits extended to the assessees under sections 80 and 80HHC of the Income-tax Act. For the present purposes the primary requirement of section 32AB(1) is (i) that the total income of the assessee must include income chargeable under the head ‘Profits and gains of business or profession’, (ii) that the amount must be deposited in the deposit accounts maintained for this purpose in a Development Bank, and (iii) such amount must be deposited before six months from the end of the previous year or before filing the return. With the alternative to the above deposit, utilisation in terms of clause (b) of section 32AB, is not the present concern. That the respondent-assessee had fulfilled all these conditions is not in dispute. The procedural requirement is that the deduction is not admissible until the accounts of the assessee claiming such deduction of the previous year relevant to the assessment year in question are audited and the report of such auditor is furnished along with the return.

The consistent view which prevailed with the different High Courts except a Division Bench decision of the Punjab and Haryana High Court in Commissioner Of Income-Tax v. Jaideep Industries. [1989] 180 ITR 81 (P&H), which too has subsequently been overruled by a Full Bench of the same High Court in CIT v. Punjab Financial Corporation [2002] 254 ITR 6 (P&H) [FB], is that the provisions relating to filing of audit report along with the return is a part of procedure for producing evidence in respect of the fact that claim to deduction is founded on audited accounts, while getting the accounts audited before filing the returns claiming such relief has been held to be substantive condition and mandatory. Submitting the proof of accounts being part of procedural requirement, compliance with the substantive provision has been held to be directory.

The provisions requiring the filing of audit report along with the return has been held to be directory and not mandatory.”

9. The hon'ble Division Bench ultimately held, inter alia, as under (page 437):

“Further, the audit forms substantive foundation for claiming allowance and such foundation must exist at the time of tiling reference, viz., the accounts must have been audited before claiming deduction in a return, and in the absence of which, such deduction cannot be claimed. The compliance with the aforesaid requirement is mandatory before deduction is claimed. So far as such compliance along with the return is concerned, it is directory and this procedural compliance can be made as such during the course of assessment proceedings.”

10. It may also be noticed that in Gupta Fob's case [2005] 274 ITR 620 (P&H), the hon'ble Punjab and Haryana High Court was precisely concerned with the question as to whether the Assessing Officer was justified in allowing deduction under section 80HHC of the Act when the condition of filing of audit report along with the return of income was not satisfied. The Division Bench of the Punjab and Haryana High Court referred to the decision in Punjab Financial Corporation's case [2002] 254 ITR 6 (P&H) [FB] wherein, as noticed, the Full Bench of that High Court had held that the requirement of filing of duly audited report along with the return could not have been treated as mandatory; and that the assessee could not be deprived of the benefit of deduction if the report was filed before finali-sation of the assessment. After noticing the provisions and dictum of the Full Bench, the hon'ble High Court held as under (page 624):

“Since the provisions of section 80HHC of the Act are substantially similar to section 32AB(5), we have no hesitation to hold that the Tribunal did not commit any error by granting relief to the assessee.”

11. Thus, this court, while concerned with a similar nature question qua the provisions of section 32AB(5), held that the time of filing of the report was a condition directory in nature and also held that the provisions of section 32AB on relevant aspects were in pari materia with the provisions of section 80HHC of the Act. Then, the hon'ble Punjab and Haryana High Court held the requirement of filing of the report along with return for the purpose of deduction under section 80HHC to be directory and, again, held that the two provisions, i.e, section 80HHC and section 32AB(5) were substantially similar.

12. It may be observed that section 32AB(1) provides for certain deductions in respect of an assessee whose total income includes income chargeable to tax under the heads “Profits and gains of business or profession” and the assessee makes deposit or utilizes any amount for the purposes specified in the section. Furnishing of the report of the accountant in the prescribed form along with the return is necessary for the purpose of claiming such deduction. On the other hand, under section 80HHC, an assessee who is engaged in the business of specified export, is entitled to a deduction to the extent of the referred profit derived from the specified export. The deduction is also allowed to a supporting manufacturer who sells the goods or merchandises to any export house or trading house on fulfilment of the given conditions. Furnishing of the report for the purpose of sub-section (1) as also sub-section (1A) of section 80HHC is necessary. For the present purpose, the relevant part of the provisions as occurring in sub-section (5) of section 32AB and in sub-section (4) of section 80HHC could be noticed in juxtaposition as under:

Sub-section (5) of section 32AB Sub-section (4) of section 80HHC (5) The deduction under sub-section (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: (4) The deduction under sub-section (1) shall not be admissible unless the asses-see furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section:

13. On the material aspects pertaining to the questions involved in this appeal, obvious it is that the two provisions aforesaid are in pari materia. Thus, the interpretation as made by a co-ordinate Bench of this court in respect of section 32AB(5) would apply to the requirement of sub-section (4) of section 80HHC too.

14. In view of the above and following the principles enunciated in the two decisions aforesaid and particularly for the view as taken in Dr. L.M Singhvi's case [2007] 289 ITR 425 (Raj) by a Division Bench of this court, we have no hesitation in coming to the conclusion that the expression “along with the return of income” as occurring in sub-section (4) of section 80HHC could always be interpreted as directory so far it relates to the time of filing of the report and, hence, even if the report is filed during assessment proceedings, the assessee cannot be denied the claim of deduction. In other words, while filing of the accountant's report in subsection (4) of section 80HHC, could be considered to be a mandatory requirement for the purpose of the assessee being entitled to claim deduction but the time of filing of the same could only be considered directory in nature and such report cannot be removed out of consideration only because of having not been filed at the time of filing of the return.

15. On the facts of the present case, we may, however, observe that even when the report as filed during the course of assessment proceedings may not be removed out of consideration and, to that extent, the Tribunal does not appear unjustified yet, we have reservations about the other part of the order passed by the Tribunal where the benefit of deduction under section 80HHC has directly been allowed at Rs. 37,08,019.97 only on the basis of the amount stated in the audit report in Form No. 10CCAC. As noticed, the deduction claimed by the assessee in the first place had been Rs. 39,86,538. Some inconsistency having occurred, in our view, the matter ought to have been sent to the Assessing Officer concerned for appropriate orders.

16. Accordingly, in view of the above, to the question of law formulated in the present case, our answer is that the expression “along with the return of income” occurring in sub-section (4) of section 80HHC of the Income-tax Act, 1961, is directory in nature in so far it relates to the time for furnishing of the report of an accountant by the assessee in the prescribed form; and even if such a report in the prescribed form is not furnished along with the return of income, but is furnished during the course of assessment proceedings, it cannot be removed out of consideration only for the reason of the same having not been filed at the initial stage of filing of the return. In view of the above answer to the question involved in the matter, the order as passed by the Tribunal does not call for any interference and stands confirmed in so far it is held that the assessee cannot be denied the benefit of deduction under section 80HHC. However, the other part of the directions of the Tribunal, where the benefit of deduction under section 80HHC has directly been allowed at Rs. 37,08,019.97 only on the basis of the amount stated in the audit report in Form No. 10CCAC, the same stands modified in the manner that the issue about quantification of the eligible deduction under section 80HHC is restored to the file of the Assessing Officer who shall re-examine the matter as regards the amount eligible for deduction and then, shall pass appropriate consequential orders in accordance with law.

17. The appeal stands disposed of accordingly No costs.