IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 22.12.2014 CORAM HON'BLE MR.JUSTICE R.SUDHAKAR AND HON'BLE MR.JUSTICE R.KARUPPIAH T.C.(A).No.730 of 2014 Commissioner of Income Tax Chennai. .. Appellant Vs. Ramani Realtors (P) Ltd. Old No.3, New No.5, II Street Lakshmipuram, Royapettah Chennai 600 014. .. Respondent PRAYER: Appeal under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal 'C' Bench, Chennai, dated 9.9.2010 made in I.T.A.No.1019/Mds/2010 for assessment year 2005- 2006. For Appellant : Mr.T.R.Senthil Kumar Standing Counsel For Respondent : Mr.T.N.Seetharaman JUDGMENT (Delivered by R.SUDHAKAR, J.) Revenue has filed this appeal challenging order of Income Tax Appellate Tribunal 'C' Bench, Chennai, dated 9.9.2010 made in I.T.A.No.1019/Mds/2010 for assessment year 2005-2006 and same was admitted on following question of law: (2) Whether on facts and in circumstances of case Tribunal was right in allowing deduction especially when assessee has not filed audit report in Form 10CCB along with return nor before date of completion of assessment? 2. learned counsel for respondent entered appearance and pointed out that question of law raised in this appeal has been considered by this Court in catena of decisions and it was held that filing of of audit report in Form 10 CCB is not mandatory and only directory. 3. identical issue was considered by this Court in Commissioner of Income Tax v. AKS Alloys (P) Ltd., (2012) 18 Taxmann.com 25 (Mad), wherein this Court after referring to number of judicial precedents held that filing of audit report along with return was not mandatory, but directory, and that if audit report was filed at any time before framing of assessment, requirement of provisions of Act should be held to have been met. 4. Similarly, in Commissioner of Income Tax v. Jayant Patel, (2001) 117 Taxman 707 (Mad.), wherein audit report was produced only before appellate authority, this Court, while holding that filing of audit report along with return is directory and not mandatory, observed that appellate authority has also powers of original authority and it is open to appellate authority to direct Assessing Officer to receive audit (3) report or to direct him to consider audit report filed before appellate authority on merits or to consider report himself. 5. In yet another decision in Commissioner of Income Tax v. Print Systems & Products, (2006) 285 ITR 260 (Mad.), this Court held that filing of audit report along with return, as contemplated under Section 32AB(5) of Income Tax Act, is only directory and not mandatory. relevant portion of said decision reads as under: With regard to interpretation of section 32AB as well as corresponding section 80J(6A) of Act, it is trite law that: (i) since there is no stipulation as to time when audit report should be filed, except that it should be filed along with return, all that assessee is required to do is to delay filing of return until audit report is made available. ground relied on that preparation of audit report was beyond control of assessee and hence, assessee could justifiably delay in filing return itself so that it is accompanied by audit report, should also be taken care of while construing statute constitutionally valid. In such event, Income-tax Officer could not deny deduction merely because report is not filed along with return, otherwise, very purpose of section 32AB(5) would be defeated. If that be so, section 32AB(5) cannot be construed to give such incongruous result. Therefore, to make section 32AB(5) of Act constitutionally valid, only alternative or workable solution is that audit report should be made (4) available before assessment is made : (vide K. P. Varghese v. ITO [1981] 131 ITR 597 (SC) and followed in CIT v. A. N. Arunachalam [1994] 208 ITR 481 (Mad)); (ii) Full Bench of Punjab and Haryana High Court in CIT v. Punjab Financial Corporation [2002] 254 ITR 6, interpreting section 32AB(5) itself, which is subject matter in present appeal, held that submission of audit report is directory, but not mandatory. According to Full Bench, assessee s claim for deduction under section 32AB does not depend on submission of audit report along with return, but on deposit of amount in account maintained by him with Development Bank before expiry of six months from end of previous year or before furnishing return of income, whichever is earlier. Therefore, requirement of filing duly audited report along with return cannot be treated as mandatory and assessee cannot be deprived of benefit of deduction if same is filed before finalisation of assessment. It is, therefore, specifically held that sub-section (5) of section 32AB is not mandatory and Assessing Officer has discretion to entertain audit report, even though it has not been filed with return and give benefit of deduction to assessee in terms of section 32AB(1). Full Bench, while so holding that filing of audit report is not mandatory, has observed that question as to whether statute is mandatory or directory depends upon intent of Legislature and not upon language in which intent is clothed. meaning and intention of (5) Legislature must govern not only from phraseology of provision, but also by considering its nature, its design and consequences, which should follow from construing it one way or other ; (iii) Full Bench of Punjab and Haryana Court in Punjab Financial Corporation s case [2002] 254 ITR 6 referred to supra, has thus arrived at conclusion that filing of audit report is directory, but not mandatory, based on rule of interpretation, with reference to fiscal statute in matter of imposing penalty, formulated by apex court, in State of U.P. v. Manbodhan Lal Srivastava, AIR 1957 SC 912, wherein it has been held as under (page 13): 'All parts of statute or section must be construed together and every clause of section should be construed with reference to context and other clauses thereof so that construction put to be on particular provision makes consistent enactment of whole statute. This would be more so if literal construction of particular clause leads to manifestly absurd and anomalous results which could not have been intended by Legislature. principle that fiscal statute should be construed strictly is applicable only to taxing provisions such as charging provision or provision imposing penalty, and not to those parts of statute which contain machinery provisions.' (emphasis supplied) (iv) concededly, this court, interpreting corresponding provision of section 80J(6A) in CIT v. A. N. Arunachalam [1994] 208 ITR 481, held that requirement that audit report should be filed along with return is not (6) mandatory and audit report could be filed even after submission of return, but before framing of assessment and same could be construed as sufficient compliance with condition contemplated under section 80J(6A); (v) again, in recent decision of this court in CIT v. Jayant Patel [2001] 248 ITR 199, while interpreting corresponding section, viz. 80J, which also requires audit report to be filed along with return, held that requirement that audit report should be furnished along with return is only directory and not mandatory. In view of well-settled principles uniformly held in decisions cited supra, we have no hesitation to hold that filing of audit report along with return, as contemplated under section 32AB(5) of Act, is only directory and not mandatory. Hence, finding no substantial question of law arising for consideration, appeal is dismissed. 6. This Court in Commissioner of Income Tax v. SM Scrap Recycling Private Limited (Order dated 15.7.2014 made in T.C.(A) No.875 of 2013), to which one of us R.Sudhakar,J. was party, following decision in Commissioner of Income Tax v. Print Systems & Products, (2006) 285 ITR 260 (Mad.) answered question of law in favour of assessee and against Revenue. (7) 7. From above, it is apparent that consistent view of this High Court is that filing of audit report along with return is only directory and not mandatory, which we respectfully agree. In such view of matter, this appeal is dismissed answering question of law against Revenue and in favour of assessee. No costs. (R.S.J.) (R.K.J.) 22.12.2014 Index : Yes Internet : Yes sasi To: 1. Assistant Registrar, Income Tax Appellate Tribunal Chennai Bench "C", Chennai. 2. Secretary, Central Board of Direct Taxes, New Delhi. 3. Commissioner of Income Tax (Appeals) - V Chennai 4. Assistant Commissioner of Income Tax Company Circle-V(3), Chennai. (8) R.SUDHAKAR,J. and R.KARUPPIAH,J. (sasi) T.C.(A).No.730 of 2014 22.12.2014 Commissioner of Income-tax, Chennai v. Ramani Realtors (P) Ltd