ORDER SHEET ITA 190 OF 2009 IN HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE COMMISSIONER OF INCOME TAX, KOLKATA Versus M/S. S.R. BATLIBOI & ASSOCIATES BEFORE: Hon'ble JUSTICE GIRISH CHANDRA GUPTA Hon'ble JUSTICE ARINDAM SINHA Date : 24th February, 2015. For Appellant/Petitioner : Mrs.Smita Das De,Advocate For Respondent/assessee : Mr.R.N.Bajoria,Sr.Advocate Mr.A.Gupta,Advocate Mr.M.Ghorawat,Advocate Court : subject matter of challenge in this appeal, at instance of revenue, is judgement and order dated 13th February, 2009 by which learned Tribunal agreeing with CIT (Appeal) held that omission to file certified copy of instrument of change in partnership deed along with 2 return was not fatal and therefore, did not attract consequences laid down in Section 185 of Income Tax Act. Aggrieved by order of learned Tribunal, revenue has come up in appeal. following question of law was framed at time of admission of appeal : Whether on facts and in circumstances of case, learned Tribunal was justified in overlooking factum of non-filing of reconstituted partnership deed along with returns as required under section 184(4) of Income Tax Act, 1961 ? . question may be reframed as follows : Whether Income Tax Appellate Tribunal was justified in upholding deletion of disallowance amounting to sum of Rs.4,49,60,000/- on account of remuneration of partners under section 185 of Income Tax Act when instrument of change in partnership was not filed along with return? 3 It is not in dispute that certified copy of instrument of change in constitution of partnership was duly produced before assessing officer at time of assessment. assessing officer held that As per Sec.184(4) assessee was required to submit certified copy of Partnership Deed along with return. assessee did not file any certified copy of Deed along with return but claimed remuneration to partners for Rs.4,49,60,000/-. aforesaid view of assessing officer was reversed by CIT(Appeals) who held that Mere omission to file deed with return cannot and should not be treated as fatal. In appeal preferred by revenue, learned Tribunal discussed matter threadbare and expressed following views : We observe that there was change in partnership deed with effect from 1st August, 2004 and assessee was required to file certified copy of partnership deed along with return as per section 184 (4) of Act. Section 185 of Act provides that if firm does not comply with 4 provisions of Section 184 for any assessment year, firm shall be so assessed that no deduction by way of any payment of interest, salary, bonus, commission or remuneration, by whatever name called made by such firm to any partner of such firm shall be allowed in computing income chargeable under head "profit and gains of business or profession . There is no dispute to fact that assessee filed certified copy of deed during course of assessment proceedings. question arises as to whether non filing of copy of changes in partnership deed along with return is violation of substantive provision and make return invalid or it is only procedural default and is irregularity in filing return. We are of considered view that non-filing of copy of changes in partnership deed along with return is only omission and does not make return filed by assessee as invalid so as to disallow claim of assessee. Section 292B of Act provides that merely by reason of any mistake, defect or omission in such return of income, assessment, etc. shall not be invalid or shall not be deemed to be invalid. Hon'ble Kerala High Court has held in case of CIT vs- Masoneilan (India) Ltd. [242 ITR 569] that section 292B provides that no return of income shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income if it is in substance and effect in conformity with or according to intent and purpose of Act. It is further observed that section 139 also throws some light on question, if there is any 5 defect, A.O. is required to give opportunity to assessee to rectify defect within stipulated time. We are of considered view that purpose of filing copy of changes in partnership deed before A.O. is to enable A.O. to examine as to whether there is genuine partnership in existence and remuneration being paid to partners is properly distributed and paid in accordance with partnership deed. Furnishing of certified copy of revised instrument of partnership deed as per section 184(4) of Act is procedural in nature though word shall is stated but filing of instrument of partnership deed is required by A.O. as mentioned hereinabove to ascertain genuineness of existence of partnership and to ascertain share of each of partner as to whether remuneration being paid is in accordance with deed of partnership deed and is also in accordance with limit prescribed under section 40 (b) of Act. defect in not filing copy of change in instrument of partnership deed along with return is curable defect only through section 184(4) provides that same should be furnished along with return of income. In this regard, we find support from decision of Hon'ble Calcutta High Court in case of CIT-vs- Magnum Export (Pvt.) Ltd. [262 ITR 10]. In above case, it has been held by Their Lordships that sub-section (4) of Section 80HHC consists of two parts. first part requires filing of special audit report for claiming deduction without which deduction is not admissible. This part is mandatory. However, second 6 part consists of requirement that such audit report is to be filed along with return. Filing of report is condition precedent for claiming deduction. It is purely matter of procedure. It was held by Their Lordships that deduction under section 80HHC could not be disallowed simply because audit report was not furnished along with return. purpose of incorporation of sub-section (4) was to enable A.O. to ascertain claim for deduction on basis of authentication by auditor that goods or merchandise was really exported, which is otherwise admissible only on actual basis, situation which is difficult for A.O. to determine. Their Lordships also held that question whether is statute is mandatory or directory depends about intent of Legislature and not upon language in which intent is clothed. It was held that word shall in statutory though taken in mandatory sense, does not necessarily have that effect in every case. intention of legislature is to be ascertained not only from phraseology of provision but also by considering its nature, its design and consequences that would follow from construing it one way or other. Hon'ble Kerala High Court has also held in case of CIT-vs- G. Krishnan Nair [259 ITR 727] that filing of audit report to claim deduction under section 80HHC (4A) of Act is only directly in name and it can be filed at any time before completion of assessment. 7 We are also of considered view that filing of revised/changed instrument of partnership deed along with return is directory in nature and it can be filed at any time before completion of assessment by A.O. We do not agree with Ld. D.R. that after amendment by Finance Act, 2003, non filing of instrument of partnership deed along with return will make claim of assessee illegal so as to deny claim of assessee though requisite details and evidence is made available to A.O. before he completes assessment. Hon ble Delhi High Court has also held in case of Remfry & Sons vs.- CIT [276 ITR 1] that non filing of partnership deed is irregularity and is curable defect, which gets cured by filing same in assessment proceedings. Further Hon ble jurisdictional High Court in case of Joshi And Co. Vs CIT [162 ITR 268 ] has observed that non- accompanying of instrument of partnership could only be held to be defective and Income Tax Officer ought to have called upon assessee to make defect, Hon ble Gujrat High Court in case of Billimora Engineering Mart Vs CIT 153] observed as under Head Note : In Act of 1961, requirement is that partnership deed should be evidenced by instrument and application shall be accompanied by original instrument evidencing partnership at date of application. words, evidenced by instrument of partnership do not indicate necessarily that evidence should be 8 contemporaneous evidence when application is made, because, in ultimate analysis, purpose of any evidence, and for that matter instrument of partnership, is to satisfy authority that there was genuine and valid partnership in existence in accounting year. Procedural law is always to be construed and applied in manner so as to make it hand maid to cause of justice, and it cannot be treated as substantive provision so as to defeat rights of parties. Therefore, we do not find any reason to interfere with finding of Ld. CIT(A) to hold that non-filing of instrument of change in partnership deed along with return filed by assessee but filed during course of assessment proceedings will disentitle assessee to claim remuneration paid to partners, which is paid in accordance with provisions of deed of partnership and provisions of Act. In view of above, we hold that Ld.CIT(A) has rightly deleted disallowance of Rs.4,49,60,000/- made by A.O. Hence, we reject Ground No.1 of appeal taken by Department. It is this order which is under challenge. Mrs.Das De, learned advocate appearing for appellant reiterated submissions advanced before learned Tribunal that section 185 is emphatic 9 and also starts with non-obstante clause. Therefore, omission on part of assessee to comply with requirement of sub-section 4 of section 184 precludes assessee from claiming any deduction by way of salary paid to partners. She contended that learned Tribunal erred in taking view which is plainly contrary to section namely Section 185. We have not been impressed by such submission. We are of opinion that view taken by learned Tribunal is correct view. We may add further reasons why view taken by learned Tribunal is unimpeachable. assessee is required to file return under sub- section 1 of Section 139 within time prescribed therein. What is time prescribed has been dealt with in Explanation 2 appended to sub-section 1 of section 139. This requirement of law has to be held subject to provision of sub-section 4 which permits assessee to file return at any time before expiry of one year from end of relevant assessment year or even before completion of assessment whichever is earlier. 10 Apex Court in case of CIT, Punjab v. Kulu Valley Transport Co.P.Ltd., reported in 77 ITR 518 held that sub-section 3 of section 22 is to be read as proviso to sub-section 1 of section 22. Sub-section 1 of section 22 is in pari materia with sub-section 1 of section 139. relevant portion of said judgement reads as follows : It can well be said that section 22(3) is merely proviso to section 22(1). Thus, return submitted at any time before assessment is made is valid return. In considering whether return made is within time sub-section (1) of section 22 must be read along with sub-section (3) of that section. return whether it is return of income, profits or gains or of loss must be considered as having been made within time prescribed if it is made within time specified in section 22(3). In other words if section 22(3) is complied with section 22(1) must also be held to have been complied with. If compliance has been made with 11 latter provision requirements of section 22(2A) would stand satisfied. Mrs.Das De has not disputed before us that assessee could have filed his return along with certified copy of instrument of change within period prescribed by sub-section 4 of section 139. In that case, return would have been perfectly valid and there would have been no violation of sub-section 4 of section 184. But because assessee filed instrument of change before day on which assessee could have filed under sub-section 4 of section 139, return is to be treated as invalid, is submission which we are in position to accept. records reveal that prayer was made before assessing officer on behalf of assessee to treat return as defective return because instrument of change in partnership deed was not annexed to return. In that case, assessee would be entitled to opportunity to cure defect. assessing officer refused to treat return as defective return. Once he 12 refused to treat return as defective one he could not have also held that return was in derogation of sub-section 4 of section 184 of Act nor could he in that case have refused to allow deductions. If, on contrary, he had held that return was defective, then under sub-section 9 of section 139 assessee would get chance to cure defect. In either case, result is that section 185 read with section 184, although worded in emphatic terms, is not intended to be mandatory provisions. For aforesaid reasons, question is answered in affirmative and in favour of assessee. appeal is, thus, disposed of. (GIRISH CHANDRA GUPTA, J.) (ARINDAM SINHA, J.) ssaha AR(CR) Commissioner of Income-tax, Kolkata v. M/s. S.R. Batliboi & Associate