Tarun Chatterjee, J.
1. This writ application is directed against a revi-sional order passed by the Commissioner of Income-tax (ix), West Bengal under Section 264 of the Income-tax Act, 1961 (for short 'the Act'), affirming the order passed by the Income-tax Officer refusing to cancel the disallowance made in the intimation under Section 143(1)(a) of the Act.
2. The facts leading to moving of this writ application are stated below :
Writ petitioner No. 1 is a registered firm (hereinafter referred to as 'the firm'), and writ petitioner No. 2 is one of its partners. The firm filed its return of income for the assessment year 1991-92 showing therein profits on export business of Rs. 3,74,960 and claiming exemption from tax of 100 per cent. of such income under Section 80HHC of the Act. It is not in dispute that the return of income was accompanied by the audited profit and loss account as also the auditor's report in respect of general audit of the accounts of the firm.
3. It is also not in dispute that a special audit report known as tax audit was also furnished as required under Section 44AB. It is also not in dispute that in the return a separate computation statement was attached showing the claim of 100 per cent. deduction under Section 80HHC of the Act being the profit of business being exclusively from export business. However, the additional separate audit certificate as indicated in Form No. 10CCAC was omitted to be enclosed with the return although the audit was carried out and certificate in Form No. 10CCAC was also made out and handed over by the auditor to the firm. The deduction asked for by the firm was disallowed by the Assessing Officer on the ground that the audit certificates as required to be filed with the return under Section 80HHC of the Act were not filed with the return of income. It appears from the intimation issued under Section 143(1) of the Act that although, the total income as shown in the return after adjustments of the deduction claimed under Section 80HHC of the Act was nil, the Assessing Officer refused to give benefit to the firm under Section 80HHC of the Act. The firm immediately thereafter filed an application for rectification before the Assessing Officer showing in the said application that the firm was entitled to the deduction under Section 80HHC of the Act in respect of the profit derived from its export business and pointed out therein that the requisite audit certificates in Form No. 10CCAC were in fact ready for being furnished with the return but the same was not attached to the return, due to inadvertence of the clerk to whom such details of work had been assigned before filing the return with the Department. The Assessing Officer, however, declined to rectify the adjustment made by him in the adjustment under Section 143(1)(a) stating that the special audit certificate required under Section 80HHC of the Act in the prescribed form must be furnished with the return and not afterwards, as this was not a rectifiable mistake. Feeling aggrieved by this order passed by the Assessing Officer, the petitioners carried the dispute before the Commissioner of Income-tax, West Bengal (IX), by moving a revisional application under Section 264 of the Act for his intervention. The Commissioner of Income-tax (IX), West Bengal, however, affirmed the decision of the Assessing Officer and refused to give deduction to the writ petitioner under Section 80HHC of the Act also on the ground that it was mandatory on the part of the firm to submit the special audit certificate with the return of income. The writ petitioners against the aforesaid orders have come up to this court under article 226 of the Constitution.
4. I have heard Mr. Bagchi, appearing on behalf of the writ petitioners, and Mr. Shome for the Revenue. I have carefully examined the materials on record and also the orders impugned in this application under article 226 of the Constitution. After giving my anxious consideration to the submissions made by learned counsel for the parties and after going through the materials on record it appears to me that the authorities below had acted illegally in the exercise of their jurisdiction by not allowing the deduction as claimed by the writ petitioner under Section 80HHC of the Act. The reasons are as follows :
Before I take up the real issue for decision one more additional fact needs to be stated which is as follows. It is not disputed before me by learned counsel for the Revenue that in the event it is held that the required special audit certificates can be filed subsequently to the filing of the return of income, then the firm will be entitled to a deduction of income under Section 80HHC of the Act as the firm is admittedly an exporter within the meaning of Section 80HHC of the Act. The assessment year involved in this writ petition is 1991-92. The question therefore iswhether the requirement of filing a special audit certificate with the return for claiming deduction of income under Section 80HHC of the Act was mandatory or not in view of the words 'with the return' being used in Section 80HHC of the Act. Chapter VI-A of the Act deals with the deductions to be made in computing the total income. Section 80A makes a general provision for deduction to be made in computing the total income of the assessee. It says that in computing the total income of an assessee, there shall be allowed from his gross total income in accordance with and subject to the provisions of this Chapter, the deductions specified in Sections 80C to 80U. Therefore, from a plain reading of Section 80A it is clear that an assessee shall be allowed from his gross total income in accordance with and subject to the provisions of this Chapter deductions specified in Sections 80C to 80U of the Act. Section 80HHC of the Act makes the provision for deduction in respect of profits earned from export business. Section 80HHC(1) of the Act says that where an assessee, being an Indian company or a person (other than a company) resident in India, is involved in the business of export out of India of any goods or merchandise to which this Section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction and the profits derived by the assessee from the export of such goods or merchandise. Therefore, Section 80HHC gives a right to the assessne to claim deduction in respect of profits earned in export business if he satisfies the Assessing Officer that he is engaged in a business of export out of India of any goods or merchandise. In this case it is not disputed either before me or before the authorities that the firm is engaged in the business of export of goods out of India. Section 80HHC, Sub-section (4), however, says that the deduction claimed under Sub-section (1) of Section 80HHC of the Act shall not be admissible unless the assessee furnishes in the prescribed form along with the return of income, the certificate of an accountant under Section 288 certifying that the deduction has been correctly claimed in accordance with the provision of Section 80HHC of the Act. As noted hereinabove in this case the requirement mentioned in Sub-section (4) of Section 80HHC of the Act was fulfilled excepting that the special audit certificate of the accountant was not attached with the return of income certifying that the deduction was correctly claimed by the assessee in accordance with the provisions of this section. From a bare look at Sub-section (4) of Section 80HHC of the Act it may be legitimately argued that under Sub-section (4) of Section 80HHC of the Act deduction of income shall not be admissible unless the assessee furnished in the prescribed form along with the return of income the special audit report or certificate of an accountant certifying that the deduction was correctly claimed. But in my view from a plain reading of Section 80HHC of the Act and considering other Sections in Chapter VI-Aand, namely sections 80C to 80U, and the scheme and scope of the Act, I am of the firm opinion that so far as the first part of Section 80HHC of the Act is concerned, the said provision is mandatory that is to say, an assessee shall be entitled in computing his total income, to a deduction of the profits earned by the assessee from the export of goods or merchandise. If Sub-sections (1) and (4) of Section 80HHC are read together it becomes clear that the benefit of this provision is available to an assessee who is engaged in the business of export of any goods or merchandise out of India. There can be no doubt that this beneficial provision is for giving incentives to such persons who are bringing foreign exchange to our country. It is of course true that the benefit is subject to what is provided by Sub-section (4) of Section 80HHC of the Act. When I turn to the first part of Sub-section (4) of Section 80HHC of the Act I find that it is mandatory that the deductions under this Sub-section shall not be admissible unless the assessee furnishes in the prescribed form the special audit certificate of an accountant. This part of the provision obviously refers to the Section where the Assessing Officer allows the amount on the return figures with a view to finding out whether the deductions contemplated by Sub-section (1} of Section 80HHC are admissible or not. At that stage, the Assessing Officer has to find out whether the account of the assessee claiming such deduction was certified by an accountant as defined in the Explanation to Sub-section (2) of Section 288 of the Act. It must be said also and it was not also disputed by any of the lawyers appearing for the parties that this part of the provision is a mandatory provision. Therefore, it becomes obvious that with the assessment being framed by the Income-tax Officer the assessee must be able to show to the income-tax authority that the relevant accounts in respect of which deductions have been claimed by the assessee under Section 80HHC of the Act are certified by an accountant as defined in the Explanation to Sub-section (2) of Section 288 of the Act. Therefore before the order is passed if the special audit certificate if filed, there will be substantial compliance of the requirement as contained in Section 80HHC of the Act. The Assessing Officer as well as the Income-tax Commissioner took the view that as the requirement contained in the second part of Sub-section (4) of Section 80HHC was not complied with by the assessee as the special audit certificate of the accountant in accordance with Section 80HHC(4) of the Act was not furnished along with the return of income, the question of giving deduction from income to the assessee shall not arise as Section 80HHC of the Act clearly says that the return shall be filed along with the certificate of the accountant and as the filing of the certificate with the return is a mandatory one, the assessee cannot claim deduction from the total income under Sub-section (4) of Section 80HHC of the Act as the certificate was not filed with the return. I cannot share the views expressed by the concerned authorities in the matter of interpretation ofSection 80HHC of the Act. In my view, the first part of Sub-section (4) of Section 80HHC of the Act makes it mandatory to an assessee to furnish in a prescribed form the report of the accountant certifying that the deduction was correctly claimed in accordance with the provisions of Section 80HHC(4) of the Act. But the second part thereof in my view is procedural in nature and requires the assessee to submit a certificate of the special audit report along with the return. It is merely directory in nature as it calls for substantial compliance as observed hereinbefore. It is possible as it happened in this case, that at the time the return of income was filed by the firm, due to some negligence of some persons or for any other good reason, even though the special audit certificate was available, it could not be annexed with the return and on such mistake being found out the report could be filed before the Income-tax Officer before the income of the assessee was assessed and, tax was demanded from such assessment of income. If any literal compliance with the words ('the assessee furnished in the prescribed form along with the return of income the report of an accountant certifying that the deduction was correctly claimed') is insisted upon then in such unforeseen contingency as it happened in this case the assessee would be denied benefit of Section 80HHC of the Act. In my view, as I have held that the second part of Sub-section (4) of Section 80HHC regarding furnishing of the special audit certificate along with the return is not a mandatory provision but only a directory one, as it requires only substantial compliance in the sense that whenever the income-tax authority applies its mind concerning computation of the assessee's income if it is found that some documents which were required to be filed along with the return were not filed he should ask the assessee to furnish the same within a time specified by him before making any computation of the income of the assessee. A question was however raised on behalf of the Revenue that it was not a part of the job of the Assessing Officer to direct the assessee to file the audit certificate if it was not filed with the return. According to learned counsel for the Revenue, Section 80HHC only entitles the assessee to get some deductions if he claims such deduction by filing with the return the special audit certificate. It is difficult to appreciate the submission of learned counsel for the Revenue. In my view, learned counsel for the firm was right in his submission that Section 139(5) of the Act and Section 139(9) of the Act cast a duty on the Assessing Officer to ask the assessee to supply the wanting certificate before such disallowance. But learned counsel for the Revenue contended that the defects pointed out in the Explanation to Section 139(9) of the Act shall not cover the case in hand, and, therefore, the disallowance was rightly refused by the authorities. I have carefully examined this aspect of the matter argued by learned counsel for both the parties. I have also examined Section 139 of the Act carefully, I am of the view that the submission of learned counselfor the assessee has substance and should be accepted. Chapter XIV deals with the procedure for assessment and Section 139 requires an assessee to file a return of his income. Section 139(1) of the Act requires every person to file his return of income if he is assessable under the Act. Section 139(4) of the Act deals with the furnishing of return which was not filed within the time allowed under a notice issued under Sub-section (1) of Section 142 of the Act. And in that case any person may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Section 139(5) of the Act gives a right to any person who has furnished a return under Sub-section (1) or in pursuance of a notice issued under Sub-section (1) of Section 142 but discovers any omission or any wrong statement therein in that case he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Therefore from a plain reading of Section 139(5) of the Act it is clear that if a person who has furnished a return discovers any omission or wrong statement therein, he may furnish a revised return at any time before the assessment is made. Such revised return should be filed within one year from the end of the relevant assessment year. Section 139(9) of the Act, however, sets out the circumstances in which a return can be deemed to be defective. In such cases, the Assessing Officer must give the assessee an opportunity to rectify the defect. In the Explanation to Section 139, Sub-section (9), of the Act it has been categorically classified for the purpose of Sub-section (9) of Section 139 of the Act a return of income shall be regarded as defective unless all the following conditions are fulfilled.
(a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in ;
(b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return ;
(bb) the return is accompanied by the report of the audit obtained under Section 44AB ;
(c) the return is accompanied by proof of-
(i) the tax, if any, claimed to have been deducted at source and the advance tax and tax on self-assessment, if any, claimed to have been paid,
(ii) the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974) ;
(d) where regular books of account are maintained by the assessee, the return is accompanied by copies of-
(i) manufacturing account, trading account, profit and loss account or, as the case may be, income and expenditure account or any other similar account and balance-sheet ;
(ii) in the case of a proprietary business or profession, the personal account of the proprietor, in the case of a firm, association of persons or body of individuals, personal accounts of the partners or members ; and in the case of a partner or member of a firm, association of persons or body of individuals, also his personal account in the firm, association of persons or body of individuals.
(e) where the accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance-sheet and the auditor's report and, where an audit of cost accounts of the assessee has been conducted, under Section 233B of the Companies Act, 1956 (1 of 1956), also the report under that section ;
(f) where regular books of account are not maintained by the assessee, the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.
5. Section 139(9)(c) clearly says that the return shall be defective if the same is not accompanied by proof of (i) tax, if any, claimed to have been deducted at source and the advance tax on his assessment, if any, claimed to have been paid, and (ii) the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme. Section 139(9)(d) of the Act also explains that a return shall be found to be defective if it is not accompanied by copies of the documents mentioned in such Explanation. Section 139(9)(e), however, says that the return shall be found to be defective where the account of the assessee has been audited and the return is not accompanied by copies of the profit and loss account, the balance-sheet and the auditor's report and where the audit of cost accounts of the assessee has been conducted under Section 233B of the Companies Act such report is not filed. Therefore, from a plain reading of the Explanation contained in Section 139(9) of the Act it is clear that the Legislature has defined what are the defects which should be considered under Section 139(9) of the Act to be a defective return. Therefore, the power to rectify the defective return by the Assessing Officer has been clearly conferred on the Assessing Officer by Section 139(5) and (9) of the Act. If the defects mentioned in the Explanation to Section 139(9) of the Act are covered in any case then there is no doubt that the assessee is to remove such defect. As mentioned above, Mr. Shome appearing on behalf of the Revenue, submitted that the defects mentioned in the Explanationto Section 139(9) of the Act do not cover the present case as the defects mentioned therein do not include the claim of non-filing of special audit certificate as required to be filed under Sub-section (4) of Section 80HHC of the Act. According to Mr. Shome, they shall not come within the meaning of the Explanation to Section 139(9) of the Act.
6. In the case of CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust : [1992]195ITR825(Cal) , a Division Bench of this court has held that Section 139(5) of the Act enables an assessee to file a revised return and Section 139(9) empowers the Assessing Officer to intimate defects in the return to the assessee giving him an opportunity to rectify them and the Assessing Officer has power to ask the assessee to remove all defects in the return other than the defects making the return invalid. It was also held by the Division Bench in that decision that the defects specified in Section 139(9) are illustrative and not exhaustive. In view of the aforesaid decision of the Division Bench of this court with which I am in full agreement, the defects which had occurred in the present case at the time of filing the return could be rectified by the Assessing Officer in the exercise of power conferred on him under Section 139(9) of the Act. Therefore, in view of the aforesaid decision I must hold that before the assessment is completed the Assessing Officer has the power to direct the assessee to remove the defects in the exercise of his power under Section 139(5) and (9) of the Act. Therefore, I am of the view that the authorities below have acted illegally and with material irregularity in the exercise of their jurisdiction in not allowing the application filed under Section 154 of the Income-tax Act for rectification of the mistakes which had cropped up for not filing the special audit certificate as required under Section 80HHC of the Act. The Assessing Officer retains his power under Section 139(9) of the Act to rectify the defects as mentioned and in the facts and circumstances of this case the Assessing Officer ought to have allowed such filing of special audit certificate at the time of taking the hearing of the application under Section 154 of the Act. A question now arises at what stage the special audit certificate should be filed. Clause (iii) of the first proviso to Section 143(1)(a) of the Act clearly provides that the Assessing Officer, in making an intimation deemed to be a notice of demand, can make an adjustment to the income or loss declared in the return, if on the basis of the information available in the return, accounts or documents accompanying it, the deduction allowance or relief claimed is prima facie inadmissible. The conclusion that the claim of the assessee is inadmissible must in other words flow from the return as filed. No power is given to the Assessing Officer to disallow a claim for the reason that there is no proof in support of the claim made by the assessee. Only where it is evident from the return which is filed along with the documents in support thereof that a claim of the assessee is not admissible can an adjustment be made underClause (iii) to the first proviso to Section 143(1)(a). If proof in support of the claim is not furnished by the assessee then for lack of proof no disallowance or adjustment can be unilaterally made. The only option which is open to the Assessing Officer in such a case is to require the assessee to furnish the proof. It is not the law that in support of a claim made in the return for deduction or non-taxability of a receipt the proof available original document must be filed along with the return. The stage of furnishing of the proof is reached as and when the proof is demanded by the Assessing Officer at a notice under Section 143(2) of the Income-tax Act. If no proof in support of the claim is available, the Assessing Officer on the return filed by the assessee can issue a notice under Section 143(2) of the Act. But he cannot unilaterally make a disallowance by seeking to invoke the provisions of the first proviso to Section 143(1)(a) of the Act as it has been done in this case. In view of the above, I hold that the Assessing Officer was not entitled in an intimation under Section 143(1)(a) to disallow the claim of the assessee in respect of deduction claimed by the assessee under Section 80HHC of the Act on the ground that no proof in respect of the claim had been filed with the return.
7. For the reasons aforesaid this writ application must succeed. The orders passed by the authorities below are set aside, The Assessing Officer is directed to give deduction of income under Section 80HHC of the Act to the writ petitioner if the special audit certificate as required to be filed under Section 80HHC of the Act has already been filed by the writ petitioner or if it is filed within two months from the date of communication of this order.
8. Orders impugned are therefore set aside.
9. The writ petition stands allowed.
10. There will be no order as to costs.
11. All parties are to act on a xerox signed copy of this judgment on theusual undertaking.