D. K. JaIn Vs. Deputy Commissioner of Income Tax. - Court Judgment

Excerpt:
- - the matter was agitated in appeal before the learned cit(a). when it was submitted that the report of the accountant was furnished to the assessing officer before completion of the assessment and the assessed having satisfied all the requirement of s. to quote from 'law in the making' by allen, 7th edition 489, it is often found that the more commonplace a word is, the more difficult it is to arrive at its exact meaning and for a very good reason, since it is commonplaces which are used most vaguely and with least attention to precise significance'.in the words of shah j.ordern. s. chopra, a. m. :the assessed is in appeal against order dt. 13th aug., 1992 of the learned cit(a)-xi, new delhi. the assessed has taken the following grounds of appeal :'1. it is contended that the assessment under s. 143(3) dt. 27th march, 1992 is without jurisdiction, is invalid and, thereforee, non est in law.2. it is contended that the notice issued under s. 143(2) to commence and continue the proceedings under s. 143(3) is invalid and non est in law.3. it is contended that the order under s. 143(1)(a) dt. 2nd march, 1990 is itself an order under s. 143(3) and, thereforee, the subsequent proceedings. without the authority of law are invalid.4. it is contended that the deduction under s. 32ab of rs. 10,65,178 is wrong.5. the disallowance of rs. 8,102 under s. 43b is wrong.6. the disallowance of rs. 10,000 out of telephone and telex expenses is wrong.7. the assessment under s. 143(3) dt. 27th march, 1992 is wrong, invalid and time barred.8. the provisions under ss. 234b and 234c are not applicable at all.9. the appellant craves leave to add, alter, amend or forgo any of the above grounds at the time of hearing.'2. we will take up ground of appeal no. 4 first. in this ground, the grievance of the assessed is that denial of deduction under s. 32ab claimed at rs. 10,65,178 is wrong. the relevant facts are that the assessed is an individual engaged in the business of manufacturing of pens under the brand name of luxor as a proprietory concern in the name and style of m/s. luxor pen co. the account period is 31st march, 1989. he filed return of his income on 31st oct., 1989 along with audit report under s. 44ab as also prescribed report under s. 80hhc. the assesseds claim for deduction of rs. 10,65,178 under s. 32ab was disallowed by the assessing officer on the ground that the prescribed report of the accountant was not filed along with the return as required under sub-s. (5) of 32ab. the matter was agitated in appeal before the learned cit(a). when it was submitted that the report of the accountant was furnished to the assessing officer before completion of the assessment and the assessed having satisfied all the requirement of s. 32ab was entitled to the deduction claimed. the learned cit(a) did not accept the contentions of the assessed on the ground that furnishing the report of the accountant along with the return was mandatory in accordance with the provisions of sub-s. (5) of s. 32ab and having not done so, the assessed was not entitled to the deduction claimed. he supported his findings by relying upon the ratio of hon'ble punjab & haryana high court in the case of cit vs. jaideep industries (1989) 180 itr 81 wherein deduction under s. 80j(1) was denied to the assessed for having not furnished the prescribed report along with the return. the assessed is in appeal before us.3. shri ganeshan, the learned authorised representative for the assessed, submitted that the only reason for denying the assesseds claim for deduction under s. 32ab is that the prescribed report was not furnished along with the return. according to the learned counsel, it is not denied that the assessed has deposited the amount involved with the development bank. according to shri ganeshan, the assessed also made available the prescribed report to the assessing officer during the course of assessment proceedings. thus, according to shri ganeshan, the assessed fulfills all the conditions prescribed under s. 32ab. shri ganeshan submitted that the provision of sub-s. (5) of s. 32ab are only directly and not mandatory. shri ganeshan submitted that he was conscious that the ratio of punjab & haryana high court in the case of jaideep industries (supra) was against the assessed. however, according to shri ganeshan, the provision of sub-s (5) of s. 32ab are not mandatory, he submitted that the provisions of sub-s (5) have to be viewed in the context of main provisions as contained in sub-s. (1) so s. 32ab. viewed against this, shri ganeshan submitted that the deduction claimed could not have been disallowed to the assessed merely for not having furnished the prescribed report under sub-s. (5) along with the return, when such report was duly made available to the assessing officer before completion of assessment. shri ganeshan submitted that great injustice is caused to the assessed, as even having fulfillled all the conditions under s. 32ab he has been denied his rightful claim for deduction merely for having not furnished the prescribed report under sub-s. (5) of s. 32ab, along with the return. shri ganeshan submitted that merely for lack of prescribed report with the return, the assessing officer could not justifiably disallow the claim made. in support of his proposition shri ganeshan invited our attention to the judgment of jurisdictional high court of delhi in the case of srf charitable trust vs. union of india (1992) 193 itr 95 . he also submitted that the provisions of s. 32ab read as a whole do not make the filing of the accountants report with the return mandatory. in support of his submissions, he invited our attention to hon'ble supreme courts judgment in the case of cit vs . j. h. gotla : [1985]156itr323(sc) wherein it has been held that :'though equity and taxation are often strangers, attempts should be made that these do no remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction.'he further referred to another judgment of the hon'ble supreme court in the case of badri prasad jagan prasad vs . cit : [1985]156itr430(sc) wherein it has been held by the hon'ble court that 'one should take a pragmatic approach in these matters and not get enmeshed in technicalities'. still further shri ganeshan referred to another judgment of the hon'ble supreme court in the case of saroj aggarwal vs . cit : [1985]156itr497(sc) wherein the hon'ble court has held that :'facts should be viewed in natural perspective having regard to the compulsion of the circumstances of a case. where it is possible to draw two inferences from the facts and where there is evidence of any dishonest or improper motive on the part of the assessed, it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. too hypertechnical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. it is true that there must be succession by inheritance. but is is possible in a particular case without any express provision either in the deed or in writing to infer from the conduct of the parties that there was succession and if such a view is possible in spite of the absence of express provision, such an inference could be and should be drawn. court should, whenever possible, unless prevented by the express language of any section or compelling circumstances of nay particular case, make a benevolent and justice oriented inference.'4. the learned authorised representative further invited our attention to pune bench of the tribunal judgment in the case of nemco enterprises vs . asstt. cit wherein the judgment of punjab & haryana high court in the case of jaideep industries (supra) has also been considered where on a set of same facts and under similar circumstances, the tribunal held the furnishing of prescribed report even if it was delayed for a reasonable cause could be considered on merit and still the claim of deduction under s. 32ab should be decided on appreciation of the reasonable cause shown for the delay or omission to enclose along with the return. he also referred to madras bench of the tribunal order in the case of amber electrical conductors (p) ltd. vs. dy. cit (1992) 43 itd 313 (mad). shri ganeshan submitted that the report of the accountant is dt. 26th oct., 1989 and the assessed overlooked to enclose the same along with the return. advancing his arguments further that the provision of sub-s. (5) are only directory and not mandatory, the learned authorised representative invited our attention to judgment of indore bench of the tribunal in the case of minar manufacturer vs. asstt. cit (1993) 46 ttj (ind) 448.5. the learned departmental representative argued that the provision of sub-s. (5) of s. 32ab are so apparent and clear enjoining upon the assessed to furnish the prescribed report along with the return, that no other meaning can be given to the same. he strongly supported the order of the learned cit(a).6. we have heard both the parties very carefully and have also gone through the relevant record. the issue for determination is as to whether furnishing of the prescribed report along with the return as contemplated in sub-s. (5) s. 32ab is mandatory.7. apparently, the language of sub-s. (5) of s. 32ab is clear and simple. but at times, clear and simple language present great difficulties in construction. to quote from 'law in the making' by allen, 7th edition 489, 'it is often found that the more commonplace a word is, the more difficult it is to arrive at its exact meaning and for a very good reason, since it is commonplaces which are used most vaguely and with least attention to precise significance'. in the words of shah j. as he then was in madav rao scindia vs . union of india : [1971]3scr9 , 'the more simpler and more common the word or expression, the more meaning and shades of meaning it has'. the intent and purpose of s. 32ab is primarily to allow deduction of amount deposited with the development bank subject to the prescribed conditions being fulfillled. the essence of the provisions of s. 32ab is deposit of amount by the assessed within the prescribed time with the development bank and obtaining and furnishing of a report from an accountant in support of the claim made. the provisions of sub-s. (5) are to be read in the context of main provision of s. 32ab; they are not to be read and interpreted in isolation. if strictly interpreted sub-s. (5) deprives an assessed the benefit of deduction he is entitled to under s. 32ab when the prescribed report even though available and furnished before the completion of assessment is omitted to be filed along with the return. this interpretation can lead to gross injustice and inequity defeating the very purpose of this beneficial legislation. 'a bare and mechanical interpretation of the words and application of a legislative intent devoid of concept of purpose will reduce most of the remedial and beneficial legislation to futility' [negendranath dey vs . sureshchandra dey . the hon'ble supreme court in the case of veluswami thevar vs . g. raja nainar : air1959sc422 have observed that a construction giving rise to anomalies should be avoided. the provision of s. 32ab are to be read as a whole. reading provision of sub-s. (5) of s. 32ab in isolation of the provisions of sub-s. (1) of s. 32ab would defeat the very purpose for which s. 32ab is enacted. manifestly, thereforee, the provisions of sub-s. (5) of s. 32ab are directory and not mandatory. the reliance placed by shri ganeshan on the judgments of the hon'ble supreme court (supra) as also on the orders of the tribunal completely support his contentions that the provisions of sub-s. (5) of 32ab are only directory and no mandatory. thereforee, with profound respects to the hon'ble punjab & haryana high court, we are unable to follow their judgment in the case of jaideep industries (supra). we, thereforee, accept the ground of appeal taken by the assessed and allow the claim for deduction under s. 32ab subject to verification of the prescribed conditions otherwise having been fulfillled.8. ground no. 5 is against disallowance of rs. 8,102 under s. 43b. the claim of the assessed was undoubtedly found tenable by the learned cit(a) who, however, did not allow deduction only for the reason that the evidence was not furnished along with the return. we are unable to approve of the reasoning of the learned cit(a) in the light of our findings above that furnishing of evidence along with the return of income is only directory and not mandatory. the ratio of hon'ble jurisdictional high court in the case of srf charitable trust (supra) also supports the claim of the assessed. we direct that the deduction of rs. 8,102 be allowed.9. ground no. 6 is against disallowance of rs. 10,000 out of telephone and telex expenses. the total claim made by the assessed under these heads is rs. 3,37,551. the assessing officer disallowed rs. 20,000 for non-business purposes. in appeal, the learned cit(a) reduced the same to rs. 10,000.10. we have heard the learned authorised representative as also the learned departmental representative. in our view, a further reduction of rs. 2,500 is justified.11. now, we taken up ground nos. 1, 2, 3 and also ground no. 7 all being interconnected. the assesseds grievance against two additions, i.e., rs. 10,65,178 and rs. 8,102 is fully redressed and full relief allowed as above. his remaining grievance against disallowance of rs. 10,000 is also substantially redressed the assessed having been allowed a relief of rs. 2,500. in these circumstances, these grounds of appeal are only rendered academic and do not require adjudication on facts and in the circumstances of the case. shri ganeshan, the learned authorised representative for the assessed, was also agreeable to this.12. ground no. 8 is only consequential and the assessing officer is directed to recompute the interest chargeable while giving effect to our order.13. ground no. 9 is only general in nature and does not require any adjudication.14. in the result, the appeal is partly allowed as indicated above.

Judgment:
ORDER

N. S. CHOPRA, A. M. :

The assessed is in appeal against order dt. 13th Aug., 1992 of the learned CIT(A)-XI, New Delhi. The assessed has taken the following grounds of appeal :

'1. It is contended that the assessment under S. 143(3) dt. 27th March, 1992 is without jurisdiction, is invalid and, thereforee, non est in law.

2. It is contended that the notice issued under S. 143(2) to commence and continue the proceedings under S. 143(3) is invalid and non est in law.

3. It is contended that the order under S. 143(1)(a) dt. 2nd March, 1990 is itself an order under S. 143(3) and, thereforee, the subsequent proceedings. Without the authority of law are invalid.

4. It is contended that the deduction under S. 32AB of Rs. 10,65,178 is wrong.

5. The disallowance of Rs. 8,102 under S. 43B is wrong.

6. The disallowance of Rs. 10,000 out of telephone and telex expenses is wrong.

7. The assessment under S. 143(3) dt. 27th March, 1992 is wrong, invalid and time barred.

8. The provisions under Ss. 234B and 234C are not applicable at all.

9. The appellant craves leave to add, alter, amend or forgo any of the above grounds at the time of hearing.'

2. We will take up ground of appeal No. 4 first. In this ground, the grievance of the assessed is that denial of deduction under S. 32AB claimed at Rs. 10,65,178 is wrong. The relevant facts are that the assessed is an individual engaged in the business of manufacturing of pens under the brand name of Luxor as a proprietory concern in the name and style of M/s. Luxor Pen Co. The account period is 31st March, 1989. He filed return of his income on 31st Oct., 1989 along with audit report under S. 44AB as also prescribed report under S. 80HHC. The assesseds claim for deduction of Rs. 10,65,178 under S. 32AB was disallowed by the Assessing Officer on the ground that the prescribed report of the Accountant was not filed along with the return as required under sub-s. (5) of 32AB. The matter was agitated in appeal before the learned CIT(A). When it was submitted that the report of the Accountant was furnished to the Assessing Officer before completion of the assessment and the assessed having satisfied all the requirement of S. 32AB was entitled to the deduction claimed. The learned CIT(A) did not accept the contentions of the assessed on the ground that furnishing the report of the Accountant along with the return was mandatory in accordance with the provisions of sub-s. (5) of S. 32AB and having not done so, the assessed was not entitled to the deduction claimed. He supported his findings by relying upon the ratio of Hon'ble Punjab & Haryana High Court in the case of CIT vs. Jaideep Industries (1989) 180 ITR 81 wherein deduction under S. 80J(1) was denied to the assessed for having not furnished the prescribed report along with the return. The assessed is in appeal before us.

3. Shri Ganeshan, the learned authorised representative for the assessed, submitted that the only reason for denying the assesseds claim for deduction under S. 32AB is that the prescribed report was not furnished along with the return. According to the learned counsel, it is not denied that the assessed has deposited the amount involved with the Development Bank. According to Shri Ganeshan, the assessed also made available the prescribed report to the Assessing Officer during the course of assessment proceedings. Thus, according to Shri Ganeshan, the assessed fulfills all the conditions prescribed under S. 32AB. Shri Ganeshan submitted that the provision of sub-s. (5) of S. 32AB are only directly and not mandatory. Shri Ganeshan submitted that he was conscious that the ratio of Punjab & Haryana High Court in the case of Jaideep Industries (supra) was against the assessed. However, according to Shri Ganeshan, the provision of sub-s (5) of S. 32AB are not mandatory, He submitted that the provisions of sub-s (5) have to be viewed in the context of main provisions as contained in sub-s. (1) so S. 32AB. Viewed against this, Shri Ganeshan submitted that the deduction claimed could not have been disallowed to the assessed merely for not having furnished the prescribed report under sub-s. (5) along with the return, when such report was duly made available to the Assessing Officer before completion of assessment. Shri Ganeshan submitted that great injustice is caused to the assessed, as even having fulfillled all the conditions under S. 32AB he has been denied his rightful claim for deduction merely for having not furnished the prescribed report under sub-s. (5) of S. 32AB, along with the return. Shri Ganeshan submitted that merely for lack of prescribed report with the return, the Assessing Officer could not justifiably disallow the claim made. In support of his proposition Shri Ganeshan invited our attention to the judgment of jurisdictional High Court of Delhi in the case of SRF Charitable Trust vs. Union of India (1992) 193 ITR 95 . He also submitted that the provisions of S. 32AB read as a whole do not make the filing of the Accountants report with the return mandatory. In support of his submissions, he invited our attention to Hon'ble Supreme Courts judgment in the case of CIT vs . J. H. Gotla : [1985]156ITR323(SC) wherein it has been held that :

'though equity and taxation are often strangers, attempts should be made that these do no remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction.'

He further referred to another judgment of the Hon'ble Supreme Court in the case of Badri Prasad Jagan Prasad vs . CIT : [1985]156ITR430(SC) wherein it has been held by the Hon'ble Court that 'one should take a pragmatic approach in these matters and not get enmeshed in technicalities'. Still further Shri Ganeshan referred to another judgment of the Hon'ble Supreme Court in the case of Saroj Aggarwal vs . CIT : [1985]156ITR497(SC) wherein the Hon'ble Court has held that :

'Facts should be viewed in natural perspective having regard to the compulsion of the circumstances of a case. Where it is possible to draw two inferences from the facts and where there is evidence of any dishonest or improper motive on the part of the assessed, it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. Too hypertechnical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. It is true that there must be succession by inheritance. But is is possible in a particular case without any express provision either in the deed or in writing to infer from the conduct of the parties that there was succession and if such a view is possible in spite of the absence of express provision, such an inference could be and should be drawn. Court should, whenever possible, unless prevented by the express language of any section or compelling circumstances of nay particular case, make a benevolent and justice oriented inference.'

4. The learned authorised representative further invited our attention to Pune Bench of the Tribunal judgment in the case of Nemco Enterprises vs . Asstt. CIT wherein the judgment of Punjab & Haryana High Court in the case of Jaideep Industries (Supra) has also been considered where on a set of same facts and under similar circumstances, the Tribunal held the furnishing of prescribed report even if it was delayed for a reasonable cause could be considered on merit and still the claim of deduction under S. 32AB should be decided on appreciation of the reasonable cause shown for the delay or omission to enclose along with the return. He also referred to Madras Bench of the Tribunal order in the case of Amber Electrical Conductors (P) Ltd. vs. Dy. CIT (1992) 43 ITD 313 (mad). Shri Ganeshan submitted that the report of the Accountant is dt. 26th Oct., 1989 and the assessed overlooked to enclose the same along with the return. Advancing his arguments further that the provision of sub-s. (5) are only directory and not mandatory, the learned authorised representative invited our attention to judgment of Indore Bench of the Tribunal in the case of Minar Manufacturer vs. Asstt. CIT (1993) 46 TTJ (Ind) 448.

5. The learned Departmental Representative argued that the provision of sub-s. (5) of S. 32AB are so apparent and clear enjoining upon the assessed to furnish the prescribed report along with the return, that no other meaning can be given to the same. He strongly supported the order of the learned CIT(A).

6. We have heard both the parties very carefully and have also gone through the relevant record. The issue for determination is as to whether furnishing of the prescribed report along with the return as contemplated in sub-s. (5) S. 32AB is mandatory.

7. Apparently, the language of sub-s. (5) of S. 32AB is clear and simple. But at times, clear and simple language present great difficulties in construction. To quote from 'Law in the Making' by Allen, 7th Edition 489, 'It is often found that the more commonplace a word is, the more difficult it is to arrive at its exact meaning and for a very good reason, since it is commonplaces which are used most vaguely and with least attention to precise significance'. In the words of Shah J. as he then was in Madav Rao Scindia vs . Union of India : [1971]3SCR9 , 'The more simpler and more common the word or expression, the more meaning and shades of meaning it has'. The intent and purpose of S. 32AB is primarily to allow deduction of amount deposited with the Development Bank subject to the prescribed conditions being fulfillled. The essence of the provisions of S. 32AB is deposit of amount by the assessed within the prescribed time with the Development Bank and obtaining and furnishing of a report from an Accountant in support of the claim made. The provisions of sub-s. (5) are to be read in the context of main provision of S. 32AB; they are not to be read and interpreted in isolation. If strictly interpreted sub-s. (5) deprives an assessed the benefit of deduction he is entitled to under S. 32AB when the prescribed report even though available and furnished before the completion of assessment is omitted to be filed along with the return. This interpretation can lead to gross injustice and inequity defeating the very purpose of this beneficial legislation. 'A bare and mechanical interpretation of the words and application of a legislative intent devoid of concept of purpose will reduce most of the remedial and beneficial legislation to futility' [Negendranath Dey vs . Sureshchandra Dey . The Hon'ble Supreme Court in the case of Veluswami Thevar vs . G. Raja Nainar : AIR1959SC422 have observed that a construction giving rise to anomalies should be avoided. The provision of S. 32AB are to be read as a whole. Reading provision of sub-s. (5) of S. 32AB in isolation of the provisions of sub-s. (1) of S. 32AB would defeat the very purpose for which S. 32AB is enacted. Manifestly, thereforee, the provisions of sub-s. (5) of S. 32AB are directory and not mandatory. The reliance placed by Shri Ganeshan on the judgments of the Hon'ble Supreme Court (supra) as also on the orders of the Tribunal Completely support his contentions that the provisions of sub-s. (5) of 32AB are only directory and no mandatory. thereforee, with profound respects to the Hon'ble Punjab & Haryana High Court, we are unable to follow their judgment in the case of Jaideep Industries (supra). We, thereforee, accept the ground of appeal taken by the assessed and allow the claim for deduction under S. 32AB subject to verification of the prescribed conditions otherwise having been fulfillled.

8. Ground No. 5 is against disallowance of Rs. 8,102 under S. 43B. The claim of the assessed was undoubtedly found tenable by the learned CIT(A) who, however, did not allow deduction only for the reason that the evidence was not furnished along with the return. We are unable to approve of the reasoning of the learned CIT(A) in the light of our findings above that furnishing of evidence along with the return of income is only directory and not mandatory. The ratio of Hon'ble jurisdictional High Court in the case of SRF Charitable Trust (supra) also supports the claim of the assessed. We direct that the deduction of Rs. 8,102 be allowed.

9. Ground No. 6 is against disallowance of Rs. 10,000 out of telephone and telex expenses. The total claim made by the assessed under these heads is Rs. 3,37,551. The Assessing Officer disallowed Rs. 20,000 for non-business purposes. In appeal, the learned CIT(A) reduced the same to Rs. 10,000.

10. We have heard the learned authorised representative as also the learned Departmental Representative. In our view, a further reduction of Rs. 2,500 is justified.

11. Now, we taken up Ground Nos. 1, 2, 3 and also Ground No. 7 all being interconnected. The assesseds grievance against two additions, i.e., Rs. 10,65,178 and Rs. 8,102 is fully redressed and full relief allowed as above. His remaining grievance against disallowance of Rs. 10,000 is also substantially redressed the assessed having been allowed a relief of Rs. 2,500. In these circumstances, these grounds of appeal are only rendered academic and do not require adjudication on facts and in the circumstances of the case. Shri Ganeshan, the learned authorised representative for the assessed, was also agreeable to this.

12. Ground No. 8 is only consequential and the Assessing Officer is directed to recompute the interest chargeable while giving effect to our order.

13. Ground No. 9 is only general in nature and does not require any adjudication.

14. In the result, the appeal is partly allowed as indicated above.