The main legal point established in the judgment is that the provisions of Section 12a are directory, not mandatory, and the Assessing Officer has the power to allow an assessee to file the audit report any time before the completion of the assessment.

( 1 ) THIS reference under Section 256 (1) of the Income-tax Act, 1961, relates to the assessment year 1984-85.

( 2 ) THE assessee, admittedly, is a charitable trust registered with the Commissioner of Income-tax. For the assessment year 1984-85, the assessee filed its return on September 17, 1984, declaring a deficit of Rs. 1,61,452. The return so filed was not accompanied by audited accounts and audit report in Form No. 10b as required under Section 12a of the Act. The audit report dated November 12, 1984 was, however, filed by the assessee in the prescribed form on March 6, 1987, before the completion of the assessment. The Income-tax Officer, while completing the assessment, refused to allow the benefit of exemption under Section 11 of the Act to the assessee on the ground that audit report in Form No. 10b was not filed "along with the return". He computed the taxable income of the assessee at Rs. 11,24,430 as per assessment order dated March 31, 1987. Certain other objections raised by the Income-tax Officer are no more relevant as these were not upheld by the Commissioner of Income tax (Appeals ).

( 3 ) BEING aggrieved, the assessee challenged the above order before the Commissioner of Income tax (Appeals) and contended that, as the audit report was filed before the completion of the assessment, there was sufficient compliance with the requirement of Section 12a (b) of the Act. The assessee also contended that there was a defect in the return filed by the assessee and that, therefore, the Income-tax Officer should have allowed opportunity to the assessee to rectify the defect under Section 139 (9) of the Act. The Commissioner of Income-tax (Appeals) did not find force in the contentions raised by the assessee. According to him, the assessee violated the mandatory provisions of Section 12a (b) of the Act and, therefore, was not entitled to exemption under Section 11 of the Act. He ordered accordingly.

( 4 ) THE assessee, ultimately, brought the issue before the Tribunal and contended that the authorities below refused to grant exemption to the assessee on highly technical grounds. It was contended that the original return filed on September 27, 1984, had a defect inasmuch as the audit report in Form No. 10b was not filed. The above defect was rectified by filing the audit report in the prescribed form before completion of the assessment and, therefore, in the light of the provisions of Sections 139 (5) and 139 (9) of the Act, the assessee was entitled to exemption under Section 11 of the Act. Even otherwise, the Income-tax Officer had powers to condone the delay. The Revenue, on the other hand, maintained that the provisions of Section 12a were mandatory and as the assessee had not submitted the audit report along with the return, it was not entitled to the exemption. The Revenue also maintained that filing of the audit report on March 6, 1987, did not tantamount to revising the original return in terms of Section 139 (5) of the Act and that the defect in not filing the audit report "along with the return" was not covered under the provisions of Section 139 (9) of the Act.

( 5 ) THE Tribunal held that the lower authorities took a highly technical view of the matter. The assessee, by filing the audit report on March 6, 1987, purporting to act under Section 139 (5) of the Act, removed the omission or defect which existed in the return furnished on September 17, 1984. No mala fides were alleged and no case was made out to show that the delay in getting the accounts audited and in filing the report in Form No. 10b defeated the object of the Act. Thus, in the circumstances of the case, the Tribunal concluded that the authorities below were not correct in denying exemption under Section 11 of the Act to the assessee.

( 6 ) ON these facts, the following question has been referred to this court :"whether, on the facts and in the circumstances of the case and having regard to the provisions of Sections 1