The main legal point established in the judgment is that the requirement of submitting proof of accounts having been audited along with the return is not mandatory and such proof can be submitted during the course of proceedings when it is pointed to the assessee that such proof of fact that accounts have been audited has not been produced along with the return, in case accounts have actually been audited prior to filing the return and claim can be made in accordance with the provisions of the Act.

Rajesh Balia, J.- Heard learned Counsel for the parties.

2. The substantial question of law which arises for consideration in this case as suggested by the

appellant is as under:-“Whether on the facts and circumstances of the case, the ITAT was right in holding that filing of the audit report under Section 32-AB (5) during the assessment proceedings and not alongwith the return of income would satisfy the requirements of the aforesaid section?

3. The brief facts of the case are that the respondent-assessee had submitted his return declaring total income of Rs. 4,67,010/-. In the return, the assessee had claimed a relief under Section 32-AB of the Act of 1961 in respect of Rs. 1,00,000/-deposited by him with Development Bank during the previous year relevant to the assessment year 1988-1989. The assessees income consisted of profit and gains of his profession. The accounts of the assessee were audited on 25.09.1988 prior to filing of the return. The return as noticed above was filed on 02.02.1989. However, the said audit report was not furnished alongwith the return but was furnished later on during the course of assessment proceedings. As the audit report has not been submitted alongwith the return, the assessee was disallowed the claim to deduction of Rs. 1,00,000/-deposited in Development Bank.

4. On appeal, the CIT (Appeals) relying on the decision in CIT vs. Malayalam Plantations, 1976 (103) ITR 835 which was rendered while considering like provisions under Section 32-A regarding deductions in respect of profit and gains from the business of tea and other decisions of the Tribunal, allowed the claim of the assessee for deduction under Section 32-AB in respect of deposits made in Development Bank by holding that analogy of the cases under Sections 80-J and 33-A of the Act of 1961 shows that filing of audit report alongwith the report has been held to be directory and not mandatory and the benefit was allowed even if the report was filed subsequently.

5. Aggrieved with the aforesaid order, the Assistant Commissioner has preferred appeal before the Tribunal and the Tribunal had affirmed the order of the CIT (Appeals), hence, this appeal under Section 260-A of the Income Tax Act, 1961.

6. Section 32-AB had been inserted in Income Tax Act, 1961 vide Finance Act, 1966 w.e.f. 01.04.1987 and the benefit extended under the said provisions was restricted upto the assessment year 1990-1991 and w.e.f. 01.04.1991 it has been withdrawn, by inserting second proviso to Sub-section (1) of Section 32-AB vide Finance Act, 1990. Sub-sections (1) and (5) of Section 32-AB laid down the procedure for claiming the deduction under Section 32-AB which reads as under:-

Section 32-AB (1) subject to the other provisions of this section, where an assessee, whose total income includes income chargeable to tax under the head “Profits and gains of business of profession”, has out of such income-

.(a) deposited any amount in an account (hereinafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of his income, whichever is earlier; or

(b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, new machinery of plant, without depositing any amount in the deposit account under Clause (a), In accordance with, and for the purposes specified in, a scheme (hereinafter in this section referred to as the scheme) to be framed by the Central Government or if the assessee is carrying on the business of growing and manufacturing tea in India, to be approved in this behalf by the Tea Board, the assessee shall be allowed a deduction (such deduction being allowed before the loss,) if any, brought forward from

earlier years is set off under Section 72; of-

.(i) a sum equal to the amount, or the aggregate of the amount, so deposited and any amount so utilised; or

.(ii) a sum equal to twenty