The provisions of Section 12A(b) of the Income-tax Act, 1961, are directory in nature and the assessee can furnish the auditor's report at a later stage, even at the appellate stage.

Ashok Bhan, J.

1. At the instance of the Revenue, the Income-tax Appellate Tribunal, Amritsar (hereinafter referred to as "the Tribunal"), after drawing up a statement of the case, has referred the following question of law to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in setting aside the order of the Appellate Assistant Commissioner in regard to filing of the audit report in terms of the provisions of Section 12A(b) and in directing the Appellate Assistant Commissioner to allow the assessee to submit the said audit report to him at the appellate stage ?"

2. For the assessment year 1977-78, the assessee which is a charitable trust claimed that its income was exempt from payment of income-tax under Sections 11 and 12 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), being income of the public charitable trust. The assessee had been allowed the benefit of exemption in respect of its income in the past years regularly ; however, for the assessment year 1977-78 which is in issue, it was found by the Income-tax Officer that its income was not liable to be treated as exempt under Section 11 of the Act. It was further held by the Income-tax Officer that the assessee was not entitled to the exemption as it had failed to furnish the auditors report which was required to be done mandatorily under Section 12A(b) of the Act.

3. The assessee carried an appeal before the Appellate Assistant Commissioner who after hearing counsel for the assessee was satisfied that the first objection of the Income-tax Officer did not have any merit. The appellate authority found substance in the second objection taken by the Income-tax Officer. According to him, the provisions contained in Section 12A(b) made it mandatory for the assessee to furnish the auditors report duly signed and verified by the chartered accountant with the return of income. Failure to furnish the auditors report disentitles the assessee to claim the exemption under Sections 11 and 12 of the Act. The assessees request to take the report of the auditor during the pendency of the appeal on record was rejected by the appellate authority on the ground that the submission of the auditors report along with the furnishing of return was mandatory. Since the assessee had failed to furnish the report along with the return before the Income-tax Officer, the appellate authority could not take the same on its file. The plea of counsel for the assessee that the Income-tax Officer had not provided him with an opportunity to produce the auditors report in the prescribed form was not accepted. The Appellate Assistant Commissioner dismissed the appeal on the ground that the assessee had not furnished the auditors report in the prescribed form.

4. Thereafter, the assessee filed an appeal before the Tribunal and reiterated its plea which had been raised before the Appellate Assistant Commissioner. According to the assessee, there was no motive for withholding the auditors report. It was thought that the requirement of the section was fulfilled in furnishing the income and expenditure account, balance-sheet and the auditors note. It was not mandatory to furnish the auditors report along with the return and the same could be furnished at a later date as well especially when the same was done under a bona fide mistaken view of law. The Tribunal accepted the plea of the assessee. It was held that having furnished the audited accounts comprising income and expenditure, balance-sheet and the auditors note giving most of the particulars required in the auditors report prescribed in Section 12A, there could be no motive in withholding the auditors report. It was held that the provisions contained in Section 12A(b) have to be fulfilled if exemption of income is required under Sections 11 and 12 but the law did not provide any time limit for production of the report. It was held that the first appellate