1. This appeal by the assessee is directed against the order of the Commissioner (Appeals), dated 5-5-1980, relating to the assessment year 1977-78. The only issue involved in this appeal is whether, on the facts and in the circumstances of the case, the learned Commissioner erred in upholding the decision of the ITO that the assessee is not entitled to deduction under Section 80J of the Income-tax Act, 1961 ('the Act').
2. The assessee is a registered firm working under the name and style of Mahalaxmi Rice Factory. For the assessment year under appeal, the return of income was due from the assessee on or before 31-7-1977. The return was actually filed on 31-8-1977, declaring net income of Rs. 81,190. In this return, the assessee made a claim for deduction under Section 80J for filing the necessary particulars. However, by virtue of the provisions of Sub-section (6A) of Section 80J, which is effective from 1-4-1976 having been inserted by the Finance Act, 1975, the deduction under Sub-section (1) of Section 80J from the profits and gains derived from an industrial undertaking shall not be admissible unless the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below Sub-section (2) of Section 288 of the Act and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. The assessee had not furnished such an audit report along with the return.
The audit report dated 14-12-1978 was filed on 18-1-1979. In the meantime, the ITO completed the assessment on 19-12-1978 with the observations as under : Relief under Section 80J has not been allowed as the assessee did not get its accounts audited as required under Section 80J(6A).
The income was computed at Rs. 1,09,010 by the ITO's order dated 19-12-1978. This was challenged in appeal.
3. The learned Commissioner considered the reasons given by the ITO in his impugned order and the contentions raised on behalf of the assessee before him. He was of the opinion that the ITO was justified in not allowing the relief under Section 80J in view of the provisions contained in Section 80J(6A) which were mandatory in character. Hence the present appeal before us.
4. The learned counsel for the assessee submitted before us that the assessee had made a valid claim before the ITO for deduction under Section 80J by filing necessary particulars. While admitting that the audit report had not been filed along with the return, as pointed out by the authorities below, the learned counsel for the assessee submitted that the assessee was not given an opportunity to make amendments before the assessment was completed. There has been violation of the principles of natural justice. Since the assessee had made a valid claim and the necessary particulars filed, the relief should not have been disallowed on the technical ground of non-submission of the audit report along with the return. This argument was raised with the legal contention that the provisions of Section 80J(6A) are only directory and, therefore, if the compliance had been made even at the appellate stage, the assessee should have been granted necessary relief to which otherwise it was entitled. Reliance was placed for this proposition on a judgment of the Tribunal in Coromandel Steel Products v. Eighth ITO  12 Taxman 55 (Mad.).
5. The learned counsel for the assessee also submitted that if the assessee had not filed the audit report along with the return for claim of deduction under Section 80J, it was merely a defective return and by virtue of the provisions of Sub-section (9) of Section 139 of the Act the assessee should have been given an opportunity to rectify the defect. Since this was not done, the assessee is entitled to an opportunity to rectify the defect to entitle itself to deduction under Section 80J. Relying upon Circular No. 14, dated 11-4-1955 issued by the CBDT, he contended that the officers of the revenue should not have exploited the ignorance of the assessee and they should have helped the assessee by giving an opportunity to file the audit report to rectify the defect in the return so that the assessee could get the deduction under Section 80J. It was contended that the provisions of Section 139(9) being procedural in nature are effective for any pending matters either before the ITO or the appellate authorities.
6. The revenue opposed these submissions strongly and pointed out that the assessee had admittedly not filed the audit report before the ITO and, therefore, the ITO could not allow to the assessee deduction in view of the clear cut provisions of Section 80J(6A). It was submitted that the report was filed after the ITO had completed the assessment.
It was, therefore, not possible for the ITO to give to the assessee opportunity as required. It was also contended that the provisions of Section 139(9) were not on the statute book when even the appeal was decided by the Commissioner (Appeals). Therefore, the grievance of the assessee that an opportunity to rectify the defect was not given in view of these provisions of the Act is unwarranted.
7. Referring to the reliance by the assessee from the judgment of the Tribunal in Coromandel Steel Products' case (supra), it was contended on behalf of the revenue that the provisions of Section 80J(6A) are mandatory because the word used for the filing of the audit report is 'shall'. In reply, the learned counsel for the assessee submitted that the word 'shall' is in a different context and so far as the furnishing of the audit report is concerned, it is only directory in nature.
8. We have given careful consideration to the rival submissions and we find that insofar as Section 139(9) is concerned, it came on the statute book with effect from 1-9-1980 as it was inserted by the Finance (No. 2) Act, 1980. We find that the orders of the authorities below were made before this date. Therefore, the grievance of the assessee that the authorities below did not comply with these provisions is unjustified as the same were not on the statute book when they dealt with the matter. However, his contention that the provisions of Section 139(9) are procedural in character, has to be accepted as it pertains to procedure for the assessment contained in Chapter XIV of the Act. A reading of Sub-section (9) shows that it contains only a rule of natural justice as it requires an opportunity being given to the assessee for removal of the defect within a period of fifteen days from the date of such intimation of the defect by the ITO. It is now trite law that to the income-tax proceedings, the principles of natural justice are applicable. Though the authorities below could not avail of Section 139(9), it is clear that this procedure can be availed of by the assessee, if the necessary facts are already on record before the authorities below and have been considered but relief not allowed only because of a defect in making such a claim.
9. Section 80J(6A) in the context that it is part of Section 80J which gives some benefits to the assessee by encouraging certain types of industrial undertakings is only directory in nature and if the assessee has not furnished an audit report but has otherwise given the necessary particulars on which Section 80J deduction can be computed, the claim cannot be rejected without giving an opportunity to the assessee to rectify the defect. In the case before the Madras Bench, the ITO had also entertained the claim as is the case before us. The relief is not allowed as the audit report had not been filed. Since the audit report has been filed and the proceedings are still open insofar as the assessment is under appeal and the necessary fads for admissibility of the claim were already before the authorities below, we direct that the audit report be taken on record and Section 80J deduction computed in accordance with law.