AJIT K. SENGUPTA, J.

(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 12a, 139 (5), 139 (9), 292b and the scheme of the Income-tax Act as a whole, the Tribunal was right in law in holding that the lower authorities were not correct in denying exemption under Section 11 to the assessee for the assessment year 1984-85 "

(7) ADMITTEDLY, the assessee is a charitable trust and is registered with the Commissioner of Income-tax. It was not disputed that the assessee, for the past several years, was treated as a charitable institution and granted exemption under Section 11 of the Act. The assessee has been denied the benefit of exemption under Section 11 as the audit report in Form No. 10b was not filed along with the return and the filing of the said report later on March 6, 1987, did riot satisfy the condition stated in Section 12a. The denial of the exemption is supported on the ground that the provisions of Section 12a are mandatory. There is no doubt that Section 12a specifically states that the provisions of Sections 11 and 12 shall not apply in relation to income of any trust if conditions stated therein are not fulfilled and, in the conditions, it is provided that the accounts of the trust should be audited and the report of the auditor (in Form No. 10b) should be furnished "along with the return". If Section 12a is read in isolation and the rule of strict and literal construction is applied, the approach of the Revenue in this case has to be held as correct. But we see no justification for applying the rule of strict construction or for considering the provisions of Section 12a in isolation.

(8) UNDER certain circumstances, the expression "shall", in its ordinary significance, is mandatory and the court shall,--ordinarily, give that interpretation to that term unless an inconvenient consequence follows or such interpretation is found to be at variance with the intent of the Legislature, to be collected from other parts of the Act. The construction of the said expression depends on the provisions of a particular Act, the setting in which the direction is given, the consequences that would flow from the infringement of the direction and such other considerations.

(9) HAVING regard to the other provisions of the Act regarding filing of the return or revised return or rectifying the defects in the return, we are of the opinion that the provisions of Section 12a are directory in the sense that the Assessing Officer is not powerless to allow an assessee to file the audit report, if not filed along with the return, any time before the completion of the assessment. One has to look at the purpose of the provisions. One has to construe the provision to ensure coherence and consistency to avoid undesirable consequences. Where the audit report was made ready after the return was filed, there was no reason why such audit report should not be allowed to be filed before the completion of the assessment. At this stage, we may also mention that the assessee made an application dated June 18, 1984, seeking extension of time up to September 30, 1984, as audit of relevant papers and statements was not completed and was likely to take more time. The said application was not rejected and it can safely be presumed that extension sought up to September 30, 1984, was granted. The return submitted on September 27, 1984, has to be treated as a return under Section 139 (1). On completion of audit, the assessee furnished the report in Form No. 10b on March 6, 1987, purporting to act under Section 139 (5) of the Act. By filing the said report, the assessee definitely removed an omission or defect existing in the return furnished on September 27, 1984. No mala fides have been alleged. No case has been made out that the delay in getting the accounts audited and in filing of the report in Form No, 10b defeated any object of the Act or the assessees action was in substance not in conformity with the intent and purpose of the Act.

(10) IN our view, the income-tax authorities fell into error in denying the claim of exemption under Section 11 of the Act. It was not disputed, as we have already indicated, that the assessee, for the past several years, was treated as a charitable institution and granted exemption under Section 11 of the Act.

(11) AS we have said, the only ground on which the exemption was denied to the assessee-trust under Section 11 of the Act is that the return was not accompanied by the audit report. Section 139 (5) of the Act provides that, if any person, having furnished a return, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. The assessee in this case could have filed a revised return annexing a copy of the audit report. Had the assessee-trust done so, the exemption under Section 11 of the Act could not have been denied to it by the Income-tax Officer.

(12) SECTION 139 (9) of the Act is also relevant in this context. It provides that, where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee giving him an opportunity to rectify the defect within a period of 15 days from the date of such intimation or within such further period which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow and if the defect is not rectified within the said period of 15 days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return.

(13) EXPLANATION to Section 139 (9), as it stood at the material time, inter alia, provided as follows :

"explanation.--For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely : (a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in ; (b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return ; (c) the return is accompanied by proof of-- (i) the tax, if any, claimed to have been deducted at source and the advance tax and tax on self-assessment, if any, claimed to have been paid ; (ii) the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974)".

(14) IT was contended that the provisions of Sub-section (5) were not applicable as the assessee did not furnish the report in Form No. 10b on March 6, 1987, with a revised return and non-filing of the above audit report was not a defect covered under the categories specified in the Explanation to Section 139 (9). This approach again disregarded the intent and purpose of the provisions and the scheme of the enactment as a whole. In our opinion, the defects specified in Section 139 (9) are only illustrative and not exhaustive. This fact will be apparent from the amendment made by the Finance Act, 1988, with effect from April 1, 1989, whereby Clause (bb) was inserted which reads as follows : "the return is accompanied by the report of the audit obtained under Section 44ab. " of course, the Assessing Officer cannot ignore the specified defects and must get them rectified but to contend that only the defects specified can be got rectified and no other defects would be putting unnecessary restrictions on the power of the Assessing Officer leading to inconvenient consequences and absurd results not intended by the Legislature. We do not see any such fetters on the powers of the Assessing Officer under Section 143. The Assessing Officer has power to ask the assessee to remove all defects in the return other than the defects making the return invalid.

(15) THE view of the lower authorities that the audit report submitted on March 6, 1987, not being filed with the revised return did not satisfy the condition in Section 12a and that the provisions of Sub-sections (5) and (9) of Section 139 were not applicable cannot be sustained. The object of both the sub-sections, in our view, is to get removed and rectified all defects and omissions in the return filed, whether discovered by the assessee or by the Assessing Officer. Both the provisions are enabling provisions inserted to facilitate reflection of correct income in the return and assessment thereof. These provisions can be simultaneously applied. Take for illustration the case of an assessee submitting a valid return but without proof of tax deducted at source which, for several reasons, was not available at the time of submission of the return. The said proof is later given to the Assessing Officer and is placed on record. It would be absurd to contend, that credit for tax deducted would be given if the proof was asked for by the Assessing Officer in terms of Section 139 (9) but not in a case where the assessee had placed the proof without filing a revised return under Section 139 (9). This would defeat the intent and purpose of the enactment. If the object of Sub-section (5) of Section 139 is to rectify a wrong or omission in the return, then any act through which such rectification is carried can be treated as revising the return if, in substance and in effect, the purpose of the Act is achieved and is not defeated. Thus, documents placed on record with or without covering letters with the intention to remove any omission or wrong in the return or record cannot be ignored simply because the revised return was not furnished unless it is shown that the purpose of the Act is not satisfied.

(16) IN our view, therefore, the Assessing Officer ought to have given the assessee an opportunity to submit the audit report as the return was defective inasmuch as the audit report was not filed along with the return. In this case, as we have already noticed, the said defect was rectified by the assessee by filing an audit report in the prescribed form before the completion of the assessment. The income-tax authorities took a hyper-technical view of this matter. Where the assessee has complied with the provisions of the Act in the course of the assessment proceedings by curing the defect in the return by filing an audit report, the Income-tax Officer cannot ignore such audit report or the return in completing the assessment.

(17) IN our judgment, both the Income-tax Officer and the Commissioner of Income-tax (Appeals) misconstrued the provisions of the Act in holding that the assessee could not file the audit report after the return had been filed before the completion of the assessment. In this connection, our attention has been drawn to a circular of the Board dated February 9, 1978, which provides as follows : "charitable trust-Requirement of filing audit report in Form 10b--Section 12a (b)--Instructions regarding.--The Board have considered whether the requirement under Section 12a (b) of filing audit report along with the return of income is mandatory so as to disentitle the trust from claiming exemption under Sections 11 and 12 in case of omission to furnish such report in the prescribed form along with the return. Normally, it should be possible for a charitable or religious trust or institution to file the auditors report along with the return of total income, where such trust or institution claims exemption under Sections 11 and 12. However, in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report the exemption as available to such trust under Sections 11 and 12 may not be denied merely on account of delay in furnishing the auditors report and the Income-tax Officer should record reasons for accepting a belated audit report. (1/1148-CBDT F. No. 267/482/77-IT (Part) dated February 9, 1978--CBDT Bulletin Tech. XXIII/582.)".

(18) WE may also take note of the fact which has been recorded by the Tribunal that the Gujarat High Court, in a similar case, declined to call for a reference under Section 256 (2) of the Income-tax Act, 1961, against the decision of the Tribunal. The Department moved the Supreme Court by a special leave petition which was dismissed on August 18, 1989.

(19) FOR the foregoing reasons, we answer the question in this reference in the affirmative and in favour of the assessee. There will be no order as to costs.