Question: Which of the following sentences is better to use?

> 
> 1. Where it is concluded that the report is incorrect it will be returned.
> 2. If the report is incorrect then it will be returned.
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> 
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Or do they mean the same thing?

These sentences will be used for a description of activities.

Answer: 
In your examples, the sentence starting with *if* is easier to understand. But it always depends on the context of what's being written as well as target audience. I find *where* is used more often in formal writings, but not always.
"Where" is making a more general statement. In particular the statement with "if" would be appropriate whether we were talking about a particular report right now, or about any report which might happen to be produced; "where" would be appropriate only in the latter case. 
Apart from that, I agree with vehomzzz and joshdick