Commissioner of Income Tax vs Apex Laboratories P. Ltd.

P.P.S. Janarthana Raja, J.—The present appeal is filed u/s 260A of the Income Tax Act, 1961 by the Revenue, in I.T.A. No. 879/Mds/ 99

dated February 10, 2005, passed by the Income Tax Appellate Tribunal, Madras ""A"" Bench raising the following substantial questions of law.

Whether, on the facts and circumstances of the case, the Tribunal was right in holding that no penalty is imposable u/s 271B for non-compliance

with the provisions of Section 44AB on the ground that the returns were filed belatedly neither u/s 139 nor on a notice u/s 142?

Whether, on the facts and circumstances of the case, the Tribunal was right in deleting the penalty without giving a finding of fact as to whether

the tax audit report had been obtained within the prescribed time by the assessee?

The facts leading to the above questions of law are as under:

The relevant assessment year is 1993-94. The assessee filed its return of income on March 13, 1997 along with the audit report u/s 44AB. As the

return was a belated one and there was no income assessable for the assessment year under consideration, the same was treated as invalid.

However, it was noticed that the audit report in Form No. 3CD was not furnished to the Department on or before the due date, namely,

December 31, 1994, as specified in the Act u/s 44AB. A show-cause notice u/s 271B was issued to the assessee calling for explanation as to why

penalty u/s 271B should not be levied for the assessee''s failure to furnish the report of audit before the due date, as provided u/s 44AB of the

Income Tax Act. The assessee, by its reply has stated that no penalty is contemplated in the Act for assessees who have got the audit completed,

and furnished the report of such audit and further stated that the delay in getting the accounts audited or in submission of audit does not attract

penalty u/s 271B. The Assessing Officer rejected the contention and held that it was a clear violation of the provisions u/s 44AB and penalty u/s

271B is leviable in this case, and levied a penalty of Rs. 1,00,000 u/s 271B of the Act. Aggrieved by the order, the respondent filed an appeal

before the Commissioner of Income Tax (Appeals) and held that no penalty was imposable u/s 271B as the section envisaged levy of penalty for

failure to get the accounts audited, obtain a report and furnish the report along with the return filed u/s 139(1) or in response to a notice u/s 142(1).

Since in this case, the report was filed under neither section, the question of specific date does not arise. The Commissioner of Income Tax

allowed the appeal. The Revenue took up the matter to the Income Tax Appellate Tribunal. The Tribunal held that it is sufficient if the audit report

was obtained in time and the delay in filing the same would not lead to imposition of penalty, and dismissed the appeal.

We heard learned standing counsel appearing for the Revenue, who submitted that there cannot be a situation where a person files his appeal on

time, but does not file his audit report on time, should be in a worse situation than a person who files both belatedly. She further submitted that the

Tribunal ought to have given a finding of fact as to when the audit report was signed, and thereafter decided the issue on whether the audit report

had been obtained within the time prescribed by the statute. In this case, the due date for the return was December 31, 1993. The assessee filed its

return belatedly on March 31, 1997. It may be seen that the return was not filed within the time-limit stipulated u/s 139(1). The return for the

assessment year 1993-94 was time-barred by March 31, 1995, and the Assessing Officer did not issue any notice u/s 142(1) calling for furnishing

of the return for the said year and so, the return could not be taken as filed in response to a notice u/s 142 also. Since Section 271B envisage levy

of penalty for failure to get his accounts audited, obtain a report of such audit and furnish the said report along with his return of income filed u/s

139(1) or in response to a notice u/s 142(1), the submission that the audit report should have been filed within the specified date was not correct,

as the specified dates only arise to returns filed u/s 139(1) or response to a notice u/s 142(1)(i). Hence, when the return was not filed under the

provision of law, no default could be made out u/s 44AB. In this case, the penalty is leviable only if the assessee fails to get his accounts audited

and obtain a report. In this case, the accounts were audited and also the assessee got the audit report, but the same was filed along with the return

which was filed belatedly. Hence, penalty cannot be imposed u/s 271B of the Act.

In the foregoing conclusions, we find no error in the order of the Tribunal and hence no substantial questions of law arise for consideration of this

Court. Hence, we dismiss the above tax case. No costs.