Commissioner of Income Tax vs Arun Kumar Agrawal

The Income Tax Appellate Tribunal, Allahabad has referred the following question of law u/s 256(1) of the Income Tax Act, 1961, hereinafter referred to as "the Act" for opinion to this court:

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was legally correct in cancelling the penalty of Rs. 42,242 imposed u/s 271B of the Act on the ground that no penalty under the said Section is exigible if the audit report is obtained within the specified time, though not furnished within time allowed for filing of the return u/s 139(1) of the Income Tax Act, 1961?

The present reference relates to the assessment year 1990-91.

The brief facts giving rise to the present reference are as follows:

The assessee was required to get his accounts audited and obtain the audit report u/s 44AB of the Act before October 31, 1990. The assessee got his accounts audited and obtained the report before this date. However, the Assessing Officer was of the view that the assessee was also required to file his audited accounts within the specified time u/s 139(1) of the Act upon which he issued a show-cause notice to the assessee. In reply to the said notice the assessee submitted that his accounts were audited on October 25, 1990, i.e., within the specified time and the audit report was filed with the return, which was filed u/s 139(4) of the Act and not u/s 139(1) of the Act. However, the Assessing Officer not having been satisfied with the plea taken by the assessee vide order dated October 14, 1992, imposed a penalty of Rs. 42,242. Against the said order the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), who upheld the order of the Assessing Officer. However, in appeal before the Tribunal, the Tribunal relying on its earlier decisions, has held that the penalty u/s 271B of the Act could not be legally imposed in this case and, therefore, cancelled the same.

We have heard the learned Counsel for the parties.

We find that this court in the case of Commissioner of Income Tax Vs. Jai Durga Construction Co., has held that the penalty u/s 271B of the Act, as it stood at the relevant point of time prior to its amendment by the Finance Act, 1995, which came into existence with effect from July 1, 1995, was not exigible in case the audit report has been obtained within the specified date and the return of income has been filed beyond time.

Respectfully following the aforesaid decision of this court, we are of the considered opinion that the penalty u/s 271B of the Act has rightly been deleted.

We, accordingly, answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. There will be no order as to costs.