Commissioner of Income Tax vs Jagat Rice Mills

The Income Tax Appellate Tribunal, New Delhi 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 Tribunal was legally justified in upholding the Commissioner (Appeals)''s action in cancelling the penalty of Rs. 37,672 levied u/s 271B of the Income Tax Act, 1961?"

The dispute relates to the assessment year 1989-90.

The respondent/assessee a registered partnership firm was required to file return of income by 31-10-1989, but it was filed with delay on 30-3-1990. The provisions of section 44AB were also applicable and, therefore, along with the return audit report dated 3-1-10-1989 was also filed. The return was processed u/s 143(1)(a) of the Act and penalty proceedings u/s 271B was initiated by the issuance of notice dated 30-3-1990. In reply to the show-cause notice the assessee explained that the audit report was obtained within the time allowed u/s 139(1) of the Act and, therefore, there was no violation envisaged u/s 271B of the Act. The assessee also pleaded that it was prevented by sufficient cause for not filing the audit report and return within the prescribed time. The assessing officer rejected the explanation of the assessee and levied penalty for the failure of the assessee to furnish the return of income along with the audit report as prescribed u/s 44AB within the time allowed u/s 139(1) of the Act. The penalty order was cancelled by the Commissioner (Appeals) on the findings that the penalty proceeding had not been initiated during the course of proceedings u/s 143(1) and that the assessee was prevented by reasonable cause in filing the audit report late. The explanation of the assessee that the return of the income could not be filed because of serious illness of one of the partners, who admittedly died, was accepted as sufficient cause by Commissioner (Appeals). The Tribunal in the appeal filed by the revenue held that in view of the amendment with effect from 10-9-1986 by the Taxation Laws (Amendment) and Misc. Provisions Act, 1986 the words ''without reasonable cause'' were omitted from section 271B of the Act. Therefore, it was not necessary for the Commissioner to consider the aspect of reasonable cause before levying the penalty u/s 271B of the Act. It was also found that the penalty proceedings were initiated during the course of assessment proceedings and the contrary observation by the Commissioner (Appeals) was incorrect. However, the Tribunal sustained the deletion of penalty on the ground that the audit report was obtained within the time allowed u/s 139(1) of the Act and, therefore, no penalty can be levied in law.

Heard the learned standing counsel for the department. None appeared on behalf of the assessee /respondent.

We find that this court in Commissioner of Income Tax Vs. Jai Durga Construction Co., has held that where the assessee has got the accounts audited before the specified date, no penalty can be levied u/s 271B of the Act even though the assessee has not filed such audit report before the assessing officer before the specified date. To meet this situation, the law has been also amended by Finance Act, 1995.

in view of the above discussion we find no illegality in the order of the Tribunal.

We, therefore, answer the aforesaid question referred to us in the affirmative i.e., in favour of the assessee and against the revenue. There shall be no order as to costs.