Commissioner of Income Tax vs Premier Fuels Products

The Income Tax Appellate Tribunal, Delhi, had 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 correct in law in confirming the order of the Commissioner (Appeals) cancelling the penalty imposed by the Income Tax Officer u/s 271B on the ground that same was not exigible where the audit report u/s 44AB was filed along with a return u/s 139(4) and no notice u/s 142(1) had been issued ?"

The present reference relates to the assessment year 1989-90.

Briefly stated the facts giving rise to the present reference are as follows:

The respondent-assessee is a registered firm. It was required to get its books of account audited and obtain an audit report in prescribed Form No. CD-3 within the time prescribed u/s 44AB of the Act. The audit report was obtained within the specified period, i.e., on 23-10-1989, but it was filed along with the return of income on 31-5-1990. In other words, the return was filed not u/s 139(1) of the Act but u/s 139(4) of the Act. The Income Tax Officer on the basis of the aforesaid facts initiated penalty proceedings u/s 271B of the Act and by means of an order passed on 30-7-1991 he levied a penalty of Rs. 3,43,967. Feeling aggrieved, the respondent-assessee preferred an appeal before the Commissioner (Appeals), who while deleting the penalty, placed reliance on two decisions of the Tribunal, namely, (1992) 42 ITD 384 and (1992) 43 ITD 259 and observed as under:

"I have carefully considered the submissions of the learned authorised representative. I am of the view that the reasons for delay in filing the return of income should also be sufficient reasons for delay in filing the audit report. However, in the appellant''s case, in my opinion, the provisions of section 271B are not attracted having regard to the clear language of section 271B. Section 271B speaks of a situation where a return has already been filed u/s 139(1) or a return has been filed in response to a notice u/s 142(1) and the assessee fails to furnish the audit report in the prescribed form along with returns. In a case where no return is filed u/s 139(1) or in respondence a notice u/s 142(1) the assessee cannot be held liable for default u/s 271B. In the case of the appellant the return has neither been filed u/s 139(1) or in response to notice u/s 142(1) and the audit report has only been filed along with a return u/s 139(4) and, accordingly, there is no case for imposition of penalty u/s 271B. This view is also supported by the orders of the Income Tax Appellate Tribunal supra relied upon by the learned authorised representative. In view of what is discussed above, the penalty u/s 271B does not deserve to be sustained and the same is cancelled."

Further on appeal before the Tribunal, the Tribunal upheld the order of the Commissioner (Appeals).

We have heard Sri R.K. Upadhyaya, learned standing counsel for the revenue. Nobody has appeared on behalf of the respondent-assessee.

We find that this court in the case of Commissioner of Income Tax Vs. Jai Durga Construction Co., has held as under:

"The obligation created by section 44AB of the Income Tax Act, 1961, as it stood prior to 1-7-1995, was merely to get the accounts audited before the specified date. There was no obligation to furnish that audit report before the assessing officer before the specified date. This obligation has been created by substituting the words ''furnish by'' for the words ''obtain before'' by the Finance Act, 1995, with effect from 1-7-1995. Thus, prior to the amendment the obligation of an assessee to whom u/s 44AB applied was merely to get the accounts audited and obtain an audit report before the specified date." (p. 857)

We do not find any infirmity in the order of the Commissioner (Appeals), which has been upheld by the Tribunal and the same is in conformity with the aforesaid decision.

In view of the aforesaid discussion, we answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the revenue. However, there shall be no order as to costs.