Commissioner of Income Tax vs Raj Rice Mills

The Income Tax Appellate Tribunal, Delhi has referred the following question of law u/s 256(l) of the Income Tax Act, 1961, hereinafter refer-red 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 cancelling the penalty levied u/s 271B of the Income Tax Act, 1961?"

The present Reference relates to the assessment year 1989-90 in proceeding arising out of imposition of penalty u/s 271B of the Act.

Briefly, stated the facts giving rise to the present Reference are as follows:-

The respondent-assessee is a registered firm. The assessment year involved is 1989-90. For the assessment year in question the respondent-assessee filed its return on 16-1-1990 declaring the total turn over of Rs. 68,76,563. The respondent-assessee was required to get its accounts audited u/s 44AB of the Act before the specified date i.e., 3 1 - 101989 for the assessment year in question. The audit report was filed along with the return on 16-1-1990. The assessing officer observing that the return along with audit report was not filed within the specified date as required u/s 139(1) of the Act, initiated proceedings u/s 271B of the Act and ultimately imposed a penalty of Rs. 34,383 u/s 271B of the Act. On appeal, the Commissioner of Income Tax (Appeals) rejected the respondent-assessee''s explanation that the accounts were got audited well within time and the respondent-assessee had filed its return before getting any notice u/s 142(l) of the Act and as such it was not to be treated in default. He concur-red with the finding of the assessing officer and confirmed the penalty levied u/s 271B of the Act. In second appealthe, Tribunal vide paragraph No. 5 of its order deleted the penalty levied u/s 271B of the Act, by observing as under:-

"We have heard the rival submission of the parties and have gone through the entire material on record including the order of the Tribunal was referred to before us on behalf of the assessee and a copy of which is available on record. In the instant case the due date for obtaining the audit report u/s 44AB was 31-10-1989. According to assessee the tax audit report was obtained well within the prescribed time from the Chartered Accountant on the prescribed form and since there is no provision to file the audit report separately or independently, it could only be filed on 16-1-1990 along with the return. The assessee''s counsel has further submitted that late filing of the return is a separate default for which separate procedure is prescribed and that penalty u/s 271B cannot be imposed unless the default is established. The contention of the assessee, in our considered opinion, has substantial force. The provisions of section 44AB as it stood at the relevant time prescribed for obtaining the audit report from the auditors before the due date for filing the return u/s 139(l). According to assessee it had obtained the audit report well within the time prescribed time. Therefore, mere late filing of the return along with the audit report cannot be a ground for levy of penalty u/s 271B. Accordingly, orders of the authorities below levying and confirming penalty u/s 271B are quashed and penalty u/s 271B if collected, shall be refunded forthwith. Order accordingly."

We have heard Sri AN Mahajan, learned standing counsel for the revenue and Sri Vishwajeet, learned counsel for the respondent-assessee.

We find that the view taken by the Tribunal is in conformity with the decision of the Allahabad High Court in the case of Commissioner of Income Tax Vs. Jai Durga Construction Co., . Thus, the Tribunal has rightly deleted the penalty imposed u/s 271B of the Act.

Respectfully following the aforesaid decision, 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.