Commissioner of Income Tax, Lucknow vs Anil Kumar Mittal

The Income Tax Appellate Tribunal, Bench New Delhi has referred the following question of law u/s 256(1) of the Income Tax Act, 1961 for opinion of this Court:- Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the Assessing Officer was not justified in levying the penalty u/s 271B of the Income Tax Act, 1961?

The reference relates to the year 1990-91.

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

The assessment year involved is 1990-91. The assessee filed the return of income on 31-7-91, which was covered u/s 139(4) of the Income Tax Act as the same has been filed after the expiry of the time allowed u/s 139(1). As per the trading account, the assessee''s total sales amounted to Rs. 70,83,147. The Assessing Officer felt that the assessee was under the legal obligation to:

(i) get his accounts audited and to obtain the audit report as required u/s 44AB ;

(ii) furnish the audit report along with the return filed under sub section (1) of Section 139.

As there was no compliance in respect of Item (ii) above, penalty proceedings u/s 271B were initiated. The assessee contended that the return of income has been filed on 31.7.1989 showing net income of Rs. 18,330 that all the necessary papers had been filed along with the Audit Report by the C.A. In the proper form and that the penalty proceedings be dropped. However, the Assessing Officer held that the assessee has "failed to file the Audit Report within the time allowed u/s 139(1) of the Income Tax Act, 1961 without reasonable cause". In that view matter, he levied a penalty a penalty of Rs. 35,415 u/s 271B of the Income Tax Act, 1961.

On appeal, the Commissioner (Appeals) agreed with the assessee''s counsel''s submission that the provisions or section 271B were attracted in those case where return has been filed u/s 139(1) or in response to a notice u/s 142(1) and such return was not accompanied by the audit report u/s 44AB. Accordingly, he held that in the assessee''s case, there was no return u/s 139(1) and, therefore, there was no default on the part of the assessee u/s 271B.

In the Revenue''s appeal, the Tribunal found that the audit report u/s 44AB was dated 29.10.90 and was filed along with the return on 31.7.1991. The Tribunal observed that the Assessing Officer levied the impugned penalty "as the assesses has failed to file the audit report within the time allowed u/s 139(1) of the Income Tax Act 1961". The Tribunal held that, according to the provisions of section 271B, there was no requirement to file audit report within the time allowed u/s 139(1). The Tribunal held that, the assessee cannot be penalised by the Assessing Officer u/s 271B. The Tribunal In that view held that the Assessing Officer was not justified in levying the penalty u/s 271B of the Income Tax Act 1961.

We have her3rd Sri A.N. Mahajarn, learned Standing Counsel and Sri Pawan Shree Agarwal, learned counsel for the respondent.

We find that the question raised in this case is squarely covered by the Division Bench decision of this Court Commissioner of Income Tax Vs. Jai Durga Construction Co., , wherein this Court has held that prior to amendment by Finance. Act, 1995 w.e.f. 1.7.1995 the only obligation created by section 44AB of the Income Tax Act 1961 was merely to get the accounts audited before the specified date and there was no obligation to furnish that audit report before the Assessing Officer before the specified date. Therefore, no penalty could have been imposed u/s 271B of the Act. The present reference related to the assessment year 1990-91 and the aforesaid decision is squarely applicable. We accordingly answer the question in the affirmative, i.e. in favour of the assessee and against the Revenue. There shall be no order as to costs.