Commissioner of Income Tax, Meerut vs Abhay Ram Suraj Mal

The income tax Appellate Tribunal, Delhi has referred the following question of law u/s 256(1) of the income tax Act, 1961, for opinion of this Court:- Whether the Tribunal was justified in law in opining that penalty u/s 271-B was not leviable in a case where the audit report had been obtained prior to the "specified date" and the return filed by the assessee was one u/s 139(4) and not a return filed u/s 139(1) or a return in response to notice u/s 142(1).

The reference relates to the year 1989-90.

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

The assessee is having a turnover of Rs.1,82,21,480. It was required to get its accounts audited in accordance with the provisions of section 44AB of the income tax Act before the specified date i.e., 31-10-1989 and furnish the same along with the return of income u/s 139(1) of the income tax Act, whereas the assessee got its accounts audited within time but did not file its return by the due date i.e., 31-10-1989 and consequently did not furnish the audit report. However, the audit report was furnished along with the return filed on 26-2-1990. The Assessing Officer initiated penalty proceedings u/s 271-B. In reply, the assessee made explanation mainly to the effect that whereas it had got its accounts audited by the specified date, it could not file its return within time allowed u/s 139(1) due to various reasons including illness of the Managing partner. In support of this contention the assessee also furnished medical certificate. The Assessing Officer, however, found the explanation unsatisfactory and levied the impugned penalty which was upheld in appeal by the learned Commissioner of income tax (Appeals).

On further appeal by the assessee the Tribunal noted that the assessee had got its accounts audited by the specified date. The only default committed by the assessee is having filed the same along with the return beyond time allowed u/s 139(1). The Tribunal noted that, on the other hand, the assessment was framed on the basis of such return and, therefore took the view that there has been substantial compliance of law and assessee could not be punished for late furnishing of report along with the return. The Tribunal, thus, cancelled the penalty.

We have heard Sri A.N. Mahajan, learned Standing Counsel for the Revenue and Sri Pawan Shree Agrawal, learned counsel for the respondent-assessee.

We find that the controversy raised herein is squarely covered by the decision of this Court in the case of Commissioner of Income Tax Vs. Jai Durga Construction Co., wherein this Court has held as under:-

At the relevant time, the obligation created by section 44AB 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 1-6-1995. 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. There is no dispute that in the present case the assessee complied with these requirements. The contention of the Commissioner that if the report has not been filed before the Assessing Officer before the specified date, the assessee becomes liable to penalty u/s 271B is not sustainable from the language of section 44ABor section 271B. We are, therefore, of the opinion that the legal position is clear and self-evident and the Tribunal has taken the correct legal view.... (P. 859)

Respectfully following the aforesaid decision we are of the considered opinion that the penalty imposed u/s 271-B was not locigble on the facts and circumstances of the present case. We accordingly answer the question in the affirmative i.e., in favour of the respondent-assessee and against the Revenue. There shall be no orders as to costs.