Hathising Mfg Co. Ltd. vs Commissioner of Income Tax

K.S. Jhaveri, J.—This appeal u/s. 260A of the Income Tax Act, 1961 is filed against the judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in ITA No. 361/AHD/1991 dated 20.09.2005 whereby, the appeal filed by the Revenue was allowed.

Briefly stated, the appellant-assessee is a Public Limited Company. On 31.12.1993 the assessee filed its Return of income for the A.Y. 1993-94 declaring loss of Rs. 1,13,19,799/-. Along with the Return, provisional Balance-sheet and P & L Accounts were enclosed. Notice u/s. 139(9) was issued and served upon the assessee pointing out the defects in the Return. However, the assessee did not remove these defects within the prescribed time-limit. Thereafter, a revised Return was filed on 04.10.1994. As the assessee had failed to obtain the Tax Audit Report within the due date, as specified u/s. 44AB of the Income Tax Act, 1961, Notice dated 11.03.1996 was issued to the assessee asking it to show cause as to why penalty u/s. 271B of the Act should not be imposed. The assessee did not furnish any reply to the said Notice. The Assessing Officer passed the order dated 30.09.1996 directing the assessee to pay penalty u/s. 271B amounting to Rs. 1.00 Lacs.

Aggrieved by the order dated 30.09.1996, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee vide order dated 10.12.1998. Being aggrieved by the order of CIT(A), the Revenue preferred appeal before the Tribunal. Vide impugned judgment and order dated 30.09.2005, the Tribunal allowed the appeal of the Revenue. Hence, this appeal at the instance of the assessee.

This Tax Appeal was admitted on 21.09.2006 in terms of the following substantial question of law;

"Whether in the facts and circumstances of the case, the Tribunal is right in law in confirming the levy of penalty of Rs. 1,00,000/- u/s. 271B?"

Ms. Niyati Shah learned counsel appearing for the assessee submitted that the appellant assessee is a "sick unit" under the BIFR and could not finalize its Accounts and obtain the Tax Audit Report before 31.03.1994. The assessee had submitted the original Return on the basis of the provisional Balance Sheet and P & L Accounts and revised Return was filed on 04.10.1994 along with the Tax Audit Report. Therefore, there was sufficient cause behind the delay and the A.O. ought not to have imposed the penalty u/s. 271B of the Act.

Mr. Nitin Mehta learned Standing Counsel appearing for the Revenue submitted sufficient opportunity was granted to the assessee to file the Tax Audit Report, however, the assessee failed to avail all the opportunities provided to it. Further, the assessee also did not respond to the Notice u/s. 139(9) of the Act dated 31.03.1994 issued to it. Therefore, penalty u/s. 271B has rightly been imposed on the assessee.

We have heard learned counsel for both the sides and perused the material on record. It is a matter of fact that the assessee did not file the Tax Audit Report within the prescribed time. It appears from the record that the accounts were audited and signed by the Statutory Auditor on 24.03.1994 and the Tax Audit Report was obtained on 31.03.1994 and therefore, it could not be filed prior to 24.03.1994. It is a matter of fact that the assessee is a "sick unit" before the BIFR. Therefore, it could not file the Tax Audit Report within the prescribed time-limit.

Considering the facts of the case, it would be relevant to refer to a decision of this Court in the case of Commissioner of Income Tax Vs. Kashiram Textile Mills (P) Ltd., , wherein it has been held that liberal approach has to be adopted for determining whether reasonable cause existed or not behind delay in filing audit report. Similar view has been taken by the Allahabad High Court in the case of Commissioner of Income Tax Vs. U.P. Rajya Sahkari Evam Bhoomi Vikas Bank Ltd. and by the Punjab and Haryana High Court in the case of Commissioner of Income Tax Vs. Punjab State Leather Development Corpn. Ltd., .

Considering the facts of the present case and the principle rendered in the above cases, we are of the view that the Tribunal ought not to have reversed the order of CIT(A) whereby, the penalty u/s. 271B imposed by the Assessing Officer was quashed and set aside. Hence, the impugned judgment and order passed by the Tribunal in ITA No. 361/AHD/1991 dated 20.09.2005 is quashed and set aside and the order of CIT(A) dated 10.12.1998 is restored. Therefore, the question of law as to whether the Tribunal is right in law in confirming the levy of penalty of Rs. 1,00,000/- u/s. 271B of the Act is answered in the negative in favour of the assessee and against the Revenue. The appeal is, accordingly, allowed.