1999 (3) TMI 106 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee failed to comply with the provisions of Section 44AB by not getting the accounts audited before the specified date.
2. Whether the penalty under Section 271B is leviable for the delay in filing the audit report along with the return of income.
3. Whether there was a reasonable cause for the delay in filing the return and audit report.

Issue-wise Detailed Analysis:

1. Compliance with Section 44AB:
The Assessing Officer (AO) contended that the assessee failed to comply with Section 44AB by not getting the accounts audited before the specified date, i.e., 31st December 1990. The AO inferred that the audit report was not obtained by the specified date because the return and audit report were filed on 15th January 1991. However, the CIT(A) noted that the audit report was dated 28th December 1990, and there was no evidence to suggest that the audit was conducted after the specified date. The Tribunal found that the audit report was indeed obtained before the specified date, and the mere delay in filing the return did not imply non-compliance with Section 44AB.

2. Levy of Penalty under Section 271B:
The AO imposed a penalty of Rs. 2,00,000 under Section 271B for the alleged failure to comply with Section 44AB. The CIT(A) cancelled this penalty, referencing Tribunal decisions such as Auto Squaw vs. ITO and ITO vs. Mohinder Kumar, which supported the view that penalty under Section 271B was not warranted. The Tribunal upheld the CIT(A)'s decision, emphasizing that the penalty under Section 271B is not for delay but for absolute failure to get the accounts audited or to obtain the audit report. Since the audit report was obtained in time, the penalty was not exigible.

3. Reasonable Cause for Delay:
The assessee argued that the delay in filing the return was due to an expectation that the due date would be extended, based on past instances where similar petitions to the Finance Minister had resulted in extensions. The Tribunal found this explanation plausible, noting that the delay was only 15 days. Additionally, Section 273B provides that no penalty shall be imposed if there is a reasonable cause for the failure. The Tribunal concluded that the assessee had a reasonable cause, and the AO did not successfully rebut this. Therefore, the penalty under Section 271B was not justified.

Conclusion:
The Tribunal concluded that the assessee had complied with the provisions of Section 44AB by obtaining the audit report before the specified date. The delay in filing the return and audit report did not constitute a failure under Section 271B, and there was a reasonable cause for the delay. Consequently, the penalty imposed by the AO was not warranted, and the CIT(A)'s decision to cancel the penalty was upheld. The Revenue's appeal was dismissed.