2004 (7) TMI 62 - HC - Income Tax

Question of law Reference - imposition of penalty under section 271B - It was held that the assessee did file the audited accounts though late and the same were accepted by the authorities. The explanation offered by the assessee was also accepted being sufficient and genuine. It was on this basis, the penalty imposed was set aside by the Commissioner of Income-tax (Appeals) and upheld by the Tribunal. - Once the explanation offered by the assessee found favour with the authorities and the report was taken on record, this court as a reference court cannot again probe into the sufficiency of cause in filing the audit report. - In a case of this nature, no question of law arises application filed by revenue dismissed

Summary

Issues Involved:
Application under section 256(2) of the Income-tax Act, 1961 against Tribunal's order rejecting section 256(1) application by Revenue regarding imposition of penalty under section 271B for late filing of audited accounts.

Analysis:
The judgment delivered by the High Court of Madhya Pradesh pertains to an application made under section 256(2) of the Income-tax Act, 1961 by the Income-tax Department (Revenue) against a Tribunal's order dated November 20, 1998. The Tribunal had rejected the Revenue's application under section 256(1) of the Act, stating that no referable question of law arose from their order. The High Court concurred with the Tribunal's finding that no such question of law was evident under section 256(1) of the Act, hence declining to call for the reference proposed by the Revenue.

The main issue in question was the imposition of penalty under section 271B of the Act on the assessee for late filing of audited accounts for the assessment years 1989-90 and 1990-91. The authorities accepted the audited accounts filed by the assessee, along with the explanation provided for the delay, deeming it sufficient and genuine. Consequently, the penalty imposed for the two years was set aside by the Commissioner of Income-tax (Appeals) and upheld by the Tribunal.

The High Court highlighted that in cases where the assessee's explanation for late filing is accepted by the authorities and the audit report is taken on record, there is no scope for the court to re-examine the sufficiency of the cause for filing the report. The court emphasized that the imposition of a penalty requires more than just a technical breach, as per the settled view of the Supreme Court. It was noted that unless there is something beyond a mere breach in the conduct of the assessee, the penalty cannot be imposed. Since no such case was identified by the authorities, the High Court concluded that there was no question of law warranting a reference under section 256(1) of the Act.

In light of the above analysis, the High Court dismissed the application, stating that no costs were to be imposed. The judgment underscores the importance of a thorough examination of the circumstances surrounding the imposition of penalties under tax laws, emphasizing the need for substantive grounds beyond mere technical violations to justify such penalties.