2003 (4) TMI 48 - HC - Income Tax

Imposition of penalty under section 271B - reasonable cause for waiving or dispensing with the penalty under section 271B - not obtaining tax audit report under section 44AB in time - The conduct of the assessee indicates delay in filing the audit report - imposition of penalty was justified

Summary

Issues:
1. Imposition of penalty under section 271B of the Income-tax Act for not obtaining tax audit report in time for the assessment year 1992-93.
2. Appeal against the order of the Tribunal regarding the penalty imposed.

Analysis:
1. The assessee, a steel manufacturing company, filed its return of income for the assessment year 1992-93 with a delay of 14 months in obtaining the audit report under section 44AB. The Income-tax Officer issued a show cause notice for penalty under section 271B, and subsequent adjournments were sought by the assessee without providing reasons related to inter se disputes between directors. The Commissioner of Income-tax (Appeals) set aside the penalty, citing reasons of inter-group disputes. However, the Tribunal upheld the penalty, stating that the disputes among directors were not a reasonable cause for waiving the penalty. The High Court concurred with the Tribunal's decision, emphasizing the delay in filing the audit report and the conduct of the assessee in not providing explanations for the delays caused by internal disputes.

2. The High Court upheld the penalty of Rs. 1 lakh for the assessment year 1992-93, considering the delay in obtaining the audit report. However, it set aside the penalty for the assessment year 1993-94, noting that the delay in obtaining the report for 1992-93 impacted the subsequent year's report. The Court refused to remand the matter back to the Income-tax Officer due to the assessee's conduct and lack of valid reasons for the delays. The Court found that the internal disputes between the directors were not sufficient grounds to waive the penalty under section 271B. Therefore, the High Court upheld the penalty for the assessment year 1992-93 but waived it for the assessment year 1993-94 due to the interconnected nature of the audit reports.

Conclusion:
The High Court upheld the penalty of Rs. 1 lakh for the assessment year 1992-93 while setting aside the penalty for the assessment year 1993-94. Both appeals were disposed of with no order as to costs, affirming the Tribunal's decision on the penalty imposed under section 271B of the Income-tax Act.