2003 (3) TMI 76 - HC - Income Tax

Whether the Tribunal was right in law in sustaining the penalty of rupees one lakh for each year after proper interpretation of section 271B read with section 273B of the Act? - we are of the view that the penalty so imposed upon the assessee cannot be sustained as the assessee has reasonable cause for not submitting the accounts before the due date and the same is liable to be set aside hence, the same part of the penalty order is set aside.

Summary

Issues:
Penalty under section 271B read with section 273B of the Income-tax Act for assessment years 1990-91 and 1991-92.

Analysis:
The appeals involved a common question of law regarding the penalty imposed by the Assessing Officer under section 271B of the Income-tax Act for the assessment years 1990-91 and 1991-92. The appellant was required to file an audit report in Form No. 3CD along with audited balance-sheet and profit and loss account as per section 44AB of the Act. The penalty of rupees one lakh for each year was levied due to the non-submission of the audit report along with the return. The Tribunal affirmed the penalty for the years 1990-91 and 1991-92, citing lack of reasonable cause for not filing the audit report as required by law.

In the appeal before the High Court, the appellant argued that the Accountant-General was the only competent authority to audit the accounts and that there was a valid reason for the delay in submitting the audit report. The Revenue contended that there was no reasonable cause for the delay, as evidenced by the dates on which the accounts were handed over to the Accountant-General office. The Tribunal's judgment highlighted the specific dates related to the audit process for each assessment year, emphasizing the delay in submitting the accounts.

The High Court considered the detailed timeline provided by the appellant's counsel, showing the dates of audit, submission of accounts, issuance of audit certificates, and receipt of tax audit reports for the relevant years. It noted that the appellant had a valid reason for the delay in submitting the audit report for the assessment year 1990-91, as it needed time to adjust the accounts based on the previous year's audit report. Similarly, for the assessment year 1991-92, the delay was attributed to the time required to adjust the final accounts after receiving the audit report. The High Court concluded that the penalty imposed on the appellant could not be sustained as there was a reasonable cause for the delay in submitting the accounts, setting aside the penalty order.

In light of the above analysis, the High Court allowed both appeals, overturning the penalty imposed for the assessment years 1990-91 and 1991-92 due to the reasonable cause shown by the appellant for the delay in submitting the audit reports.