2010 (4) TMI 924 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was justified in law in giving the assessee benefit of reasonable cause for the delay in preventing it from complying with the provisions of section 44AB of the Incometax Act, 1961, for the assessment years 1990-91 and 1991-92 ? Held that - The facts stated in the order of the Tribunal has not been disputed, namely, that the books of account has been delivered by the assessee for statutory audit on August 14, 1989 (in time), which is referred in the order of the Tribunal and the report was received from the auditors on March 31, 1991. On this fact, the Tribunal arrived at a conclusion that the delay was caused on the part of the auditors and it amounts to reasonable cause. We do not see any error in the order of the Tribunal. The finding of the Tribunal on the facts and circumstances that there was reasonable cause, is the finding of fact. No substantial question of law is involved. The order of the Tribunal is accordingly upheld. Appeal dismissed.

Summary

Issues:
Penalty under section 271B of the Income-tax Act, 1961 for failure to get accounts audited within stipulated period as required under section 44AB - Whether there was a reasonable cause for the delay in getting accounts audited for the assessment years 1990-91 and 1991-92.

Analysis:
The assessee, a co-operative society, filed the return for the assessment year 1990-91 showing a receipt of Rs. 26,35,99,400. The assessing authority imposed a penalty under section 271B of the Act due to the failure to get accounts audited within the stipulated period as required under section 44AB. The Commissioner of Income-tax (Appeals) upheld the penalty, but the Tribunal accepted the explanation that the delay was caused by auditors and set aside the penalty. The Tribunal held that the delay in getting accounts audited was beyond the control of the assessee and was due to the auditors' delay, constituting a reasonable cause.

The High Court noted that the Tribunal's finding of reasonable cause was based on the fact that the books of account were provided to auditors on time, but the audit report was delayed due to auditors, not the assessee. The Court referred to precedents from the Madras High Court and Rajasthan High Court, emphasizing the need for a reasonable cause to avoid penalty under section 271B. The Court upheld the Tribunal's decision, stating that no error was found in the Tribunal's order and that the finding of reasonable cause was a factual determination. The Court concluded that no substantial question of law was involved, and the appeal was dismissed.

The Court highlighted the provisions of sections 44AB and 271B of the Act, emphasizing that penalty under section 271B is not imposable if the assessee proves a reasonable cause for failure to comply with section 44AB. The Court referenced precedents to support the interpretation that penalty for failure to perform a statutory obligation should be a matter of discretion exercised judicially, considering all relevant circumstances. The Court concluded that the Tribunal's decision to set aside the penalty was valid based on the reasonable cause shown by the assessee.

Therefore, the High Court upheld the Tribunal's decision to set aside the penalty imposed under section 271B, finding that there was a reasonable cause for the delay in getting the accounts audited for the assessment years 1990-91 and 1991-92. The Court emphasized the importance of proving a reasonable cause to avoid penalties for failure to comply with statutory obligations under the Income-tax Act, 1961.