2004 (12) TMI 695 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the deletion of penalty imposed under section 271B.
2. Evaluation of "reasonable cause" for delay in compliance with section 44AB.
3. Applicability of previous judicial decisions and orders under section 264 in waiving penalties.

Issue-wise Detailed Analysis:

1. Legality of the Deletion of Penalty Imposed under Section 271B:
The Revenue appealed against the CIT(A)'s decision to delete penalties of Rs. 1,00,000 each for the assessment years 1987-88 and 1988-89, imposed under section 271B for non-compliance with section 44AB. The CIT(A) had accepted the assessee's explanation for the delay as a "reasonable cause" and deleted the penalties. The Revenue argued that the CIT(A) erred in law and facts by accepting the reasons for delay, which they claimed did not constitute a "reasonable cause" under section 271B.

2. Evaluation of "Reasonable Cause" for Delay in Compliance with Section 44AB:
The assessee cited several reasons for the delay, including arrear works, resignation of key staff, and the time required for new staff to acclimate and compile accounts. The CIT(A) and the CIT under section 264 accepted these reasons as "reasonable cause." The Tribunal noted that the Assessing Officer rejected the explanation without providing detailed reasons or an opportunity for the assessee to present further material, which was deemed arbitrary and against principles of natural justice. The Tribunal emphasized that the imposition of penalty under section 271B is discretionary and not mandatory, as per section 273B, which allows for no penalty if "reasonable cause" is proven.

3. Applicability of Previous Judicial Decisions and Orders under Section 264 in Waiving Penalties:
The Tribunal considered the CIT's quasi-judicial orders under section 264, which had accepted the same reasons for delay in waiving interest under section 139(8). The Tribunal held that these orders have binding force and should be considered while deciding on the penalty under section 271B. The Tribunal also referenced several judicial precedents that supported the acceptance of "reasonable cause" for delays in similar circumstances.

Conclusion:
The Tribunal concluded that the reasons provided by the assessee constituted a "reasonable cause" for the delay in obtaining audit reports and filing returns. The Tribunal upheld the CIT(A)'s decision to delete the penalties imposed by the Assessing Officer, rejecting the Revenue's grounds of appeal. The cross-objections filed by the assessee were also dismissed, as they merely supported the CIT(A)'s order without introducing new grounds.

Final Judgment:
All appeals and cross-objections were dismissed, affirming the deletion of penalties imposed under section 271B for the assessment years 1987-88 and 1988-89.