2008 (12) TMI 35 - HC - Income Tax

Violation of provisions of section 44AB - assessee filed his return as proprietor of two concerns but audit report was filed in respect of one concern. The Assessing Officer levied penalty under Section 271B - finding recorded by the Tribunal that non-filing of audit report was for bona fide reasons being pure finding of fact, we are unable to hold that any substantial question of law arises - appeal by revenue is dismissed - ITAT has not erred in deleting the penalty

Summary

Issues:
- Appeal against penalty under Section 271B of the Income Tax Act, 1961 for assessment year 2002-03.
- Whether non-filing of audit report was for bona fide reasons justifying the deletion of penalty.

Analysis:
1. The appeal was filed by the revenue under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal regarding the penalty imposed under Section 271B for the assessment year 2002-03. The substantial questions of law proposed by the revenue included the violation of Section 44AB by the assessee for not getting all businesses audited and not furnishing the audit report within the specified time. The revenue contended that the audit report of only one business filed by the assessee could not be considered as compliant with Section 44AB.

2. The Tribunal found that the assessee, who had filed his return as the proprietor of two concerns, had only submitted an audit report for one concern. The Assessing Officer had levied a penalty under Section 271B, which was upheld by the CIT(A). However, the Tribunal overturned the penalty, citing the bona fides of the assessee's actions. The Tribunal specifically noted that the non-filing of the audit report was due to genuine reasons, and therefore, no substantial question of law arose from this factual finding.

3. The High Court concurred with the Tribunal's decision, emphasizing that the Tribunal's finding regarding the bona fide nature of the non-filing of the audit report was a pure question of fact. As a result, the High Court dismissed the appeal, upholding the Tribunal's decision to delete the penalty under Section 271B. The judgment highlights the importance of assessing the genuineness of reasons behind non-compliance with statutory requirements when imposing penalties under the Income Tax Act.