2009 (8) TMI 36 - HC - Income Tax

Failure to get its account audited penalty u/s 271B Audit report obtained before specified date but submitted after the specified date - Tribunal cancelled the penalty of Rs.1, 00, 000/- levied u/s 271B in spite of the fact that the assessee was under obligation to get his accounts audited and to file the audit report within the stipulated time as provided under section 139 (1) of the I.T. Act - held that - the penalty under Section 271B of the Act as it stood at the relevant point of time prior to its amendment by the Finance Act 1995 which came into existence with effect from 1st July 1995 was not exigible in case the audit report has been obtained within the specified date and the return of income has been filed beyond time order of tribunal maintained.

Summary

Issues:
- Interpretation of penalty under Section 271-B of the Income-tax Act, 1961 based on the timing of obtaining the audit report and filing the return.

Analysis:
The High Court of Allahabad was presented with a question regarding the legality of upholding the cancellation of a penalty imposed under Section 271-B of the Income-tax Act, 1961. The case involved the requirement for the assessee to obtain an audit report before a specified date, which in this instance was 31.10.1989, and the subsequent filing of the audit report along with a belated return on 28.11.1989. The Assessing Officer imposed a penalty of Rs.1 lac under Section 271-B, contending that the delay in filing the return warranted the penalty. However, the Commissioner of Income Tax (Appeals) canceled the penalty based on the argument that since the audit report was obtained before the specified date, no penalty should be imposed. The Tribunal upheld this decision, leading to the current reference before the High Court.

The High Court referred to a previous decision in the case of Commissioner of Income-tax Vs. Jai Durga Construction Co., where it was established that under Section 271-B of the Act, as it stood before an amendment in 1995, the penalty was not applicable if the audit report was obtained within the specified date, even if the return was filed late. Relying on this precedent, the High Court concluded that the penalty under Section 271-B had been rightfully deleted in the present case. Therefore, the High Court answered the question in favor of the assessee and against the Revenue, emphasizing that no costs would be awarded in this matter.