2009 (8) TMI 37 - HC - Income Tax

Failure to get its account audited penalty u/s 271B - 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:
1. Interpretation of penalty under Section 271B of the Income-tax Act, 1961 for failure to submit audit report and return within stipulated time.

Analysis:
The High Court of Allahabad was tasked with deciding whether the Income-tax Appellate Tribunal was justified in canceling a penalty of Rs.1,00,000/- imposed under Section 271B of the Income-tax Act, 1961. The case pertained to the Assessment Year 1991-92. The assessee had filed the return after the due date of 31.10.1991 along with the audit report dated 22.10.1991. The Assessing Officer issued a notice for imposing the penalty under Section 271B due to the delayed submission. The assessee argued that the penalty was not applicable as it was related to not obtaining the audit report under Section 44AB, rather than delayed filing. However, the Assessing Officer disagreed, emphasizing the importance of filing the audit report within the specified time under Section 139(1) of the Act.

The Commissioner of Income-tax (Appeals) later canceled the penalty based on certain Tribunal decisions. The Revenue appealed to the Tribunal, which upheld the cancellation. The High Court referred to a previous decision in the case of Commissioner of Income-tax Vs. Jai Durga Construction Co., (2000) 245 ITR 857, where it was held that the penalty under Section 271B 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 ruled in favor of the assessee, stating that the penalty under Section 271B had been rightfully deleted. The Court answered the question in the affirmative, favoring the assessee and against the Revenue, with no costs imposed.