2009 (8) TMI 66 - HC - Income Tax

Penalty u/s 271B - the audit report obtained within the specified date though furnished alongwith the belated return filed under Section 139 (4) of the Income Tax Act, 1961 - Assessment Year 1989-90 - 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. penalty not to be imposed.

Summary

Issues:
- Interpretation of Section 271B of the Income-tax Act, 1961 regarding penalty imposition.
- Requirement of obtaining and filing audit report under Section 44AB of the Act.
- Validity of penalty cancellation by the Income-tax Appellate Tribunal.
- Applicability of the decision in Commissioner of Income-tax Vs. Jai Durga Construction Co. to the present case.

Analysis:
The High Court of Allahabad addressed the issue of penalty imposition under Section 271B of the Income-tax Act, 1961 in a case where the audit report was obtained within the specified date but filed along with a belated return. The Assessing Officer imposed a penalty of Rs.31,040 under Section 271B due to the delay in filing the return beyond the specified date. The Commissioner of Income Tax(Appeals) upheld the penalty, stating that the delay was not justified by a reasonable cause. However, the Income-tax Appellate Tribunal, relying on previous decisions, noted that there was no requirement for furnishing the audit report independently of the return under Sections 44AB and 271B of the Act at the relevant time. The Tribunal canceled the penalty based on this interpretation.

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 the provisions of Section 271B prior to its 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. Following this precedent, the Court concluded that the penalty under Section 271B was rightly deleted in the present case where the audit report was obtained within the specified date. Therefore, the Court ruled in favor of the assessee and against the Revenue, holding that the penalty cancellation by the Tribunal was appropriate based on the legal interpretation of the relevant provisions.

In summary, the judgment clarified the requirement of obtaining and filing audit reports under Section 44AB of the Income-tax Act, 1961 and the implications for penalty imposition under Section 271B. It emphasized the importance of the specified date for obtaining the audit report and highlighted the impact of timely compliance on penalty assessment. The decision in Commissioner of Income-tax Vs. Jai Durga Construction Co. provided a legal precedent for the interpretation of penalty provisions in cases where audit reports are obtained within the specified date but returns are filed late, leading to the cancellation of penalties in such circumstances.