2009 (7) TMI 117 - HC - Income Tax

Compulsory Audit of Accounts Failure Section 44AB read with 271B - circular dated June 19, 1985 ITAT hold that in view of the assessee filing the return of income within the time up to which extension had been sought and making the payment of tax under section 140A within that extended time, the assessee had satisfied the condition of the Central Board of Direct Taxes circular for payment of self-assessment tax within the normal period prescribed under section 139(1) of the Act for filing the return of income and thereby cancelled the penalty imposed under section 271B of the Income-tax Act held that - As in the present case, in view of the circular of the Board the audit report has been obtained on September 30, 1985, that would be sufficient compliance with section 44AB of the Act. Thus, the Tribunal was justified in deleting the penalty. decided in favor of assessee

Summary

Issues:
Interpretation of Income-tax Act, 1961 - Compliance with section 44AB - Penalty under section 271B - Central Board of Direct Taxes circular - Extension of time for filing return of income - Payment of self-assessment tax within prescribed period.

Analysis:

The judgment by the High Court of Allahabad dealt with the interpretation of the Income-tax Act, 1961, focusing on compliance with section 44AB and the imposition of a penalty under section 271B. The specific issue revolved around whether the assessee had satisfied the conditions outlined in the Central Board of Direct Taxes circular regarding the filing of the return of income and payment of self-assessment tax within the prescribed period. The case related to the assessment year 1985-86, where the assessee was required to obtain an audit report by a certain date but obtained it later, leading to a penalty imposition.

The assessee cited a circular by the Central Board of Direct Taxes, which stated that penalty proceedings under section 271B were not required if the audit report was obtained by a specified date and the self-assessment tax was paid within the normal period for filing the return of income. The assessee filed for extensions to submit the return, which was eventually filed after the extended deadline, along with the payment of self-assessment tax. The Commissioner of Income-tax (Appeals) canceled the penalty based on the fulfillment of the circular's conditions.

The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals), emphasizing that the audit report was obtained within the stipulated period and the self-assessment tax was paid before filing the return. The High Court referred to a previous case where it was held that penalty under section 271B was not applicable if the audit report was obtained within the required timeframe. Therefore, the High Court ruled in favor of the assessee, stating that the Tribunal was justified in deleting the penalty based on compliance with the circular and relevant provisions of the Act.

In conclusion, the High Court answered the question referred to it in favor of the assessee, highlighting the importance of adhering to the provisions of the Income-tax Act and relevant circulars issued by the Central Board of Direct Taxes. The judgment serves as a precedent for cases involving the imposition of penalties under section 271B and the significance of timely compliance with audit requirements and tax payments as per the Act.