2009 (12) TMI 23 - HC - Income Tax

Penalty - period of limitation of imposing penalty - Due date for filing return was 31.7.1988. The audit-report should have been obtained on or before 30.6.1988. In the instant case, the assessee has obtained audit report on 28.7.1988 and has filed the same along with the return on 28.7.1988. The assessee has not obtained the tax audit report before or on due date, so the Assessing Officer has levied the penalty under Section 271-B for Rs. 1,00000/-. The same was not only upheld by the First Appellate Authority but also by the Tribunal. held that - , there was delay of about 28 days. At the relevant time, it is true that the assessee was not supposed to furnish the tax audit report along with the return but he was under obligation to obtain the report on or before due date. In the instant case, the assessee has admittedly obtained the tax audit report belated. For obtaining report belated, no cogent or reasonable reason has been given as per the provisions of Section 44-AB. Penalty confirmed

Summary

Issues involved:
1. Appeal against penalty under Section 271-B of the Income Tax Act.
2. Interpretation of Section 44 AB of the Income Tax Act 1961.

Analysis:

Issue 1: Appeal against penalty under Section 271-B of the Income Tax Act
The appeal was filed by the department challenging the judgment and order passed by the ITAT Allahabad Bench, upholding the penalty of Rs. 1,00,000 levied under Section 271-B for the assessment year 1988-89. The assessee had filed the audit report after the due date, leading to the penalty imposition by the Assessing Officer. The First Appellate Authority and the Tribunal upheld the penalty. The appellant argued that the penalty was not initiated during the assessment proceedings and was time-barred under Section 275. The appellant relied on the case law CIT v. M. Chandra Sekhar (1985) 1 SCC 283, contending that penalty cannot be levied if the return was filed within the extended time granted by the I.T.O. The department, represented by Sri D. D. Chopra, defended the penalty, stating there was no reasonable cause for its cancellation.

Issue 2: Interpretation of Section 44 AB of the Income Tax Act 1961
The Court noted that the assessee was required to obtain the Tax Audit Report on or before the due date, which in this case was 30.6.1988. However, the audit report was obtained on 28.7.1988, causing a delay of 28 days. While the assessee was not obligated to submit the report along with the return, obtaining it after the due date was a violation of Section 44-AB without any valid reason. The Court found no grounds to interfere with the Tribunal's decision upholding the penalty. Consequently, the substantial questions of law (A) and (E) were answered affirmatively and negatively, respectively, in favor of the appellant. Ultimately, the appeal filed by the appellant-assessee was dismissed.

This judgment highlights the importance of complying with statutory deadlines and regulations under the Income Tax Act, emphasizing the consequences of delays in submitting required documents such as audit reports. The Court's decision was based on a strict interpretation of the law and adherence to procedural requirements, ultimately upholding the penalty imposed on the assessee for non-compliance with Section 44-AB.