1994 (10) TMI 84 - AT - Income Tax

Summary

Issues: Penalty under section 271B for failure to file audit report along with the return of income within the due date.

The judgment pertains to an appeal against the imposition of a penalty under section 271B on the assessee for failing to file an audit report along with the return of income within the prescribed due date. The assessee, an individual, was required to submit the audit report under section 44AB along with the return for the assessment year 1991-92 by October 31, 1991. The Income Tax Officer (ITO) initiated penalty proceedings based on a report from an Inspector indicating the audit report was not ready. The assessee contended that the audit report had been prepared and signed on August 24, 1991, but due to circumstances beyond their control, they could not file it along with the return by the due date.

The ITO rejected the explanation provided by the assessee and imposed a penalty, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. However, the appellate tribunal considered the submissions made on behalf of the assessee, highlighting that the audit report was ready on August 24, 1991, and certain unforeseen events, such as communal riots and the illness of the assessee's father, prevented timely submission. The tribunal found the reasons presented by the assessee to be valid and accepted the evidence supporting the delay in filing the audit report.

The tribunal emphasized the concept of a "reasonable cause" as a valid defense under section 273B and cited precedents to support the contention that failure to get the accounts audited within the specified timeframe of section 271B renders the penalty provision applicable. Given the circumstances faced by the assessee, including the inability to travel to obtain the audit report due to external factors, the tribunal concluded that a reasonable cause existed for the delay. Consequently, the tribunal held that the penalty imposition was unwarranted and canceled the order under section 271B, allowing the appeal in favor of the assessee.