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2003 (12) TMI 275 - AT - Income TaxImposition of Penalty u/s 271-B - Non-compliance with Section 44AB - return not filed within stipulated period as provided u/s 139(1) - difference of opinion between the Members - Whether the penalty u/s 271-B of the Income-tax Act, 1961 was not leviable on the assessee as held by the Vice President or the view taken by the Judicial Member to the effect that the penalty was leviable, was the correct one? HELD THAT - The substantial requirement of section 44AB are (i) to get the audit of accounts completed before the specified date and also (ii) to furnish the said audit report before that date along with return of income. It is an undisputed fact that the audit report had duly been completed and signed on 30-10-1992 i.e., before the specified date. Thus there was a sufficient compliance of the provisions of section 44AB and no penalty u/s 271B was then leviable for failure on the part of the assessee to furnish such audit report. The amendment made w.e.f. the cut-off date of 1-7-1995 cannot be applied in relation to assessment year 1992-93. It may also be relevant here to make a useful reference to the judgment of Hon'ble Punjab Haryana High Court in the case of ITO v. Kaysons India 2000 (2) TMI 58 - PUNJAB AND HARYANA HIGH COURT and in the case of CIT v. Janta Service Station 2000 (12) TMI 33 - PUNJAB AND HARYANA HIGH COURT in which the Hon'ble High Court had held that the Tribunal was justified in cancelling the penalty levied u/s 271B in a case where the audit report had been obtained before the specified date but had been filed along with belated return u/s 139(4) and not with the return filed u/s 139(1). Ordinarily, the date on which audit report is signed by the auditor, is considered to be the date on which the assessee had obtained the said audit report because in most of the cases, the auditors are themselves the tax consultants of the said concern and the audit report is retained or given back to them for furnishing the same along with their income-tax returns, as was done by the assessee in the present case. Once it is accepted that the audit was got completed on 30-10-1992 i.e., before the specified date, the further fact as to when that audit report was physically obtained without there being any statutory requirement, at the relevant time, to furnish the said report before the specified date, looses its significance and therefore, such a default, if any, would only be a technical or venial breach, for which no penalty could be sustained on the facts of the present case, in view of the judgment of Hon'ble Apex Court in the case of Hindustan Steel Ltd. v. State of Orissa 1969 (8) TMI 31 - SUPREME COURT . In the present case, soon after the expiry of the specified date on 31-10-1992, the Assessing Officer visited the assessee's premises u/s 133A on 4-11-1992 and examined the books of account, which had the necessary ticks put by the auditors. The partner in his statement dated 4-11-1995 had stated that the books had duly been audited and the audit report is not with them but may be with the auditors. The Assessing Officer visited the office of the auditors and found that he was out of station. The return, of income along with the audit report was duly furnished on 9-11-1992. Thus there was a delay of only 8 days in furnishing of the return along with the audit report. The aforesaid circumstances constituted a reasonable cause for explaining the delay of 8 days. The penalty levied u/s, 271B deserved to be cancelled in view of existence of reasonable cause in terms of section 273B explaining the short delay of 8 days. It will, however, be pertinent to repeat that after submission of certificate of auditors and assessee's reply during penalty proceedings, the Assessing Officer did not examine anyone; nor brought any material on record to challenge the facts stated in the auditor's certificate. The correctness of the facts stated in the said certificate cannot, therefore, be validly disputed. Thus, I am inclined to agree with the view expressed by the learned Vice President. The matter will now go before the regular Bench for decision according to the majority opinion.
Issues Involved:
1. Whether the penalty u/s 271B of the Income-tax Act, 1961 was rightly imposed for not complying with the provisions of section 44AB within the stipulated period. Summary: Issue 1: Penalty u/s 271B for Non-compliance with Section 44AB The revenue appealed against the CIT(A)'s order deleting the penalty imposed u/s 271B for not complying with section 44AB within the stipulated period. The assessee-firm was required to obtain an audit report as per section 44AB by 30-10-1992 and file it with the return within the period stipulated u/s 139(1). The Assessing Officer (AO) visited the assessee's premises on 4-11-1992 and recorded a statement from Raj Kumar, a partner, who stated that the audit report had not been obtained. Consequently, the AO imposed a penalty of Rs. 1 lakh u/s 271B. The assessee appealed to the CIT(A), arguing that Raj Kumar, being educated only up to the 10th standard, misunderstood the term "obtain." The CIT(A) accepted the assessee's explanation, supported by a certificate from the C.A., and deleted the penalty, reasoning that the audit was completed on 30-10-1992 and the penalty was a result of a misunderstanding by the AO. The revenue, dissatisfied with the CIT(A)'s decision, appealed to the ITAT. The revenue argued that the audit report was antidated and that Raj Kumar's statement on 4-11-1992 should be taken at face value, indicating that the audit report was not obtained by the stipulated date. The ITAT considered whether Raj Kumar's categorical statement to the AO should be accepted over the subsequent retraction. The ITAT found that the audit report was not obtained by 30-10-1992, as Raj Kumar's statement on 4-11-1992 indicated otherwise. The ITAT restored the AO's order and set aside the CIT(A)'s order, allowing the revenue's appeal. Dissenting Opinion by Vice President Mehta: Vice President Mehta disagreed with the Judicial Member's decision, emphasizing that the audit report was obtained on 30-10-1992, as supported by the C.A.'s certificate and the receipt dated 30-10-1992. Mehta argued that the penalty u/s 271B was not attracted as the audit report was obtained within the specified time, and the CIT(A) rightly canceled the penalty. He highlighted that the statement of Raj Kumar should be read as a whole and that the explanations provided by the assessee were plausible and acceptable. Third Member Decision: The Third Member, B.M. Kothari, agreed with Vice President Mehta, concluding that the penalty u/s 271B was not attracted both on facts and in law. The Third Member emphasized that the audit was completed on 30-10-1992, and the certificate from the C.A. confirmed this. The Third Member noted that the AO did not examine the auditors or bring any material to rebut the certificate's facts. The Third Member also considered the short delay of 8 days in filing the return along with the audit report as a reasonable cause, justifying the cancellation of the penalty. Final Decision: The matter was referred to the regular Bench for a decision according to the majority opinion, which favored the view that the penalty u/s 271B was not leviable.
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