2004 (4) TMI 268 - AT - Income Tax

Summary

Issues involved:
Appeal against cancellation of penalty under section 271B of the IT Act, 1961.

Analysis:
The appeal and cross-objection were heard together as they involved a common issue. The Revenue contested the cancellation of a penalty of Rs. 1 lakh imposed under section 271B by the Assessing Officer (AO). The assessee had filed an audit report under section 44AB on time but without the Profit & Loss account and balance sheet. The AO imposed the penalty citing incompleteness of the audit report. The assessee argued that the penalty was unjustified, citing a technical default and precedence from a Tribunal decision. The Commissioner of Income Tax (Appeals) (CIT(A)) accepted the assessee's contentions and canceled the penalty, leading to the Revenue's appeal.

The Tribunal noted that the audit report was filed on time, and the missing documents were later submitted along with the return of income. The purpose of section 44AB is to enable verification of accounts' accuracy, which was fulfilled when the AO processed the return. The Tribunal emphasized that a penalty is not mandatory for technical defaults and cited a Supreme Court ruling. It concluded that there was no conscious disregard of statutory obligations by the assessee, supporting the CIT(A)'s decision to cancel the penalty. The Tribunal dismissed all grounds of the Revenue's appeal.

The cross-objection filed by the assessee was supportive of the CIT(A)'s order. Since the Revenue's appeal was dismissed, the cross-objection was deemed infructuous and dismissed accordingly. Ultimately, both the Revenue's appeal and the assessee's cross-objection were dismissed by the Tribunal.