1992 (12) TMI 71 - AT - Income Tax

Summary

Issues:
1. Levy of penalty under section 271B for failure to get accounts audited within the specified date.
2. Interpretation of section 271B in light of the removal of the expression "without reasonable cause" and its impact on penalty imposition.
3. Consideration of "reasonable cause" for failure to adhere to the specified date for audit.

Detailed Analysis:
1. The judgment deals with an appeal against the imposition of a penalty under section 271B for failing to get accounts audited within the prescribed time frame. The appellant, a contractor, started maintaining accounts for the first time for the assessment year 1987-88 due to the provisions of section 44A(2) and 44AB being applicable. The delay in obtaining the audit report was attributed to the illness of the accountant. The Assessing Officer imposed the penalty under section 271B, contending that the illness of the accountant did not justify the non-adherence to the specified date for audit.

2. The CIT (Appeals) upheld the penalty, citing the removal of the expression "without reasonable cause" from section 271B post-10-9-1986. The appellant, on second appeal, argued that section 271B should be read in conjunction with section 273B, which includes the provision for "reasonable cause." The Tribunal agreed with the appellant's contention, emphasizing the importance of considering "reasonable cause" before imposing penalties under section 271B.

3. The Tribunal analyzed the interplay between section 271B and section 273B, inserted in 1986, and concluded that penalties under section 271B cannot be levied mechanically without considering whether there was a reasonable cause for the failure to adhere to audit requirements. In the present case, the illness of the accountant, who played a crucial role in the audit process, was deemed a reasonable cause for the delay in obtaining the audit report. The Tribunal highlighted the significance of the accountant's role in assisting the auditor and the lack of penalties for the belated filing of the return, indicating a reasonable cause for the delay. Consequently, the Tribunal canceled the penalty levy, emphasizing the presence of a reasonable cause for the non-compliance with the audit timeline.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of considering "reasonable cause" before imposing penalties under section 271B and canceling the penalty in this case due to the proven illness of the accountant, which hindered the timely audit process.