1992 (5) TMI 69 - AT - Income Tax

Summary

Issues:
- Appeal against cancellation of penalty under section 271B of the IT Act, 1961.
- Interpretation of provisions of section 271B and section 44AB regarding filing of audit report along with the return of income.
- Assessment of whether the delay in filing the return of income justifies the imposition of penalty.

Analysis:
The case involves an appeal by the Revenue against the cancellation of a penalty under section 271B of the IT Act, 1961, imposed on the assessee for failing to furnish the audit report along with the return of income. The issue arose when the return of income was filed after the due date, even though the audit report was obtained before the specified date. The Income Tax Officer (ITO) initiated penalty proceedings based on the failure to file the audit report along with the return filed under section 139(1). The assessee contended that all necessary conditions were met, and there was no default under section 271B.

During the appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], the assessee argued that the delay in filing the return should not attract a heavy penalty, especially considering that the audit report was obtained before the specified date. The CIT(A) ultimately canceled the penalty, noting that the delay was due to the fault of the counsel and his staff, not the assessee. The Revenue, represented by the Departmental Representative, supported the penalty order, emphasizing the late filing of the return and the verification date in the return.

The key legal issue revolved around the interpretation of section 271B in conjunction with section 44AB. The Tribunal analyzed the amendments brought about by the Finance Act, 1988, and the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986. The amended provisions required the audit report to be appended along with the return of income filed under section 139(1) or in response to a notice under section 142(1)(i) to avoid a penalty under section 271B. The Tribunal found that the CIT(A) had overlooked these amendments and incorrectly considered a "reasonable cause" for the delay in filing the return.

Ultimately, the Tribunal upheld the cancellation of the penalty by the CIT(A) but on different grounds. It clarified that the return filed by the assessee did not fall under section 139(1), and no notice under section 142(1)(i) was issued, which are the only situations attracting a penalty under section 271B for non-filing of an audit report. Therefore, the penalty was dismissed based on the specific provisions of the law, without the need to establish a reasonable cause for the delay in filing the return.