1996 (4) TMI 157 - AT - Income Tax

Summary

Issues Involved:
1. Interpretation of section 271B of the Income-tax Act, 1961.
2. Whether the assessee had a reasonable cause for the delay in obtaining the audit report.

Summary:

Issue 1: Interpretation of Section 271B
The core issue was whether section 271B of the Income-tax Act, 1961, imposes a penalty only for the absolute failure to get accounts audited or also for delays in obtaining the audit report beyond the specified date u/s 44AB. The Tribunal noted conflicting interpretations from different Benches. The Special Bench was constituted to resolve this.

The Tribunal held that the provisions of section 44AB are mandatory, requiring accounts to be audited and the report obtained before the 'specified date.' Failure to comply within this timeframe attracts penalty u/s 271B unless there is a reasonable cause. The Tribunal rejected the argument that section 271B punishes only total failure and not delays, emphasizing that the time-frame is in-built in the words "as required under section 44AB" in section 271B.

Issue 2: Reasonable Cause for Delay
For the assessment years 1985-86 and 1986-87, the assessee argued that delays were due to auditors' preoccupation and reconciliation issues in trial balances, not deliberate or intentional. The Tribunal considered these explanations and found them reasonable.

For 1985-86, the audit report was delayed due to auditors' prior commitments and trial balance reconciliation. The Tribunal accepted this as a reasonable cause, noting that the assessee had taken steps to comply but was hindered by circumstances beyond its control.

For 1986-87, similar issues were cited, including differences in the trial balance and auditors' preoccupation. The Tribunal found these reasons valid, noting the Assessing Officer had extended the return filing date, recognizing the genuine difficulty.

Conclusion:
The Tribunal concluded that the assessee had shown reasonable cause for the delays in both years. Consequently, the penalties u/s 271B were cancelled, and the Revenue's appeals were dismissed.