2000 (6) TMI 142 - AT - Income Tax

Summary

Issues Involved:
1. Cancellation of penalty under section 271B for not obtaining an audit report within the specified time.
2. Requirement of furnishing the audit report under section 44AB before 1-7-1995.
3. Interpretation of section 139(6A) and its amendment.
4. Applicability of penalty under section 271B for defaults related to section 44AB.
5. Relevance of the decision of Hon'ble Rajasthan High Court in Abhay Kumar v. Union of India.

Detailed Analysis:

1. Cancellation of Penalty under Section 271B:
The appeal by the revenue challenges the CIT(A)'s decision to cancel the penalty levied by the Assessing Officer under section 271B. The penalty was initially imposed because the assessee did not obtain the audit report within the specified time. The CIT(A) cancelled the penalty, noting that the audit report was filed late along with the income tax return, and the Chartered Accountant confirmed that the audit report was prepared on time.

2. Requirement of Furnishing the Audit Report under Section 44AB Before 1-7-1995:
The provision of section 44AB, as it stood before the amendment effective from 1-7-1995, required only the obtaining of the audit report by the specified date, not its furnishing. The amendment introduced the requirement to furnish the audit report. Therefore, for the assessment year 1993-94, the requirement to furnish the audit report was not applicable.

3. Interpretation of Section 139(6A) and Its Amendment:
Section 139(6A) required the furnishing of various audit reports along with the return of income, but it did not specifically mention the audit report under section 44AB before the amendment effective from 1-7-1995. The amendment inserted the words "referred to in section 44AB," making it mandatory to furnish the audit report under section 44AB along with the return of income.

4. Applicability of Penalty under Section 271B for Defaults Related to Section 44AB:
Penalty under section 271B, as it stood before 1-7-1995, was applicable for:
- Failure to obtain the audit report under section 44AB.
- Failure to file the audit report along with the return of income under section 139(1) or in response to a notice under section 142(1)(i).
The penalty was not applicable for returns filed under section 139(4). As the assessee filed the return under section 139(4), the penalty under section 271B was not leviable.

5. Relevance of the Decision of Hon'ble Rajasthan High Court in Abhay Kumar v. Union of India:
The decision in Abhay Kumar's case was cited to argue that the provisions of section 44AB and section 271B should be read together. However, the issue before the Hon'ble High Court was the constitutional validity of section 44AB, not the leviability of penalty under section 271B. The observations made were in the context of judging the workability of section 44AB with section 139(9)(e) and section 271B, not specifically addressing the penalty issue. Therefore, the revenue does not benefit from this decision in the current context.

Conclusion:
The Tribunal concluded that prior to the amendment effective from 1-7-1995, the penalty for non-furnishing of the audit report under section 44AB was not leviable. The assessee had obtained the audit report by the specified date, and there was no conclusive evidence to prove otherwise. Therefore, the CIT(A)'s decision to cancel the penalty was justified, and the appeal of the revenue was dismissed.