2009 (8) TMI 138 - HC - Income Tax

Failure to furnish audit report penalty - Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was legally correct in upholding the order of the first appellate authority cancelling the penalty of Rs. 1,00,000 imposed under section 271B of the Act on the ground that no penalty under the said section is exigible if the audit report is obtained within the specified date though furnished along with the return filed under section 139(4) of the Income-tax Act, 1961 ? audit report obtained before specified date but filed with return after delay - We find that this court in the case of CIT v. Jai Durga Construction Co. 2008 - TMI - 15036 - ALLAHABAD High Court has held that the penalty under section 271B of the Act, as it stood at the relevant point of time prior to its amendment by the Finance Act, 1995, which came into existence with effect from 1st July, 1995, was not exigible in case the audit report has been obtained within the specified date and the return of income has been filed beyond time. - Respectfully following the aforesaid decision of this court, we are of the considered opinion that the penalty under section 271B of the Act has rightly been deleted. - We, accordingly, answer the question referred to us in the affirmative, i.e. in favour of the assessee

Summary

Issues:
Penalty under section 271B of the Income-tax Act, 1961 for delayed filing of audit report and return.

Analysis:
The Income-tax Appellate Tribunal referred a question of law under section 256(1) of the Income-tax Act, 1961 regarding the imposition of a penalty of Rs. 1,00,000 under section 271B of the Act for delayed filing of the audit report and return. The case pertained to the assessment year 1991-92. The assessee obtained the audit report on October 24, 1991, within the specified date of October 31, 1991, but filed it along with the belated return on March 31, 1992. The Assessing Officer imposed the penalty, which was later canceled by the Commissioner of Income-tax (Appeals) and upheld by the Tribunal based on previous decisions.

In a previous case, CIT v. Jai Durga Construction Co., the court held that the penalty under section 271B of the Act was not applicable if the audit report was obtained within the specified date, even if the return was filed late. The court noted that this was the position before the amendment by the Finance Act, 1995. Following this precedent, the High Court concluded that the penalty under section 271B was rightly deleted in the present case.

The High Court answered the question referred in the affirmative, favoring the assessee and ruling against the Revenue. The court cited the previous decision and held that the penalty under section 271B was not applicable in this scenario. No costs were awarded in this judgment.