2025 (1) TMI 1192 - HC - Income Tax

Penalty u/s. 271B - tax returns and audit report filled with some delay - Failure to to follow its own order in a similar case involving the Appellant s sister concerns wherein penalty was deleted - as per revenue delay in the Appellant s case was longer than the delay in the case of the sister concerns - Determination of quality of the cause shown for delay - HELD THAT - Besides Appellant pointed out that after the accounts were filed for Assessment Year 1985-1986 again there were raids and seizures. Due to this the Appellant couldn t file the audit report within the prescribed period. Still it is not as if the Appellant was indolent. All steps were possible in the circumstances that were being taken and were taken. The Appellant applied for copies of the books and upon receiving them submitted them to their chartered accountants. The Chartered Accountants naturally took some time to prepare the audit report. The audit report was prepared only on 8 December 1988 and filed on the next date. In our judgment the factors above should have been considered. These factors were additional to the factors that the Tribunal already accepted in the case of the Appellant s sister s concerns. These additional factors were sufficient to explain the length of the delay in the Appellant s case. Based on the material on record it does not appear that the Appellant was completely indolent or avoiding the filing of audit reports. There were genuine difficulties and after overcoming them the audit report was filed. Also Revenue accepted the Appellant s returns. In that sense there was no loss to the Revenue. There was a delay. However merely because there was a delay there is no case for imposition of penalty. Thus we agree with Appellant that the impugned orders warrant interference. Decided in favour of assessee.

Summary

The judgment from the Bombay High Court involves an appeal concerning the imposition of a penalty under Section 271B of the Income Tax Act, 1961. The core issues considered by the Court were whether the Tribunal erred in confirming the penalty and whether it failed to follow its own order in a similar case involving the Appellant's sister concerns.

The relevant legal framework centers around Section 271B of the Income Tax Act, which deals with penalties for failure to get accounts audited and furnish the audit report as required by law. The Court examined the facts of the case, including the circumstances surrounding the delay in filing the audit report and compared them with similar cases involving the Appellant's sister concerns.

The Appellant argued that the delay in filing the audit report was due to raids conducted by authorities, which resulted in the seizure of books of accounts and other documents. This, they contended, caused a significant delay in preparing the audit report. The Appellant's counsel pointed out that similar delays in the sister concerns' cases were condoned by the Tribunal, and no penalties were imposed. The delay in the Appellant's case was longer, but the cause shown was essentially the same.

The Respondent, representing the Revenue, argued that despite the raids, the Appellant had ample opportunity to obtain copies of the necessary documents and file the audit report on time. The Respondent maintained that the Appellant failed to show good cause for the delay, justifying the penalty's imposition.

The Court's analysis focused on the quality of the cause shown for the delay rather than the length of the delay itself. It acknowledged that the raids and subsequent seizures posed genuine difficulties for the Appellant in obtaining the necessary documents to prepare the audit report. The Court noted that the Appellant was not indolent and took all possible steps to comply with the requirements once they received the documents.

The Court also considered that the Revenue had accepted the Appellant's returns, indicating no loss to the Revenue despite the delay. It concluded that the circumstances warranted the exercise of discretion in favor of the Appellant, as there was no significant difference between the Appellant's case and that of the sister concerns, where penalties were not imposed.

Significant holdings from the judgment include the Court's emphasis on the importance of the cause shown for the delay over its duration. The Court set aside the penalty, answering both substantial questions of law in favor of the Appellant and against the Revenue. The decision underscores the principle that penalties should not be imposed solely based on delay without considering the underlying reasons and circumstances.