2005 (4) TMI 28 - HC - Income Tax

Audit - Whether Tribunal was right in law in cancelling the penalties imposed on the assessee under section 271B on the ground that the same were not exigible in a case where the audit report under section 44AB had been obtained on or before the specified date and the same was filed along with a return other than a return under section 139(1) and no notice had been issued to the assessee by the Assessing Officer under section 142(1)(i)? - held that where the return of income has been filed under subsection (4) of section 139 of the Act and the same is duly accompanied by the audit report obtained by the assessee in accordance with the provisions of section 44AB of the Act, penalty under section 271B of the Act is not exigible. - we answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue

Summary

Issues:
1. Interpretation of penalties under section 271B of the Income-tax Act, 1961 for not filing audit reports along with the return of income by the due dates.

Analysis:
The High Court was tasked with determining whether the penalties imposed on the assessee under section 271B of the Income-tax Act, 1961 were justified. The penalties in question amounted to Rs. 25,021 and Rs. 31,142 for the assessment years 1989-90 and 1990-91, respectively. These penalties were levied due to the alleged violation by the assessee for failing to file audit reports along with the return of income by the due dates specified under section 139(1) of the Act.

The assessee contended that there was no default on their part as the returns of income were filed under section 139(4) of the Act, which did not necessitate the audit reports to be filed along with the returns. Despite this argument, the Assessing Officer imposed the penalties. The Commissioner of Income-tax (Appeals) upheld the penalties, leading the assessee to appeal to the Tribunal.

The Tribunal, in its order, relied on previous cases where penalties were deleted under similar circumstances. These cases involved situations where the audit report was obtained before the specified date and no notice under section 142(1) of the Act had been issued. The Tribunal concluded that in such cases, the provisions of section 271B of the Act were not applicable.

The High Court, referencing previous decisions, reiterated that when the return of income is filed under section 139(4) and is accompanied by the required audit report obtained in accordance with section 44AB of the Act, the penalty under section 271B is not applicable. Therefore, the High Court ruled in favor of the assessee and against the Revenue, disposing of the reference in the process.