2006 (1) TMI 90 - HC - Income Tax

Audit - 1. Whether, Tribunal was right in holding that no penalty is imposable under section 271B for non-compliance with the provisions of section 44AB on the ground that the returns were filed belatedly neither under section 139 nor on a notice under section 142? - 2. Whether, Tribunal was right in deleting the penalty without giving a finding of fact as to whether the tax audit report had been obtained within the prescribed time by the assessee? - Accounts were audited and also the assessee got the audit report, but the same was filed along with the return which was filed belatedly. Hence, penalty cannot be imposed under section 271B - we find no error in the order of the Tribunal and hence no substantial questions of law arise for consideration of this court

Summary

Issues:
1. Imposition of penalty under section 271B for non-compliance with section 44AB.
2. Deletion of penalty without determining if the tax audit report was obtained within the prescribed time.

Analysis:
1. The case involved an appeal by the Revenue under section 260A of the Income-tax Act, 1961, regarding the imposition of penalty under section 271B for non-compliance with section 44AB. The assessee filed its return belatedly for the assessment year 1993-94, along with the audit report under section 44AB. The Assessing Officer levied a penalty of Rs. 1,00,000 under section 271B for not furnishing the audit report by the due date. The Commissioner of Income-tax (Appeals) held that no penalty was imposable under section 271B as the section applies to reports filed under section 139(1) or in response to a notice under section 142(1). The Income-tax Appellate Tribunal concurred, stating that as long as the audit report was obtained in time, the delay in filing it would not lead to a penalty. The court upheld the Tribunal's decision, emphasizing that penalty under section 271B is applicable only if the accounts are not audited and a report is not obtained, which was not the case here as the audit report was obtained, albeit filed belatedly.

2. The second issue pertained to the deletion of the penalty without a finding on whether the tax audit report was obtained within the prescribed time. The Revenue contended that the Tribunal should have determined when the audit report was signed to decide if it was obtained within the statutory timeframe. The court noted that the return was filed belatedly, not within the time limit specified under section 139(1) or in response to a notice under section 142(1). Since section 271B applies to reports filed under these sections, the court held that no default under section 44AB could be established in this case. As the accounts were audited, and the audit report was obtained, albeit filed late, the court concluded that penalty under section 271B could not be imposed. The court found no error in the Tribunal's decision and dismissed the case, stating that no substantial questions of law arose for consideration.