2006 (7) TMI 141 - HC - Income Tax

Penalty for not getting account audited limitation - On noticing the failure to get the accounts audited under section 44AB, a notice was issued on June 8, 1993. Penalty was also levied on December 15, 1993, by the Department. The said penalty was confirmed by the Commissioner. The Tribunal has set aside the penalty on the sole ground of limitation. It is in these circumstances, the Revenue is before us. A combined reading of sections 271B and 275(1)(c) would show that the six-month period of limitation is with reference to initiation of proceedings in terms of section 275(1)(c) of the Act. In the case on hand, it is seen that initiation was done on June 8, 1993, and the penalty was levied on December 15, 1993. It is within six months from the date of initiation of penalty proceedings. - Tribunal is not justified in deleting the penalty on the ground of limitation

Summary

Issues: Assessment order, reassessment proceedings, failure to audit accounts under section 44AB, penalty levied, penalty confirmed, Tribunal setting aside penalty on grounds of limitation, question of law framed regarding penalty proceedings.

Analysis:
The High Court of Karnataka addressed an appeal by the Revenue concerning penalty proceedings initiated due to the failure to audit accounts under section 44AB of the Income-tax Act, 1961. The Tribunal had set aside the penalty solely based on the ground of limitation. The court framed the question of law as to whether the penalty proceedings were beyond the period of limitation. The court examined the provisions of section 271B and section 275(1)(c) of the Act to determine the applicability of the time limitation for imposing penalties. Section 271B allows for the levy of penalties for failure to audit accounts, while section 275(1)(c) specifies the time limitation for initiating penalty proceedings. In this case, the penalty was initiated within six months from the date of the proceedings, thus falling within the prescribed time limit.

The court also considered section 275(1)(b) of the Act, which pertains to cases where assessments are under revision. However, the court noted that this section does not apply to penalty proceedings under section 271B. Therefore, the Tribunal's decision to delete the penalty on grounds of limitation was deemed unjustified by the court. The court found merit in the arguments presented by the Revenue and ruled in favor of the Revenue and against the assessee. The court held that the penalty imposition in accordance with the penalty provisions was sustainable in this case. Consequently, the court ordered in favor of the Revenue, with no costs imposed on either party.