2012 (2) TMI 280 - HC - Income Tax

Penalty u/s 271-B failure to get accounts audited u/s 44AB - A.Y. 2000-01 to 2003-04 Tribunal deleted the penalty on ground that penalty proceedings having been initiated long after the completion of the assessment Held that - In the given case, penalty proceedings for the A.Y. 2000-01, 2001-02, 2002-03 & 2003-04 were initiated after the period of more than 4.5, 3.5, 2.5 & 1.5 years respectively after the completion of assessment. Therefore in wake of Section 275(1)(c), no penalty can be imposed Decided against the Revenue.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was right in deleting penalties under Section 271-B for the assessment years 2000-01 to 2003-04.
2. Whether the Tribunal was correct in holding that penalty proceedings under Section 271-B could only be initiated during assessment proceedings and not after.

Analysis:
Issue 1: The assessee company, engaged in deposit and money lending business, filed income tax returns for the years 2000-01 to 2003-04 without submitting the required audit reports under Section 44AB of the Income Tax Act. Consequently, penalties under Section 271B were imposed by the Assessing Officer in 2008. The Commissioner of Income Tax (Appeals) upheld the penalties citing the mandatory nature of Section 271-B. However, the Income Tax Appellate Tribunal later ruled in favor of the assessee, stating that penalties initiated long after the assessment completion could not be sustained. The Tribunal's decision was supported by a Co-ordinate Bench judgment. The High Court concurred with the Tribunal, emphasizing that penalty initiation after specific time frames as per Section 275 of the Income Tax Act renders penalties invalid. As penalty proceedings for the mentioned years were initiated well beyond the prescribed time limits, the High Court upheld the Tribunal's decision to delete the penalties.

Issue 2: Section 275 of the Income Tax Act outlines conditions where penalties under Chapter XXI cannot be imposed. Specifically, Section 275(1)(c) stipulates that penalties cannot be initiated after certain time periods post-assessment completion or penalty imposition initiation. In this case, penalty proceedings for the relevant years were initiated significantly beyond the specified time limits: over four and a half years for 2000-01, more than three and a half years for 2001-02, over two and a half years for 2002-03, and one and a half years for 2003-04. The High Court concluded that due to these delays, penalties could not be imposed as per the statutory provisions. Consequently, the Court dismissed the appeals raised by the revenue, affirming the Tribunal's decision and closing the connected matters without costs.