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TMI Blog1994 (10) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of M/s United Wine Traders, the year ending relating to assessment year 1991-92 was 31-3-1991 and the audit report had been prepared by the auditors on 20-10-1991. Due date for the filing of return was 31-10-1991 but it was filed on 20-11-1991. Assessment was made on 28-12-1992 under section 143(3). A penalty of Rs. 1 lakh was imposed. under section 271B for failure to file audit report. 3. The ld. counsel representing both the assessees has contended before us that the returns in both the cases had been actually filed under section 139(4) and not under section 139(1) of the Act. Since it was a belated return, it could not be treated to have been filed under section 139(1). There was no notice also under section 142(1) to the assessee in either case. Therefore, the first plea raised by the ld. counsel is against the applicability of section 271 B of the Act. It will be appropriate to read the section so as to understand its applicability in the present case. Section 271B of the Act reads as under : " 271B. If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or obtain a report of such audit as require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to an assessment year, means,--- (a) Where the assessee is a company, 31st December of the assessment year ; (b) In any other case, 31st October of the assessment year." The present assessees are in the status of partnership firms and, therefore, the specified date in these two cases shall be treated to be October 31. In both the cases, the audit report had been obtained before the said specified date. It may be noted that the specified date and the due date for filing of return are the same. Since the assessee did not fail to obtain the report before the specified date as required under section 44AB, there is no violation of section 44AB. In this light, it has been argued by the ld. counsel that the assessee, by making compliance of section 44AB, did not commit any default so far as the submission of the report is concerned. It is only a default in the filing of the retum.Section 271B did not lay down any requirement regarding the filing of the return. It simply laid down three conditions :--- (i) The assessee must get his accounts audited ; (ii) The assessee must obtain a report of the audit as required under section 44AB ; and (iii) The assessee must furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein that the compulsory audit of accounts was being required to ensure that the books of account and other records are properly maintained and faithfully reflect the true income of the taxpayer. Since the intention was to ensure the reflection of the true income, the assessee made sufficient compliance of section 44AB by getting its accounts audited and obtaining audit report within the specified date in the prescribed form. Our attention has been drawn to the CBDT circular in respect of new section 271B, which was inserted by the Finance Act, [1984] 152 ITR 12 (Statute)). There also, it has been made clear that the new section required the assessee to get the accounts audited and to obtain report of audit. The main thrust of the argument of the ld. counsel is that the intention of the Legislature should be kept in view while levying any penalty. Since the intention was to ensure the proper maintenance of accounts and the reflection of the true income of the taxpayer, there was no reason to punish the assessee only on account of late furnishing of the audit report. 7. The ld. counsel has drawn our attention to the decision of the Madras High Court in the case of CWT v. Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held that where no tax had been actually avoided, there was no justification to impose a penalty. The ld. counsel, on the strength of the said decision, has submitted that in the case of M/s Aggarwal Agricultural Industries, return of income had been duly accepted under section 143(1) and in the case of M/s United Wine Traders, assessment had been framed under section 143(3) without raising any objection against the filing of the retum. 9. We may also refer to certain other decisions of the Tribunal on the similar question. One case relates to the penalty imposed under section 271B where the audit report was available with the assessee before the specified date but the same could not be flied along with the return in time. The return was filed late by 21 days. No notice had been issued by the Department under section 142(1)(i) for filing the return. It was held that the penalty under section 271B was not justified (Re. Mohinder Kumar 42 ITR 384 Delhi SMC). Similar view was taken by the Bangalore Bench in the case of P.C. Mohan v. Asstt. CIT [1993] 45 ITD 251 and by the same Bench again in the case of Bangalore Steel Distributors v. ITO [1994] 49 ITD 668. 10. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the return of income had been processed on 15-7-1991 but the notice initiating penalty proceedings had been issued on 11-5-1992. The last date for issuance of any notice initiating penalty proceedings was 31-3-1992. Our attention has been drawn to section 275(1)(c) of the Act, which reads as under :--- " 275(1). No order imposing a penalty under this Chapter shall be passed--- (a) (b) (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later." Though penalty proceedings were not initiated in the course of assessment proceedings, but still if the question is examined on the assumption that the penalty proceedings had been started, these should have been completed before the expiry of the financial year in which assessment proceedings had been initiated. In this light, we find that the initiation of penalty proceedings by issuance of notice on 11-5-1992 was time-barred. The second limb in clause (c), reproduced above, aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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