Commissioner of Income Tax vs Akhilesh Chandra Agrawal

The Income Tax Appellate Tribunal, Allahabad has referred the following questions of law u/s 256(2) of the Income Tax Act, 1961 (''the Act''), for opinion to this Court,-

Whether on the facts and in the circumstances of the case, the Tribunal was legally correct in sustaining the order of the Commissioner (Appeals) deleting the penalty of Rs. 32,730 imposed u/s 271B of the Income Tax Act, 1961, by holding that no penalty under the said Section is exigible for failure to furnish the audit report u/s 44AB along with the return u/s 139(1) of the Income Tax Act, 1961?

The reference relates to assessment year 1991-92.

Briefly stated the facts giving rise to the present reference are as follows:

The case required compulsory audit and the audit report was due to be obtained by the assessee on or before 31-10-1991. The audit report dated 25-10-1991 was, however, filed with the belated return on 2-12-1991.

Penalty of Rs. 32,730 was imposed by the assessing officer u/s 271B of the Income Tax Act, 1961, which was cancelled during first appeal.

This decision when challenged, was upheld by the Tribunal on the premises that Section 44AB, read with Section 271B of the Act as they stood at the relevant time only required the assessee to get the accounts audited and to obtain the report on or before the specified date. Later on, the Legislature felt that there was lacunae in the provisions and as such Section 271B was amended by Finance Act, 1995 with effect from 1-7-1995 to provide that not only the tax audit should be completed by the specified date but report be furnished by the specified date irrespective of the fact whether the return of income is filed or not.

We have heard Sri A.N. Mahajan, learned Standing counsel for the revenue and learned counsel appearing for the respondent-assessee.

We find that the question raised as above is covered by the decision of this court in the case of Commissioner of Income Tax Vs. Jai Durga Construction Co., wherein this court has held that prior to the amendment by Finance Act, 1995 with effect from 1-7-1995, there was no obligation on the part of the assessee to submit its report along with the return, if the (sic-accounts) have been audited prior to that within stipulated period. In the present case as the assessment year is 1991-92, the amendment would not be applicable and, therefore, the Tribunal has rightly cancelled that the penalty imposed u/s 271B of the Act.

We, accordingly, answer the question of law referred to us in the affirmative, that is, in favour of the assessee and against the revenue.

There shall be no order as to costs.