Commissioner of Income Tax vs Gulzari Lal Agrawal and Sons

The Income Tax Appellate Tribunal, Allahabad, has referred the following question of law u/s 256(1), (2) of the Income Tax Act, 1961, hereinafter referred to as "the Act" for opinion of this Court:

Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in cancelling the penalty of Rs. 59,126, Rs. 78,376 and Rs. 82,633 for the assessment years 1990-91,1991-92, 1992-93, respectively, by holding that no penalty under the said section is exigible for failure to furnish the audit report along with the return u/s 139(1) of the same is furnished along with the return filed by the assessee u/s 139(4) of the Income Tax Act, 1961 ?

The reference relates to the assessment years 1990-91 to 1992-93. Briefly stated the facts giving rise to the following facts are as follows:

In the above assessment years, the assessee had turnover exceeding Rs. 40 lakhs. Therefore, it was obliged to get its accounts audited, obtain audit reports u/s 44AB and file the same along with its return of income u/s 139(1) of the Income Tax Act, 1961. The assessee, however, filed the audit report along with its return furnished u/s 139(4). The relevant particulars are as under:

Assessment years

Due date for obtaining audit report u/s 44AB

Audit report u/s 44AB obtained on

Return of income u/s 139(1) due on

Audit report u/s 44AB filed along with return u/s 139(4) on

1990-91

30-11-1990

22-10-1990

30-11-1990

24-4-1991

1991-92

31-10-1991

31-10-1991

31-10-1991

2-12-1991

1992-93

31-10-1992

29-10-1992

31-10-1992

31-12-1992

For the default on the part of the assessee of not furnishing audit report along with the return u/s 139(1), the assessing officer initiated penalty proceedings u/s 271B.

The assessing officer however did not agree with the explanation filed by the assessee and after rejecting the same, imposed penalties u/s 271B as below:

1990-91

1991-92

1992-93

Rs. 59,12.6

Rs. 78,376

Rs. 82,633

In appeal by the assessee, the learned Commissioner (Appeals) considered the submissions of the assessee and confirmed the levy of penalty as he did not find any reasonable cause.

Aggrieved, the assessee went in second appeal before the Tribunal. The Tribunal has cancelled trie penalties levied u/s 271B by relying upon the various decisions of the Tribunal wherein the ratio of the Hon''ble Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa, and in the case of The Commissioner of Income Tax, West Bengal 1, Calcutta Vs. Vegetables Products Ltd., were considered.

We have heard Sri A.N. Mahajan, learned standing counsel for the revenue. Shri S.D. Singh has appeared for the respondent-assessee.

We find that the controversy raised by the assessee is similar in the case 9 of Commissioner of Income Tax Vs. Jai Durga Construction Co., , wherein this Court has held that (headnote):

The obligation created by Section 44AB of the Income Tax Act, 1961, as it stood prior to 1-7-1995, was merely to get the accounts audited before the specified date. There was no obligation to furnish that audit report before the assessing officer before the specified date. This obligation has been created by substituting the words ''furnish by for the words ''obtain before'' by the Finance Act, 1995, with effect from 1-7-1995. Thus, prior to the amendment the obligation of an assessee to whom u/s 44AB applied was merely to get the accounts audited and obtain an audit report before the specified date.

As in the present case we find that the audit report as required u/s 44AB of the Act was obtained by the assessee before the date specified under the aforesaid section, penalty u/s 271B of the Act was not exigible.

We, accordingly, answer the question in the affirmative, i.e., in favour of the assessee and against the revenue.

There shall be no order as to costs.