Commissioner of Income Tax vs Keshipra and Co.

B.A. Khan, J.—Penalty was imposed on the assessee of Rs. 32,880 for the assessment year 1985-86 and Rs. 1,00,000 for the assessment year 1986-87 for not filing the audit report. The assessee took appeal against this before the Commissioner of Income Tax (Appeals) and showed that the audit report was filed and that the requirement of filing the audit report was brought into force by the Finance Act, 1988, from April 1, 1989, and thus, was not attracted to the case. The Commissioner of Income Tax (Appeals) dismissed the appeal and the assessee carried the matter to the Tribunal which found on the facts that the assessee had submitted the audit report vide receipt No. (333898, dated March 21, 1990, thus, satisfying the requirement. It accordingly held levy of penalty illegal and also observed that the imposition of such penalty was otherwise barred by limitation u/s 275.

The Revenue seized the limitation issue and sought reference on this which was rejected by the Tribunal noticing that imposition of penalty was otherwise not justifiable on the facts because the assessee had submitted the requisite audit report. But the Revenue filed this application for calling the reference from the Tribunal on the following questions, stated to be questions of law, for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the penalty of Rs. 32,880 levied by the Assessing Officer u/s 271B by holding that the order levying the penalty is barred by limitation ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the penalty of Rs. 1,00,000 levied by the Assessing Officer u/s 271B by holding that the order levying" the penalty is barred by limitation ?"

The fact of the assessee having filed the audit report on March 21, 1990, is borne by the record and is apparent on its face. It is strange that it should have been overlooked by the Assessing Officer and the Commissioner of Income Tax (Appeals). It is also sad that the Revenue should have protracted this litigation for years on by catching hold of a non-issue of limitation in disregard to the crux of the matter, viz., whether penalty was leviable for non-filing of the audit report.

All this suggests that the Revenue thrived on launching frivolous litigation at public cost. There is no dearth of cases which involve petty amounts and are dragged on in courts for years. It serves the interest of none. It is high time that the Revenue authorities indulged in self-introspection and realised the need for developing a "tax friendly" culture. It is hoped that they would change with the times and exercise due application of mind in contesting litigation against taxpayers.

This application is frivolous and is accordingly rejected. The Registrar is directed to forward a copy of this order to the Chief Commissioner of Income Tax, Bhopal, for necessary action.