Commissioner of Income Tax vs Narang Trading Co.

The Income Tax Tribunal, Allahabad has referred the following questions of law u/s 256(1) of the income tax Act, hereinafter referred to as the ''Act'', for information to this court. The reference relates to the Assessment years 1988-89 and 1989-90. Accordingly the referred questions are as below:

"3. In terms of Section 44AB of the income tax Act, the assesses was required to get its accounts audited and to obtain the audit reports for the assessment years 1988-89 and 1989-90 by 31.7.1988 and 31.7.1989 respectively. These were obtained on 22.6.1988 and 24.7.1989, i.e., before the specified dates but were filed alongwith the belated returns filed on 28.3.1990. Penalty of Rs. 31,660/- and Rs. 35,600/- was imposed u/s 271-B of the income tax Act for the assessment years 1988-89 and 1989-90 respectively, for failure of the assessee to file the audit reports alongwith the returns within the time allowed u/s 139(1) of the income tax Act. The orders were confirmed by the first appellate authority.

3.1 The decision, when challenged, was reversed by the Appellate Tribunal on the premise that the provisions of Section 44AB, as they stood at the relevant point of time, did not require filing of the audit reports independently but only required to get the accounts audited and to obtain the audit reports on or before the specified date. The provisions of Section 44AB and Section 271B were amended by the Finance Act, 1995, with effect from 1.7.1995, enjoining upon the assessees to furnish the audit reports before the specified date. These amendments were not made retrospective in operation."

We find that the questions referred to herein above addressed to us is to be answered in favour of assessee and against Revenue in view of the decision of this court in CIT v. Jai Durga Construction Co. [2000] 245 ITR 857 1, wherein it has been held that penalty u/s 271B of the Act, as it stood at the relevant point of time prior to its amendment by the Finance Act, 1995 v which came into existence with effect from1995, was not exigible in case, audit report been obtained within specified date and return of income been filed beyond time.