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Judgment
Chitra Venkataraman, J.—The assessee has come on appeal as against the order of the income tax Appellate Tribunal, Chennai "B" Bench, dated, February 25, 2004, in I.T.A. No. 1253/Mds/1997. The appeal was admitted on the following substantial questions of law:
Whether, on the facts and in the circumstances of the case, the respondent has jurisdiction and was not barred by limitation due to lapses to initiate penal action u/s 271B while completing the assessment u/s 143(3) read with section 147, when the same was not initiated in spite of availability of all material facts while completing the assessment u/s 143(1)?
Whether, on the facts and in the circumstances of the case, non-initiation of penalty u/s 271B, while completing the assessment u/s 143(1), would show that the Assessing Officer had appreciated the reasonable cause for the delay in obtaining the audit report u/s 44AB and consciously condoned the delay and, therefore, not initiated penalty u/s 271B?
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in confirming the penalty levied u/s 271B of the income tax Act, 1961?
It is seen that the penalty came to be imposed on the ground that there was a delay in obtaining audit report u/s 44AB of the income tax Act, by 29 days. The provision relating to the filing of the audit report as stood in the relevant assessment year 1988-89 reads as follows:
44AB. Every person.--(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds forty lakh rupees in any previous year; or
(b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year,
get his accounts of such previous year audited by an accountant before the specified date and obtain before that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed:
Provided that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and obtains before that date the report of the audit as required under such other law and a further report in the form prescribed under this section.
Explanation.--For the purposes of this section,--
(i) ''accountant'' shall have the same meaning as in the Explanation below sub-section (2) of section 288;
(ii) ''specified date'', in relation to the accounts of the previous year relevant to an assessment year means,--
(a) where the assessee is a company, the 31st day of December of the assessment year;
(b) in any other case, the 31st day of October of the assessment year.
The above clause (ii) is substituted for the following clause (ii) by the Finance Act, 1988, with effect from April 1, 1989:
(ii) ''specified date'', in relation to the accounts of the previous year or years relevant to an assessment year, means the date of the expiry of four months from the end of the previous year or, where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or the 30th day of June of the assessment yean whichever is later.
The assessee herein filed the audit report relating to the assessment year 1988-89 on August 28, 1988, evidently with a delay of 29 days. In the background of the abovesaid facts, penalty u/s 271B of the income tax Act was proposed and notice dated November 16, 1995, was issued to the assessee. The assessee replied that the audit report u/s 44AB of the income tax Act could not be submitted in time due to the sudden illness of the auditor, who was entrusted with the preparation of the report u/s 44AB of the income tax Act. Hence, the assessee submitted that the delay was not intentional, but due to circumstances beyond the control of the assessee. Rejecting the said reply, the Deputy Commissioner of income tax, Special Range-I, Coimbatore, levied penalty u/s 271B of the income tax Act for a sum of Rs. 100,000 as specified in the section. The assessee filed an appeal as against the said levy of penalty before the Commissioner of income tax (Appeals), who, however, rejected the same, thus confirmed the levy of penalty. The assessee once again filed an appeal before the income tax Appellate Tribunal reiterating its contention and filed an affidavit from the chartered accountant, wherein he stated that he underwent a open heart surgery at Mallya Hospital Bangalore, on March 22, 1993, for replacement of an aortic valve of the heart due to various complaints of breathlessness. He further stated that for more than five years, he was having occasional health problems due to the said defect and on many occasions, he was sick for short periods and was advised by his doctors to take rest. The problem became acute in 1992 and he had to undergo a surgery. In this circumstance, quoting health reasons and lack of sufficient manpower, he stated that he was unable to complete the audit in time and issue necessary report. The chartered accountant further pointed out that he had been the tax auditor for the assessee-company for nearly 20 years and except for the assessment year 1988-89, he had been complying with the provisions of the Act promptly. The income tax Appellate Tribunal, however, rejected the plea of the assessee and ultimately thus, confirmed the levy of penalty. The income tax Appellate Tribunal pointed out that even as per the report from the hospital, the chartered accountant was admitted in the hospital on March 18, 1993 and discharged on April 1, 1993, and the report did not substantiate the contention of the assessee that the chartered accountant was sick during the period under consideration. Since the medical report of the hospital was not of any assistance to the assessee to establish as a matter of fact that the chartered accountant was unwell during the material time, the plea of the assessee was rejected. Aggrieved by this order, the present appeal is filed by the assessee.
Heard learned counsel appearing for the assessee and the learned standing counsel appearing for the Revenue and perused the documents.
A perusal of the discharge summary from Mallya Hospital, Bangalore, shows that the chartered accountant had past history of heart problem and physical examination and echo-cardiography revealed that an aortic valve lesion was present and he had high blood pressure for the past one year prior to the date of his surgery. In October, 1992, he underwent a cardiac catheterization and coronary angiography. Since his condition became worse, he was advised for aortic valve replacement. Thus, the chartered accountant got himself admitted in 1993 and underwent a open heart surgery. A reading of the case history thus reveals the problem of the chartered accountant who had suffered from cardiac problem for some time and that ultimately he underwent a surgery in the year 1993. The fact that the surgery was performed in the year 1993 does not mean that the case of the assessee put forth through the chartered accountant that the chartered accountant was unwell to complete the tax audit in time, could not be lightly rejected on the mere fact that the chartered accountant produced records as to his hospitalization for surgery in the year 1993. Thus, going by the nature of illness that the chartered accountant had and considering the fact that he had been in-charge of the auditing of the assessee''s accounts and had filed the tax audit report promptly for the earlier years, which fact could not be controverted, the delay of 29 days in filing of the tax audit report, u/s 44AB merited to be condoned. Thus, we do not agree with the Tribunal on the question of reasonable cause and that going by the materials explaining the delay, we are constrained to reverse the order of the Tribunal. In the light of the above, the order of the Tribunal is set aside and consequently, the levy of penalty stands cancelled and accordingly, the tax case (appeal) is allowed. No costs.