M/S LUCKY IRON SCRAP CO. vs. COMMISSIONER OF INCOME TAX ETC./

ITA/149/2001HC Punjab & HaryanaPHHC01041997200118 November 2010Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL5 pages
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What were the facts?

The assessee, M/s. Lucky Iron Scrap Co., Jalandhar, filed an appeal against the order dated 28.6.2000 passed by the Income Tax Appellate Tribunal (Tribunal) in ITA No. 485/ASR/1994 for the assessment year 1988-89. The Tribunal had confirmed the penalty imposed on the assessee under Section 271B of the Income-tax Act, 1961. The assessing officer initially passed an assessment order on 13.11.1990, directing proceedings under Sections 271(1)(a) and 271(1)(i). Subsequently, on 25.5.1993, a penalty of Rs. 27,523/- was imposed under Section 271B for violating Section 44AB, without initiating proceedings under that specific provision. The Commissioner of Income-Tax (Appeals) upheld this penalty on 19.2.1994, which was then confirmed by the Tribunal.

What did the High Court hold?

The High Court held that the Tribunal was not right in upholding the penalty under Section 271B. The Court noted that penalty proceedings under Section 271B were not initiated during the assessment proceedings which concluded on 13.11.1990. Instead, a notice was issued on 25.11.1992, after the assessment order was passed. Furthermore, considering the assessee's explanation regarding the delay in audit, the Court found it plausible. The account books were handed over in May 1988, but due to circumstances including impounding by the ADI on 20.10.1989, the audit could only be completed on 26.4.1990 after obtaining photocopies. The Court concluded that the delay was not deliberate and, in the peculiar facts and circumstances, penalty under Section 271B was not called for. The appeal was allowed, and the substantial question of law was answered in favour of the assessee.

What were the issues?

1. Whether, in the facts and circumstances of the case, imposing of penalty under Section 271B of the Act was justified? Assessee's contentions: (a) The penalty under Section 271B was unjustified because proceedings were not initiated during the assessment proceedings culminating on 13.11.1990. Notice for penalty proceedings under Section 271B was issued on 25.11.1992, over two years after the assessment order, making it bad due to delay and laches. (b) Section 273B, inserted w.e.f. 10.9.1986, provides for no penalty if reasonable cause for failure is established. The assessee handed over account books for audit in May 1988, but the audit was delayed. Books were impounded on 20.10.1989. Photocopies obtained in December 1989 allowed new auditors to complete the audit on 26.4.1990, with the return filed on the same date. This demonstrated reasonable cause, and the delay was neither deliberate nor the assessee's fault. Given the penalty amount of Rs. 27,523/-, discretion should favor the assessee. (c) An application for extension of time for filing the return, submitted on 9.1.1990, was acknowledged, and the extension sought up to 9.2.1990 was not rejected. (d) While reasonable cause is usually a factual matter, a substantial question of law arises when authorities act on mere presumption and conjecture. Revenue's contentions: Learned counsel for the Revenue supported the order of the Tribunal.

Which sections of the Income-tax Act were involved?

Section 271B,Section 44AB,Section 271(1)(a),Section 271(1)(i),Section 273B,Section 131,Section 260A

AI-generated summary — verify with the full judgment below

Income Tax Appeal No. 149 of 2001 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ---- Income Tax Appeal No. 149 of 2001 Date of decision: 18.11.2010 M/s. Lucky Iron Scrap Co., Jalandhar --- Appellant Versus Commissioner of Income-Tax (Appeals) Jalandhar and another --- Respondents ---- CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL ---- PRESENT: Mr. Harminder Singh, Advocate for the appellant. Mr. Vivek Sethi, Standing Counsel for the respondents. ---- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the assessee against the order dated 28.6.2000, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, (in short “the Tribunal”) in ITA No. 485/ASR/1994 relating to the assessment year 1988-89. The appeal raises the following substantial question of law for adjudication: “Whether in the facts and circumstances of the case, imposing of penalty under Section 271B of the Act was justified?

Income Tax Appeal No. 149 of 2001 2

The order continues below.

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