THE CIT vs. M/S SPEEDWAY RUBBER FACTORY

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ITR/240/1995HC Punjab & HaryanaPHHC01032303199508 November 2006Author: MR. JUSTICE RAJESH BINDAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the ITAT was correct in deleting the penalty. The Court relied on its own prior judgment in Income-Tax Officer v. Kaysons India (2000) 246 ITR 489. The reasoning was that Section 271B does not penalize the default or failure to file the return along with the audit report on or before the specified date. The Court noted that the revenue had not contended that the assessee failed to get its accounts audited or obtain the audit report before the specified date. Furthermore, no return had been filed under Section 139(1) or in response to a notice under Section 142(1), meaning there was no default in furnishing an audit report along with a non-existent return. The assessee filed a return under Section 139(4) after the due date, but this return was accompanied by the audit report obtained as per Section 44AB. Therefore, the default for which the penalty was levied was not covered by Section 271B, justifying the deletion of the penalty by the lower authorities.

What were the facts?

This case involves a reference to the High Court of Punjab and Haryana at Chandigarh concerning an Income Tax Appellate Tribunal (ITAT) order dated 02.09.1994 in I.T.A. No.1007(ASR)/1993 for the assessment year 1992-93. The Commissioner of Income-tax (Central), Ludhiana (the applicant/revenue) challenged the ITAT's deletion of a penalty of Rs.57,374/- levied under Section 271B of the Income Tax Act, 1961, against M/s Speedway Rubber Factory, Jalandhar (the respondent/assessee). The penalty was imposed for a default related to the filing of an audit report.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, and on a proper interpretation of the provisions of Section 271B, the Income-tax Appellate Tribunal was right in law in deleting the penalty of Rs.57,374/- levied u/s 271B? The revenue contended that the penalty was rightly levied under Section 271B. The assessee's argument, as reflected in the High Court's reliance on a previous judgment, was that the default for which the penalty was levied was not covered by Section 271B. Specifically, the assessee argued that the penalty was for not furnishing the audit report along with a return filed under Section 139(1) by the specified date. However, the assessee filed a return under Section 139(4) after the due date but with the audit report obtained in accordance with Section 44AB.

Which sections of the Income-tax Act were involved?

Section 271B,Section 44AB,Section 139(1),Section 139(4),Section 142(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.R. No.240 of 1995 Date of decision: 08.11.2006 The Commissioner of Income-tax (Central), Ludhiana. -----Applicant Vs. M/s Speedway Rubber Factory, Jalandhar. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE RAJESH BINDAL Present: Dr. N.L. Sharda, Advocate for the revenue. -----

ORDER: Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated 02.09.1994 in I.T.A. No.1007(ASR)/1993 in respect of assessment year 1992-93:- “Whether, on the facts & in the circumstances of the case, and on a proper interpretation of the provisions of Section 271B, the Income- tax Appellate Tribunal was right in law in deleting the penalty of Rs.57,374/- levied u/s 271B?” We find that the issue stands covered against the revenue by the judgment of this Court in Income-Tax Officer v. Kaysons India (2000) 246 ITR

489.

After considering the relevant provisions, this Court observed at page 492:- “It is, therefore, evident that the default or failure to file the return along with the audit report on or before the specified date is not hit by the provisions of section 271B. It is not the case of the Revenue that the assessee has failed to get the accounts audited or has failed to obtain the report of such audit in terms of section 44AB before the specified date. It is also evident that no return had been filed either under sub-section I.T.R. No.240 of 1995 (1) of section 139 or in response to any notice under clause (i) of sub-section (1) of section 142 and as such there could possibly be no default of not furnishing the audit report along with such a non-existent return. The return under sub-section (1) of section 139 in this case could be filed up to November 30, 1990. However, the assessee had filed the return on December 31, 1990, which was a return filed under sub-section (4) of section 139 and this return was duly accompanied by the audit report obtained by the assessee in accordance with the provisions of section 44AB. Thus, according to us, the default for which penalty had been levied was not covered by the provisions of section 271B and the Commissioner of Income- tax (Appeals and the Tribunal were justified in holding that no penalty was leviable.” Accordingly, the question is answered against the revenue and in favour of the assessee. ( ADARSH KUMAR GOEL ) JUDGE November 08, 2006 ( RAJESH BINDAL ) ashwani JUDGE Pag e

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