COMMISSIONER OF INCOME TAX, RO vs. M/S.AGGARWAL TRADERS, SONEPAT.

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ITR/7/2000HC Punjab & HaryanaPHHC01036445200003 November 2006Bench: MR. JUSTICE RAJESH BINDAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages
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What did the High Court hold?

The High Court held that the Tribunal was right in law in confirming the deletion of the penalty under Section 271B. The Court relied on its own previous judgment in Income-Tax Officer v. Kaysons India, (2000) 246 ITR 489. The reasoning was that Section 271B penalizes failure to get accounts audited or to obtain the audit report before the specified date. In this case, the assessee had obtained the audit report in accordance with Section 44AB. While the return was filed on December 31, 1990, which was after the due date for filing under Section 139(1) (November 30, 1990), it was filed under Section 139(4) as a belated return. Crucially, this belated return was duly accompanied by the audit report. Therefore, the default for which the penalty was levied was not covered by Section 271B, as there was no failure to obtain the audit report or to file it along with a return that was required under Section 139(1) or in response to a notice under Section 142(1). The ratio decidendi is that a penalty under Section 271B is not leviable if the audit report is obtained and filed with a belated return under Section 139(4), even if the return is filed after the due date under Section 139(1). The question is answered against the revenue and in favour of the assessee.

What were the facts?

The Revenue, Commissioner of Income-tax, Rohtak, has filed a reference application before the High Court of Punjab and Haryana at Chandigarh against an order of the Income Tax Appellate Tribunal (ITAT), Delhi Bench. The ITAT's order, dated September 23, 1998, in I.T.A. No. 4418/Del of 1992, pertains to assessment year 1990-91. The dispute concerns a penalty of Rs. 92,699 imposed under Section 271B of the Income-tax Act, 1961, which was deleted by the Commissioner of Income-tax (Appeals). The High Court is asked to decide on the correctness of the ITAT's interpretation of Section 271B.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Hon'ble Tribunal was right in law in interpreting the provisions of section 271B and thereby confirming the order of the learned CIT (A), who deleted the penalty of Rs. 92,699/- imposed u/s 271B of the Income-tax Act, 1961? Assessee's Contentions: The judgment does not record specific contentions made by the assessee before the High Court. However, the reasoning of the High Court implies that the assessee argued that the penalty under Section 271B was not leviable. Revenue's Contentions: The Revenue contended that the penalty under Section 271B was rightly imposed. The judgment does not detail the specific arguments of the Revenue, but it is evident they were seeking to uphold the penalty.

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

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

**** I.T.R. No.7 of 2000 Date of Decision:3.11.2006 Commissioner of Income-tax, Rohtak .....Petitioner Vs. M/s Aggarwal Traders, Sonepat .....Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present:- Shri Yogesh Putney, Advocate for the petitioner. **** ADARSH KUMAR GOEL, J. Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Delhi Bench, New Delhi, arising out of its order dated 23.9.1998 in I.T.A. No.4418/Del of 1992 in respect of assessment year 1990-91:- “Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal was right in law in interpreting the provisions of section 271B and thereby confirming the order of ld. CIT (A), who deleted the penalty of Rs.92.699/- imposed u/s 271B of the Income-tax Act, 1961?” We find that the issue stand 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

I.T.R. No.7 of 2000 -2- 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 (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 3, 2006 ( RAJESH BINDAL ) renu JUDGE

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