Hon'ble S.C. Nigam, J.
(Delivered by Hon'ble Rajes Kumar, J.) At the instance of the revenue the following question has been raised for the assessment years 1989-90 and 1990-91 :
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in confirming the order of the CIT(A) cancelling the penalty imposed u/s 271B of the I.T. Act, 1961, on the ground that (a) the audit report was obtained before the specified date, and (b) the penalty proceedings were initiated after several months of passing of assessment order."
The brief facts of the case are as follows :
In terms of section 44AB of the I.T. Act, the assessee was required to get its accounts audited and to obtain the audit reports for the assessment years 1989-90 and 1990-91 on 31.10.1989 and 30.11.1990 respectively. The audit reports for the aforesaid assessment years though obtained before the specified dates, on 25.10.1989 and 30.10.1990, were filed along with the belated returns furnished on 31.1.1990 and 15.4.1991 respectively. Rejecting the plea of the assessee that in the circumstances of the case, no penalty was exigible, vide his orders dated 20.1.1993, the A.O. imposed penalty of Rs. 43,200/- and Rs. 51,270/- u/s 271B of the I.T. Act, 1961 for the assessment years 1989-90 and 1990-91 respectively.
In appeals before the CIT(A), the plea of the assessee was three fold. Firstly, it was submitted that the audit reports having been obtained before the specified dates, section 271B was not applicable. In support of this contention reliance was placed on certain decisions of the I.T.A.T. Benches. The second plea was that penalty proceedings having been initiated much after the completion of the assessments were bad in law. The third plea was that the partner who was looking after the income tax matters was seriously ill and this constituted a reasonable cause for the default. By observing as under, the ld. CIT(A) cancelled the penalties, vide his consolidated order dated 27.11.1995 :-
"I have carefully considered the oral as well as written submission of the counsel. So far the legal angle is involved, the contention of the appellant has got to be accepted provided the credence is given to the decisions of the Hon'ble ITAT as cited supra. In this case there is reasonable cause also which is genuine and sufficient as stated supra. Thus from both the angles, the penalties levied by the ITO cannot be sustained. Thus both the appeals are allowed."
In appeal by the Department, the Tribunal observed that the assessee had obtained the audit report well before the specified dates. In view of the decisions of ITAT benches on this aspect, the cancellation of penalty by the CIT(A) was held to be justified. Further, after referring to and extracting the finding of a decision of the ITAT in the case of H. Ajitbhai reported in 45 ITD 262 it was held that since penalty proceedings for both the years were initiated by issue of notices after several months of passing of assessment order, the penalties were rightly cancelled by the CIT(A) on this ground also. In this view of the matter, the Tribunal did not consider it necessary to go into the question of existence or absence of reasonable cause for the default. Vide order dated 16.3.1998, the Revenue's appeals were dismissed.
Heard Sri A.N. Mahajan, learned Standing Counsel. He has submitted that the question involved is squarely covered by the decision of this Court in the case of Commissioner of Income Tax v. Jai Durga Construction Co. reported in (2000) 245 ITR 857 in favour of assessee and against the revenue wherein the Division Bench has held as follows :
"3. Both the parties were hear. There is no dispute about the fact that the audit report was obtained before the specified date. Most of the Benches of the Tribunal, including the Allahabad Benches, have been taking a view that in a case where the audit report has been obtained by an assessee before the specified date, the mere fact that it has been filed belatedly along with the belated return of income, would not attract imposition of penalty under section 271B of the Act. It has been so held because the provisions of section 44AB, as they stood at the relevant point of time, did not require filing of audit report independently. It was only after realising the lacuna of law that the provisions of section 44AB and section 271B were amended by the Finance Act, 1995, with effect from July 1, 1995, enjoining upon the assessee to furnish the audit report before the specified date. These amendments have not been made retrospective in operation, which fact also confirms that at the relevant point of time, filing of the audit report before the specified date, was not the requirement of law. In the view of the matter also, the order of the learned Commissioner of Income-tax (Appeals) cancelling the penalty does not call for any interference."
At the relevant time, the obligation created by section 44AB was merely to get the accounts audited before the specified date. There was no obligation to furnish that audit report before the Assessing Officer before the specified date. This obligation has been created by substituting the words "furnished by" for the words "obtain before" by the Finance Act, 1995, with effect from July 1, 1995. Thus, prior to the amendment the obligation of an assessee to whom under section 44AB applied was merely to get the accounts audited and obtain an audit report before the specified date. There is no dispute that in the present case the assessee complied with these requirements. The contention of the Commissioner that if the report has not been filed before the Assessing Officer before the specified date, the assessee becomes liable to penalty under section 271B is not sustainable from the language of section 44AB or section 271B. We are, therefore, of the opinion that the legal position is clear and self-evident and the Tribunal has taken the correct legal view. Therefore, no substantial question of law arises in the appeal. The same is hereby dismissed in limine."
In the present case, for both the assessment years 1989-90 and 1990-91, the assessee has obtained the audit reports on 31.10.1989 and 30.11.1990 respectively. However, both the audit reports were filed along with the belated returns on 31.1.1990 and 15.4.1991 respectively. In terms of Section 44AB of the Act, as it existed at the relevant time, the assessee was required to get its accounts audited and to obtain the audit reports for the assessment years 1989-90 and 1990-91 on 31.10.1989 and 30.11.1990 respectively and there was no requirement to furnish the same independently. Thus, the provision was duly complied with and there was no violation of Section 44AB and, therefore, Section 271B was not attracted. In the circumstances, the Tribunal has rightly deleted the penalty.
In view of above, respectfully following the aforesaid decision, the question referred is answered in affirmative against the Revenue and in favour of the assessee.
Dated : 7.1.2010.
PG.