Commissioner Of Income-Tax v. Anand Kumar And Co.

1. The Income-tax Appellate Tribunal, Allahabad, has referred the following questions of law under section 256(1) of the Income-tax Act, 1961, (hereinafter referred to as “the Act”), for opinion to this court:

“1. Whether the Tribunal is correct in law and on facts in vacating the confirmation of the penalty imposed under section 271B of the Act at Rs. 32,548 for the assessment year 1987-88?

2. Whether the Tribunal is correct in law in holding that the penalty order is also required to be vacated on account of being excessive in the quantum without appreciating that the quantum of penalty is fixed by the provisions of section 271B of the Act?

2. The reference relates to the assessment years 1987-88 and 1988-89.

3. Briefly stated the facts giving rise to the present reference are as follows:

4. The return of income for the assessment year 1987-88 was due to be filed on or before June 30, 1987, whereas it was actually filed on September 29, 1987. The respondent-assessee had also filed the audit report dated September 10, 1987, along with the return of income. Likewise for the assessment year 1988-89 the return of income was to be filed on or before June 30, 1988, but it was filed on August 31, 1988, along with the audit report dated August 30, 1988. As the audit report had not been obtained before the due date of filing of the return of income penalty proceedings under section 271B of the Act were initiated in respect of both the assessment years and the Assessing Officer after giving opportunity of hearing imposed sums of Rs. 23,548 and Rs. 37,583, respectively, as penalty. This order has been affirmed by the Commissioner of Income-tax (Appeals). However, in further appeal, the Tribunal has deleted the penalty on two grounds. Firstly, there was reasonable cause for not getting the accounts audited and obtaining the audit report within the due date and, secondly, the penalty imposed is excessive looking to the income assessed.

5. We have heard Sri R.K Upadhyaya, learned standing counsel for the Revenue, and Sri R.S Agarwal, learned counsel appearing on behalf of the respondent.

6. Learned standing counsel submitted that as the respondent-assessee had not got his books of account audited before the due date for filing of the return of income, it had committed a default under section 44AB of the Act and, therefore, exposed itself to penalty under section 271B of the Act.

7. He further submitted that the quantum of penalty has been prescribed under the statute and it cannot be deleted only on the ground that it is excessive. In any event, the penalty cannot be reduced below the minimum prescribed. Sri R.S Agarwal submitted that as the Tribunal had accepted the explanation furnished by the respondent-assessee for not getting the books of account audited within the time, the penalty has rightly been deleted by the Tribunal. The said finding having not been challenged by the Revenue, the order of the Tribunal does not suffer from any infirmity.

8. Having heard learned counsel for the parties, we find in view of the provisions of section 273B of the Act, if an assessee proves that there was reasonable cause for the said failure no penalty is to be imposed under section 271B of the Act. In the present case, the assessee had given explanation as to why its books of account could not be audited, within the due date. The Tribunal has held that the failure for both the assessment years on the part of the assessee was for good reason, i.e, the illness which is supported by the medical certificate and further the senior partner who was ill subsequently died on October 17, 1988. In this view of the matter, the penalty proceedings were not required to be initiated, much less any penalty to be imposed. We find that the findings recorded by the Tribunal are based on appreciation of evidence and materials on record and as the Tribunal has accepted the explanation offered by the respondent-assessee for not getting its books of account audited within the prescribed time it cannot be said that the Tribunal had committed any infirmity in deleting the penalty. The explanation given by the assessee which has been accepted by the Tribunal does constitute a reasonable cause and, therefore, no penalty under section 271B of the Act was imposable.

9. In view of the foregoing discussions, we answer the first question referred to us in the affirmative, i.e, in favour of the assessee and against the Revenue. In view of our answer to the first question the second question has been rendered academic and is being returned unanswered. However, there shall be no order as to costs.