High Court rules audit report submission timely, penalty under Income Tax Act not applicable. Precedent cited.

The High Court ruled in favor of the assessee, holding that penalty under section 271B of the Income Tax Act could not be imposed due to the timely audit report submission, despite the delay in filing the return of income. The Court referred to precedent establishing that if the accounts were audited before the specified date, no penalty could be levied under section 271B. The Tribunal's decision to cancel the penalty was upheld, emphasizing that the amendment to the Act removed the requirement of "without reasonable cause" for imposing penalties in such cases.

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Issues:
Penalty under section 271B of the Income Tax Act, 1961 for late filing of audit report and return of income.

Analysis:
The case involved a dispute regarding the penalty under section 271B of the Income Tax Act, 1961 for the assessment year 1989-90. The respondent, a registered partnership firm, filed its return of income with delay on 30-3-1990, along with the audit report dated 3-1-10-1989. The assessing officer initiated penalty proceedings under section 271B due to the delay in filing the audit report and return. The Commissioner (Appeals) later cancelled the penalty, citing reasonable cause for the delay, including the serious illness and subsequent death of one of the partners. The Tribunal, however, upheld the deletion of the penalty on the grounds that the audit report was obtained within the time allowed under section 139(1) of the Act, thereby no penalty could be levied. The Tribunal also noted that the amendment to the Act omitted the requirement of "without reasonable cause" for imposing penalties under section 271B.

The High Court referred to a previous judgment in CIT v. Jai Durga Construction, which held that if the accounts were audited before the specified date, no penalty could be imposed under section 271B, even if the audit report was not filed before the assessing officer by the specified date. The Court found no illegality in the Tribunal's decision and ruled in favor of the assessee, stating that the penalty could not be levied in this case. The Court answered the question referred to them in the affirmative, in favor of the assessee and against the revenue, with no order as to costs.

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