Tribunal upholds deletion of penalty under Income Tax Act

The Tribunal upheld the Commissioner of Income Tax (Appeals) decision to delete the penalty imposed under section 271B of the Income Tax Act. The Tribunal agreed that the penalty was not applicable as the audit report was obtained within the specified time under section 44AB, even though it was not filed within the time allowed under section 139(1). The Tribunal emphasized that the obligation under section 44AB was limited to getting the accounts audited and obtaining the audit report before the specified date, without the necessity to furnish the report before the Assessing Officer by that date. The appeal by the Revenue Department was dismissed.

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Issues:
Appeal against deletion of penalty under section 271B for not filing audit report within stipulated time under law.

Analysis:
The appeal was filed by the Revenue Department against the deletion of a penalty of Rs. 52,290 imposed under section 271B of the Income Tax Act by the Assessing Officer (AO) for the assessment year 1991-92. The AO initiated penalty proceedings as the audit report under section 44AB was not filed within the prescribed time, even though the accounts were audited within the time limit. The AO imposed the penalty under section 271B as the audit report was not filed within the time allowed under section 139(1) of the Act. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty, stating that the penalty under section 271B is not attracted if the audit report was obtained within the time specified under section 44AB, regardless of the filing date under section 139(1). The CIT(A) emphasized the strict construction of penal provisions in tax laws and canceled the penalty.

The assessee's counsel argued that the issue was covered by a decision of the jurisdictional High Court, where it was held that the obligation under section 44AB was only to get the accounts audited before the specified date, without the requirement to furnish the audit report before the Assessing Officer by the specified date. The High Court's decision clarified that prior to the amendment, the obligation was to obtain the audit report before the specified date. The Tribunal's legal view was considered correct in this regard.

The Tribunal concurred with the decision of the jurisdictional High Court and upheld the CIT(A)'s order. The Tribunal emphasized that the obligation under section 44AB was limited to getting the accounts audited and obtaining the audit report before the specified date, without a requirement to furnish the report before the Assessing Officer by that date. Therefore, the appeal by the Revenue Department was dismissed, and the penalty under section 271B was canceled based on the legal interpretation and precedents cited.

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