Tribunal cancels penalty for late audit report filing, holds no default in obtaining report.

The Tribunal ruled in favor of the assessee, canceling the penalty of Rs. 25,324 imposed under section 271B for delay in obtaining and filing an audit report under section 44AB. It was held that there was no default in obtaining the audit report by the specified date, the return was filed under section 139(4), not 139(1), and there was no obligation to file the audit report separately if the return was delayed. The interpretation of "before the specified date" as "by the specified date" was deemed reasonable, leading to the allowance of the assessee's appeal.

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Issues Involved:
1. Imposition of penalty under section 271B for delay in obtaining and filing an audit report under section 44AB.
2. Interpretation of the term "before the specified date" in section 44AB.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271B:

The assessee appealed against the CIT(A) order confirming a penalty of Rs. 25,324 under section 271B for delay in obtaining and filing an audit report under section 44AB. The turnover exceeded Rs. 40 lacs, necessitating an audit before the specified date, 31-7-1988. The audit report dated 31-7-1988 was filed with the return on 31-8-1989. The Assessing Officer imposed the penalty due to non-compliance with the notice to show cause, concluding a default had occurred.

The assessee argued that the accounts were audited on 31-7-1988, but the return was delayed due to the counsel's illness. The CIT(A) rejected this, confirming the penalty based on the default in not filing the audit report with the return under section 139(1).

The assessee's counsel contended that section 271B penalizes three failures: (1) failure to get accounts audited, (2) failure to obtain an audit report, and (3) failure to furnish the report with the return under section 139(1)/142(1)(i). The counsel argued that none of these failures occurred as the accounts were audited and obtained on the specified date, and the return was filed under section 139(4), not 139(1). Supporting decisions from various Tribunal Benches were cited.

The Departmental Representative maintained that the penalty was justified due to the default in filing the audit report with the return under section 139(1). Additionally, it was argued that the audit should have been completed by 30-7-1988, not 31-7-1988.

2. Interpretation of "Before the Specified Date":

The assessee's counsel argued that "before the specified date" in section 44AB should be interpreted as "within" or "not later than" the specified date, i.e., 31-7-1988. Supporting this, the Bombay High Court's decision in Premchand Nathmal Kothari v. Kisanal Bachharaj Vyas interpreted "before" as "not later than" in a similar context. The counsel also argued that there was reasonable cause for the one-day delay due to a bona fide impression that the due date was 31-7-1988.

The Tribunal considered these arguments and the decisions cited. It noted that section 44AB required obtaining the audit report by the specified date, and section 271B penalized failure to furnish the report with the return under section 139(1). The Tribunal found that the return was filed under section 139(4), removing the case from section 271B's purview. There was no provision for filing the audit report separately if the return was delayed.

The Tribunal also examined the interpretation of "before the specified date." It found that "before" in section 44AB should be interpreted as "by the specified date," consistent with the interpretation of similar expressions in section 139(1)(a). The Tribunal referred to the Bombay High Court's decision, which interpreted "before" as "not later than," and found this applicable to section 44AB.

Conclusion:

The Tribunal concluded that:
1. There was no default in obtaining the audit report by the specified date, 31-7-1988.
2. The return was filed under section 139(4), outside the purview of section 271B.
3. There was no requirement to file the audit report separately if the return was delayed.
4. The interpretation of "before the specified date" as "by the specified date" was reasonable.

The penalty of Rs. 25,324 under section 271B was canceled, and the assessee's appeal was allowed.

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