Late tax return but timely audit report saves assessee from penalty under Income-tax Act

The High Court ruled in favor of the assessee, holding that the penalty under section 271B of the Income-tax Act was not applicable in a case where the audit report was obtained within the specified date, even though the return was filed late. The court referred to a previous decision and concluded that the penalty was rightly deleted.

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Issues:
Penalty under section 271B of the Income-tax Act, 1961 for delayed filing of audit report and return.

Analysis:
The Income-tax Appellate Tribunal referred a question of law under section 256(1) of the Income-tax Act, 1961 regarding the imposition of a penalty of Rs. 1,00,000 under section 271B of the Act for delayed filing of the audit report and return. The case pertained to the assessment year 1991-92. The assessee obtained the audit report on October 24, 1991, within the specified date of October 31, 1991, but filed it along with the belated return on March 31, 1992. The Assessing Officer imposed the penalty, which was later canceled by the Commissioner of Income-tax (Appeals) and upheld by the Tribunal based on previous decisions.

In a previous case, CIT v. Jai Durga Construction Co., the court held that the penalty under section 271B of the Act was not applicable if the audit report was obtained within the specified date, even if the return was filed late. The court noted that this was the position before the amendment by the Finance Act, 1995. Following this precedent, the High Court concluded that the penalty under section 271B was rightly deleted in the present case.

The High Court answered the question referred in the affirmative, favoring the assessee and ruling against the Revenue. The court cited the previous decision and held that the penalty under section 271B was not applicable in this scenario. No costs were awarded in this judgment.

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