Audit report compliance under section 44AB avoided penalty under section 271B despite delayed return filing in the pre-amendment regime.

For the pre-amendment regime, penalty under section 271B of the Income-tax Act was not leviable where the assessee obtained the audit report within the prescribed time under section 44AB, even if the return was furnished after the due date under section 139(1). The HC applied its earlier ruling and held that timely obtaining of the audit report was sufficient compliance for the relevant assessment year before the Finance Act, 1995 amendment. The penalty was therefore deleted and the issue was decided in favour of the assessee.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961 was exigible when the assessee obtained the audit report within the prescribed time under section 44AB but furnished it along with a return filed beyond the time under section 139(1).

Analysis: The reference related to assessment year 1990-91, when the governing law required the audit report to be obtained by the specified date. The Court followed its earlier decision holding that, for the relevant period prior to the amendment by the Finance Act, 1995, penalty under section 271B was not attracted if the audit report had been obtained within time, even though the return of income was filed beyond the time prescribed under section 139(1).

Conclusion: The penalty was not exigible and was rightly deleted; the question was answered in the affirmative, in favour of the assessee and against the Revenue.

Ratio Decidendi: For the pre-amendment regime, compliance with the prescribed date for obtaining the audit report under section 44AB was sufficient to avoid penalty under section 271B, notwithstanding delayed filing of the return under section 139(1).

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