TaxTMI 
TaxTMI 
2001 (10) TMI 753
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....31-12-1990 in terms of section-44AB, a show cause notice was issued to the assessee as to why the penalty under section 271B of the Act may not be imposed. In response to show cause notice, the assessee made the following submissions. "That on 10-5-1991 when I seeked time for filing the return I was informed that computation of income is not ready and awaiting some informations from auditors. Not being fully involved directly in day today functions of accounts, I took it that accounts are yet to be audited when the fact was that accounts were finalised and audited long time back. Only computation was not completed in which auditors had to give assistance and information. That accounts were audited and tax audit as completed within the prescribed time. There is no violation of any provision of law. The misguided information given in my letter dated 10-5-1991 stands clarified as above. That in view of the submission and clarification given above and the facts there is no violation of any Income-tax provisions, it is submitted that the penalty proceedings may kindly be dropped." 2.1 The Assessing Officer considered the submissions of the assessee. He observed that in ter....
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....n filed in response to notice under section 142(1) and not under section 139(1). Hence, there was no default of the provisions of section 44AB read with section 271B and the Commissioner was not justified in sustaining the penalty. 2.4 The ld. counsel further stated that under the Income-tax Act, there are various provisions under which audits are to be carried out. For example, in the case of Company; audit is compulsory under section 224 of the Companies Act. In the Income-tax Act, it is compulsory under section 44AB, 12A, 13A, 32AB(2), 80HH, 80HHA, 80HHB, 80HHC, 80-I and so on. The audit report has to be filed as required under these sections. It may be mentioned in this connection that in addition to the audit under section 44AB, the assessees will also have to get separate audit report under the above sections, if deduction under the same was claimed. The ld. counsel further argued that no penalty can be imposed even if the audit report is obtained subsequently. Section 271B contemplates three situations when penalty can be imposed. These are :- (a)Failure to get the accounts audited; or (b)Failure to obtain such audit report as required under section 44AB; or (c....
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....re is, however, no obligation on other categories of taxpayers to get their accounts audited. 17.2 A proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they faithfully reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of the accounts before the tax authorities and considerably saving the time of Assessing Officers in carrying out routine verifications like checking correctness of totals and verifying whether purchase and sales are property vouched or not. The time of the Assessing Officers thus saved could be utilised for attending to more important investigational aspects of a case." From the said citation it is clear that the purpose of introducing sections 44AB and 271B was to ensure that the assessees should maintain proper books of account and records and their income is based on such books of account and records. 4. Now we may refer to section 271B of the Income-tax Act, 1961 as was applicable to the assessment year 1990-91 : ....
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....have examined the said auditors or some of the employees of the assessee with a view to find out the facts. In absence of any evidence brought on record, the apparent was to be treated as real and correct and the audit report in the instant case had, therefore, to be accepted as having been obtained on or before 31-12-1990. 6. As mentioned earlier, section 271B contemplates three situations in which the penalty was imposable. The situation (a) as mentioned in section 271B has not stipulated any time limit for completion of the audit. Undoubtedly, the time limit has been prescribed in section 44AB only, but it does not find place in the situation (a) mentioned above. Situation (a) ends before the words "or obtained a report". From the words "or obtain a report", the situation (b) begins. Situation (c) applies where the assessee fails to furnish the said report alongwith the return of income under section 139(1)/142(1)(i). It is undisputed fact that the audit report has been annexed alongwith the return of income filed on 22-7-1991, which was filed in response to notice under section 142(1)(i) of the Act. There is no dispute that the audit report has been obtained because unless s....
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....no obligation to file the audit report under section 44AB within the time as stipulated under section 139(1). We fully agree with the ld. counsel that no penalty can be imposed until and unless there is obligation or duty, which is cast on the assessee to comply that. Since, there is no such provision requiring the assessee to furnish the audit report within the time stipulated under section 139(1), the assessee could not be said to have committed a default. The Jaipur Bench of the Tribunal in the case of Prabhu Lal Sahu reported in 83 Taxman (Magazine) 177 has held as under : "Section 271B requires the assessee to get his accounts audited by a specified date and file the audit report alongwith the return. The first limb of section 271B contemplates absolute default on the part of the assessee. Where an assessee does not, at all, get his accounts audited, his default could be punishable under the first situation. The second limb could come into play where though the accounts were got audited if the return filed was not accompanied with the audit report. The assessee cannot be punished once for not getting the report in time and then not filing it alongwith the return. The law un....