TaxTMI 
TaxTMI 
2007 (12) TMI 138
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....y levied under section 271B of the Income-tax Act, 1961, was not barred by limitation under section 275 of the Act ?" 2. The brief facts may first be noticed. 3. The assessee-appellant was required to get its accounts audited and obtain the report before July 31, 1986, which is the specified date as per Explanation to section 44AB of the Act for the assessment year 1986-87. The assessee-appellant gave its books of account for audit on July 25, 1986. On July 30, 1986, it filed an application for extension of time for filing return of income under section 139 of the Act before the Assessing Officer seeking extension of time up to August 31, 1986, by citing the reason that accounts were under audit, which was claimed to be a reasonable cause. The application was filed in Form No. 6 as prescribed by rule 13 of the Income-tax Rules, 1962 (for brevity, "the Rules"). The reason for delay in giving the account books for audit on July 25, 1986, as pleaded before the Assessing Officer, was that there was a difference in the balance-sheet. The assessee-appellant filed the return of income on August 28, 1986, along with the audit report declaring a loss of Rs. 6,66,787. The Assessing Off....
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....r argument that no proceedings under section 271B were initiated during the assessment proceedings, it has been observed by the Assessing Officer that failure to initiate such proceedings would not result into taking the case of the assessee-appellant out of the purview of section 271B of the Act. 5. On further appeal filed by the Revenue, the Tribunal restored the order of the Assessing Officer dated August 8, 1990, and set aside the order of the Commissioner (Appeals) passed on February 21, 1991. 6. Mr. Sanjay Bansal, learned counsel for the assessee-appellant, has argued that the initiation of proceedings under section 271B on March 15, 1990, is barred by period of limitation as prescribed under section 275 of the Act. According to learned counsel, section 275(b) of the Act provides for limitation for imposition of penalties and that no penalty could be imposed by passing an order after the expiry of two years from the end of the financial year in which the proceedings in the course of which action for imposition of penalty has been initiated, are completed. According to learned counsel, section 275 has been amended with effect from April 1, 1989. It has now been provided ....
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.... also specifically raised before the authorities below. 8. Mr. Sanjiv Bansal, learned counsel for the Revenue, has submitted that section 275 does not bar imposition of penalties even if no such proceedings have been initiated in the course of assessment. He has pointed out that if a period of two years is applied, as envisaged by section 275(b) of the Act, then the order passed by the Assessing Officer is within the period of limitation because the order was passed on August 8, 1990, after issuance of show-cause notice on March 15, 1990. According to learned counsel, the period of two years is to commence from the end of the financial year in which the assessment proceedings are completed. In the present case, proceedings were completed on March 23, 1989, and the period of two years would allow the Assessing Officer to pass penalty order under section 271B up to March, 1991, whereas the notice was issued on March 15, 1990, and the order was passed on August 8, 1990. 9. He next urged that the Assessing Officer had not extended the date for filing the return and consequentially the date of getting the accounts audited up to July 31, 1986, was mandatory and the same having not ....
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....year or obtain a report of such audit as required under section 44AB, the Income-tax Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent. of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred thousand rupees, whichever is less." 13. Section 271B of the Act provides that if any person fails to get its accounts audited in respect of any previous year or years relevant to an assessment year or obtain a report of such audit as per the requirement of section 44AB then the Assessing Officer may impose penalty being a sum equal to half per cent. of the total sales, turnover or gross receipts in business or of the gross receipts in profession in such previous year or years or a sum of Rs. 1,00,000, whichever is less. 14. Section 275 has prescribed a period of limitation for passing order imposing a penalty contemplated by any provision of the Act. It may be useful to read Section 275 as it stood in 1986 and the same is as under: "275. No order imposing a penalty under this Chapter shall be passed- (a) in a case ....
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....r from initiating the proceedings for penalty under section 271B on that date. Now, the crucial issue for adjudication in the present appeal that arises is as to up to what date the Assessing Officer could pass an order under section 271B levying penalty on the assessee for its failure to get its account audited under section 44AB of the Act. 17. A perusal of clause (a) of section 275 of the Act, as it stood at the relevant time, makes it evident that no order imposing a p could be passed after the expiry of a period of two years from the end of the financial year in which proceedings in the course of which action for imposition of penalty has been initiated, are completed. The aforementioned period of two years is to apply in a case where the relevant assessment is the subject-matter of an appeal to the Appellate Assistant Commissioner, Commissioner (Appeals), under section 246 or an appeal to the Appellate Tribunal under sub-section (2) of section 253. Clause (ii) further provides that an order imposing a penalty cannot be passed if the period of six months from the end of the month in which the order of the Appellate Assistant Com missioner, Commissioner (Appeals) or the Appe....
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....eight and is, thus, rejected and the question of law as posed at the beginning is answered in favour of the Revenue and against the assessee. 20. Now, we advert to the alternative argument raised by learned counsel for the assessee. It may be noticed that under the proviso to sub-section (4) of section 260A, the High Court is empowered to frame any substantial question of law that may arise at the final hearing of the appeal. The assessee has canvassed before the authorities below regarding the alternative plea but the same was not accepted. From a perusal of the orders of the authorities below, the substantial question of law in the following term does arise and accordingly, we had allowed the parties to argue the same. The following substantial question of law arises for consideration of this court : "Whether, on the facts and circumstances of the case, the period for getting its accounts audited by the assessee-appellant within the stipulated period as envisaged under the Act stood condoned when the application for extension of time for filing of return on the ground that accounts were under audit had not been rejected by the Assessing Officer ?" 21. We find considerabl....
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....at there is ample support available to the aforementioned proposition. In that regard, reliance may be placed on a Division Bench judgment of this court in the case of CIT v. Surinder Kumar Parmod Kumar [1992]193 ITR 71, which has been approved by the apex court in CIT v. Ajanta Electricals [1995] 215 ITR 114. The Division Bench has placed reliance on the observation made in the case of Harmanjit Trust v. CIT [1984] 148 ITR 214 (P & H), wherein the judgment of the Andhra Pradesh High Court (T. Venkata Krishnaiah and Co. v. CIT [1974] 93 ITR 297) taking a contrary view was not followed. The observation of this court in the case of Harmanjit Trust [1984] 148 ITR 214, as quoted by the Division Bench reads as under (page 218) "Duty was cast on the Income-tax Officer to intimate to the assessee whether its request for extension of time for furnishing the return had been granted or refused. Thus, the predominant view in various High Courts is that the assessee can well presume that his request for extension of time for furnishing the return had been granted, unless the Income-tax Officer well in time communicates to the assessee his refusal. And it is precisely for this reason that Fo....