TaxTMI 
TaxTMI 
2005 (1) TMI 81
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....quired to file return latest by July 31, 1985 (the date was extended to September 30, 1985, by the Central Board of Direct Taxes vide its Circular No. 422 dated June 19, 1985. However, the return was actually filed on November 29, 1985. The same was accompanied by the audit report prepared by the chartered accountant, namely, M/s. Rajesh Behl and Associates. Later on, the assessee filed revised return under the amnesty scheme. The Assessing Officer accepted the return but initiated penalty proceedings under section 271B on account of delayed filing of the same. In its reply, the assessee tried to explain delay in the filing of return by stating that its partners were not well educated; that its accountant had left the service and that the chartered accountant had delayed preparation of the audit report. The Assessing Officer did not accept the explanation of the assessee, albeit without assigning cogent reasons and imposed penalty of Rs. one lakh. On appeal the Commissioner of Income-tax (Appeals) (for short, the "CIT(A)") set aside the penalty order. While doing so, he took into consideration the following factors: "(i) that the partners were by and large, not well educated, ....
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.... to get its accounts audited and obtain its report and file it up to the extended date September 30, 1985. However, in the present case the same was filed along with the return on November 29, 1985. The question arises whether the provision is mandatory or procedural. In the case of D.K. Jain, Prop. M/s. Luxor Pen Co. v. Deputy CAT (I.T.A. No. 7173/Del/92) vide order dated November 24, 1993, the Appellate Tribunal has hold that this provision is procedural. If the assessee had filed the audit report before the assessment is completed, it is a sufficient compliance. Keeping in view the order of the Appellate Tribunal and the decision of the hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, we are of the opinion that if the assessee gets its accounts audited, obtains audit report and files it along with the return on November 29, 1985, it is a sufficient compliance. Regarding reasonableness of cause for filing the return along with delay, all we would like to mention here is that the assessee has taken two pleas before the Assessing Officer. No. 1 was that the partners of the firm are all not well educated, one of the partners, namely, Shr....
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....erson under section 44AD or section 44AR or section 44AF (or section 44BB or section 44BBB), as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year, get his accounts of such previous year audited by an accountant before the specified date and furnish by that date, the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed: Provided that this section shall not apply to the person, who derives income of the nature referred to in section 44AB or section 44BBA, on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later: Provided further that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under suc....
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....sessee for not getting its accounts of the previous year audited by an accountant before the specified date and/or tiling thereof along with the return. In CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14, the Supreme Court interpreted section 271(1)(c) of the Act together with the Explanation added by the Finance Act, 1964 and held: "Where the total income returned by the assessee is less than 80 per cent. of the total income as assessed, the Explanation to section 271(1)(c) of the Income-tax Act,1961 shifts the burden to the assessee to show that the difference was not owing to fraud or gross or wilful neglect on his part. This onus is rebuttable. If, in an appropriate case, the Tribunal or the fact-finding body is satisfied on relevant and cogent material on record and draws an inference thereupon that the assessee was not guilty of gross or wilful neglect or fraud, then, in such a case, the assessee cannot come within the mischief of the section and suffer penalty. The conclusion of the Tribunal is conclusion of fact and no question of law arises." In ITO v. Kaysons India [2000] 246 ITR 489, a Division Bench of this court interpreted the provisions of sections 44AB, 139....
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....f penalty for non-compliance with the provision of section 44AB is not mandatory. The word 'may' used in that section gives discretion to the Assessing Officer to impose penalty or not to impose penalty. Further, the provision of section 273B contains a non obstante clause and provides that notwithstanding the provision of section 271B, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for the said failure." In CIT v. Capital Electronics (Gariahat) [2003] 261 ITR 4, a Division Bench of the Calcutta High Court interpreted section 271B of the Act and held: "Section 271B of the Income-tax Act, 1961, inserted with effect from April 1, 1985, began with the phrase 'if any person fails without reasonable cause, to get his accounts audited', within the time stipulated, then the concerned income-tax authority 'may direct that such person shall pay by way of penalty', the sum mentioned therein. By the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, the phrase 'without reasonable cause' was omitted with effect from September 10, 1986. By the sai....
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....ty is imposed by reason of default in compliance of a particular provision and there is some element of criminality involved in the default, the proceeding can be said to be a quasi-criminal one. The presence of the element of criminality is one of the factors that determines the question. Section 44AB imposes a liability to get the accounts audited within the stipulated time. There is nothing in the section to make it incumbent to furnish the audited accounts within the stipulated time. Failure to furnish, therefore, will not attract the mischief of section 271B though failure to get the accounts audited within the stipulated time would attract penalty." The propositions laid down in the aforementioned cases amply support our interpretation of section 271B of the Act, namely, that it is not obligatory for the Assessing Officer to impose penalty in each and every case and he has the discretion to accept the explanation given or cause shown by the assessee for delayed filing of the audit report. Reverting to the facts of the case in hand, we find that the assessee had filed the return after a delay of one month and 28 days calculated with reference to the specified date, i.....