TMI Blog2007 (12) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-appellant by exercising powers under section 271B of the Act on account of failure to obtain the report of audit of accounts as per the requirement of section 44AB of the Act. The appeal was admitted by a Division Bench of this court on the following substantive question of law "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the penalty 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of Rs. 1,00,000 was leviable and, accordingly, imposed a penalty of Rs. 1,00,000. The Assessing Officer rejected the submission made by counsel for the assessee-appellant that once an application for extension of time was filed under section 139 read with rule 13 of the Rules, then in the absence of any order to the contrary, the application was deemed to have been accepted. With regard to another 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39(1) of the Act was filed with the Assessing Officer on July 30, 1986, on the ground that the accounts were under audit and the same was never rejected by him. Impliedly, the date for filing the return stood extended, up to August 31, 1986, and consequently, the date for getting the accounts audited also stood extended. He claimed that the substantial question of law arises in this regard as this point was 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fines the expression, "specified date" as the date of the expiry of 4 months from the end of the previous year or 30th June of the assessment year. The specified date in the present case indisputably is July 31, 1986. 12. Section 271B of the Act reads thus: "271B. If any person fails, without reasonable cause, to get his accounts audited in respect of any previous year or years relevant to an assessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce it is held that it need not be that the penalty proceedings under section 271B are required to be initiated during the course of any proceedings then the same stands initiated by issue of notice for penalty in terms of section 274(1) of the Act. In the present case, the proceedings under section 271B of the Act stood validly initiated on March 15, 1990, as nothing could be shown that debarred the Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of clause (b) of section 275 of the Act would be March 31, 1989, and two years would expire on March 31, 1991. Therefore, it has to be held that an order imposing penalty could have been passed on or before March 31, 1991, whereas in the present case the order imposing penalty has been passed on August 8, 1990, which is within time. Viewed from any angle, the contention of learned counsel for the assessee carries no weight 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-appellant under section 139 in the prescribed Form No. 6 under rule 13 was filed on July 30, 1986, in which the prayer was made for extension of time up to August 31, 1986, citing reason that, the accounts were under audit. It is also undisputed that no reply to the application was given by the Income-tax Officer which led to the legal consequence of constructive acceptance of the application. We find that 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 Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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