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1991 (6) TMI 254

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..... r audit for the purposes of Tax Audit Report to be filed along with the return of income as provided for under section 44AB of the Act inserted by the Finance Act, 1984, w.e.f., l-1-4-1983. Consequently, various information required from various units of the Company for the purpose of computation taxable income has been delayed." It filed another Form No. 6 on 31-10-1985 seeking extension of time up to 22nd November, 1985, and the reason given was as follows: "The Tax Auditors, A.F. Ferguson & Co., have for the purpose of finalising the tax audit report in prescribed form 3-CA with particulars in 3-CD called for various clarification and information from various units of the company which are under compilation. Pending that, the draft audit report is being discussed with the Auditors and the final report is expected to be ready by 15-11-1985. The computation of taxable income for the purpose of tax return will be made considering the various points raised in the final tax audit report to maintain uniformity between the audit report and the return. We hope to complete this by 22nd November 1985. As stated in our application of 30-9-1985, we have effected the self asses .....

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..... ch was not required for the purposes of proper assessment earlier. It merely called upon the assessee to make available that information well in advance in order to avoid infructuous work of carrying out routine verification at the time of assessment. In this view of the matter, the IAC was fully convinced that the company had not complied with the requirements of section 44AB and had not shown reasonable cause for their failure and, hence, he levied penalty of ₹ 1,00,000. 5. When the matter went before the CIT(A), it was brought to his notice that as soon as the issue of delay in the tax audit report was raised, the assessee, in their letter dated 19th November, 1986, had prayed to the Commissioner (a copy of which was endorsed to the IAC) specifically mentioning the problems the company was facing with their labour unions. In that letter, the assessee had filed a copy of the letter from its auditors, M/s. Ferguson & Co., in which, inter alia, it was stated as follows:- "The company has 18 accounting units spread all over India. The Head Office in Bombay had issued instructions to all the units laying down various guidelines for compilation of information for incorp .....

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..... pointed out that there was no contradiction in the explanation given by the assessee in Form No. 6 filed from time to time. He argued that the self-assessment tax had been paid before the final return in September 1985, and then pointed out that the IAC had granted time for filing the return on every application made by the assessee, from time to time. Thus, on the application dated 20-6-1985, IAC, by his intimation dated 3-7-1985, had granted extension up to 30-7-1985 and on application dated 29-7-1985, the IAC, by his letter dated 1-8-1985, had granted extension of time up to 30-9-1985. Similarly, on the application dated 30st September, 1985, the IAC had granted time up to 31-10-1985 by his letter. But while granting such extension, he had called upon the assessee to ensure that self-assessment tax was paid after due verification and that there was as likelihood of any discrepancy by the company between the self- assessment tax paid and thereafter the assessee made an application on 31-10-1985 requesting for time up to 22nd November, 1985 (for reasons which have already been reproduced hereinabove) on which, by his letter dated 31st October, 1985, the IAC had granted extension u .....

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..... or grant of extension of time and having granted extensions of time, asked for from time to time by the assessee, on being satisfied that there was adequate, reason for the assessee to seek time for filing the return, the IAC should now find contradictions in the various explanations given in the applications for extensions, filed from time to time. This apart the fact is that there are, in fact, no contradictions to be seen from the various explanations given by the assessee. We are not convinced that the company had made any contradictory or incorrect statements in Form No. 6 filed on 30-9-1985 and 31-10-1985, in one of which the company had clearly stated that the tax auditors, M/s. Ferguson & Co., had just completed the audit and that they were in the process of analysing the report. The company had conveyed that by September 1985, the routine checking of books of accounts and other relevant documentary evidence by the tax auditors had been completed. There were points raised by the tax auditors which were being analysed by the company. Since 1984 was the first year of the tax audit and the tax auditors had to view several issues peculiar to the company, which required cons .....

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..... levance if such a report does not accompany the return of income to be filed under section 139(1). In the present case, the return of income, though filed late, was filed after following the proper procedure of getting extensions of time for filing the return. Different applications under Form No. 6 were filed from time to time and the Assessing Officer had, after perusal of the reasons stated in such applications, granted time for filing the return, from time to time, up to 22nd November, 1985. The tax audit report was ultimately filed with the return of income which has to be considered as a return filed under section 139(1) Therefore, on a strict interpretation of section 271B, we would hold that if the return of income was filed within the extended time and if the tax audit report was filed along with such return, there is no default punishable under section 271B. Apart from this interpretation, that we have put on the provisions of section 271B, we find that the assessee has been consistently bringing to the notice of the IAC the difficulties that it faced in getting the tax audit completed. It had also brought to the notice of the CIT the labour problems that it was facing in .....

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