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1991 (6) TMI 254

..... r the Respondent ORDER Per M. A. Ajinkya ( Accountant Member ) This appeal by the department and the cross objection by the assessee relate to the assessment year 1985-86. Both these were heard together and are disposed of by this consolidated order. 2. The short ground in the department s appeal is that the CIT(A) erred in cancelling the penalty of ₹ 1,00,000 levied by the IAC under section 271 B of the Income-tax Act, 1961. 3. The relevant facts are that the assessee is a limited company. The IAC imposed a penalty of ₹ 1,00,000 because the company had not fulfilled the requirements of section 44AB. It would appear that the company by its application in Form No. 6 dated 30-9-1985 sought extension of time for filing the return up to 31-10-1985. In the application form 6, the reason given for seeking extension was as follows: "Company s books of account are under 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 inco .....

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..... ed. On 31st October, 1985, it sought extension up to 22nd November on the ground that the auditors, for the purpose of finalising the tax audit, had called for information from various units which was under compilation. According to the IAC, there were contradictions in the reasons stated in the various applications in Form No. 6 filed by the assessee for extension of time, from time to time. The IAC observed that the Board had extended the date for getting the tax audit completed to 30th September, 1985 and, by and large, all the companies had managed to get the tax audit report completed by that date and that the reasons given by the company were an after-thought. The company had never raised a plea that the main unit was facing labour problems and, therefore, they should be allowed time. Finally, the IAC observed that the tax audit report did not call for any information which 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 th .....

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..... s business was scattered in various units and when it said that the auditors completed the report at those places, it meant that the unit accounts were duly audited. The final stage of sending all the unit reports to the head office was still to be completed and it was at that stage that the company discovered that many things were missing and some more important information had to be collected from certain units. As there was labour problem, this information could not be collected and, therefore, there was some delay and that could be treated as a reasonable cause. The CIT(A), therefore, observed that this was not a case where a general provisions of this type could be involved and, therefore, he deleted the penalty. Hence, this appeal. 7. The departmental representative, by and large, relied on the order of the IAC. 8. The learned counsel for the assessee, Shri S.E. Dastur, 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 applicat .....

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..... 1985, and the IAC levied penalty under section 271B on 6-1-1986, although he completed the assessment on 21-3-1988. 9. We have carefully considered the submissions made on either side. We have also gone through carefully the order of penalty and also the order of the CIT(A), besides other papers filed before us at the time of hearing. The most important thing that we notice is that the IAC was satisfied with the reasons given in the application for extension of time, filed from time to time, and had granted extension of Lime for filing the returns, under his various letters, to the assessee up to 22nd November, 1985. The IAC did not initiate any penalty proceedings for delay in the filing of the return, which was, in fact, filed on the day on which the last extension granted by the IAC had expired. It is, therefore, surprising that having entertained the various applications for 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 .....

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..... be considered is whether any prejudice to the revenue has been caused by such alleged delay. The section under which the assessee is penalised is section 271 B and this section, as it stood at the relevant time, read as follows :- "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 ITO may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turn over 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." 12. It would be clear that failure to get the accounts audited and obtain a report of such audit under section 44AB has relevance 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 file .....

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