TMI Blog1993 (1) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... before 30-6-1986 for assessment year 1986-87 and on or before 30-6-1987 for assessment year 1987-88. These reports were prepared by the Chartered Accountants on 20-10-1986 i.e.. late by 4 months' time approximately for assessment year 1986-87 and on 17-7-1987 for assessment year 1987-88 i.e. late by 17 days. The Assessing Officer issued show-cause notice for penalty under section 271B for these two years which were served on the assessee on 1-3-1990. The date on the notice for assessment year 1986-87 mentioned by the Assessing Officer is 1-3-1989 while the date on the notice for assessment year 1987-88 is 1-3-1990. The assessee submitted a consolidated reply dated 5-3-1990 in which it was, inter alia, stated that the firm being a dealer in cloth on wholesale basis, its certain customers are the up-country constituents and it always takes considerable time to settle the accounts with them. After such a process is over, the books of account are finally closed and adjusted and thereafter they are produced before the CAs for audit. Due to pressure of work in the office of the C.A., the work of obtaining the audit report may also take some time and the final report is usually delayed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 162 ITR 28 in which it was held that the ITO has to determine the penalty under section 271B only if he is satisfied that the specified default is without reasonable cause. Reliance was also placed on the judgment of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26. Our attention was also invited towards the facts mentioned in the statement of facts annexed with the appeal. The other relevant facts mentioned in the said Statement of Facts are briefly as follows : The appellant was an exclusive dealer of Ambica Mills. The said mill gradually since 1986 or so closed its entire business. The assessee, therefore, found it more difficult to realise dues in respect of the goods given on credit to dealers in Madras and elsewhere. The assessee, therefore, had to pay interest at the rate of 18 per cent p.a. to its depositors, banks and mills on account of delayed recovery from the debtors. This resulted in substantial losses. There were three consecutive years of famine in the State of Gujarat in the recent past prior to the accounting year in question which also resulted in losses to the appellant. In view of all these facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired under section 44AB within the prescribed time, the Assessing Officer may direct that such person shall pay by way of penalty a sum equal to one-half per cent of his total sales/turnover or gross profit or a sum of Rs. 1 lakh whichever is less. It is also true that the words " without reasonable cause " appearing in section 271B have been omitted w.e.f. 10-9-1986. Simultaneously the provisions of section 273B was inserted by the same amending Act w.e.f. 10-9-1986 saying that nothwithstanding anything contained in the various penalty provisions including section 271B, no penalty shall be imposable on the person for any such default, if he proves that there was reasonable cause for the said default. Thus the onus of proving the existence of reasonable cause has been shifted on the assessee as a result of the aforesaid amendment. 7.2 It will also be worthwhile to reproduce the provisions of section 275 of the IT Act, 1961 as it existed prior to its amendment by the Direct Taxes Laws (Amendment) Act, 1987 w.e.f. 1-4-1989 : " 275. No order imposing a penalty under this Chapter shall be passed--- (a) in a case where the relevant assessment order or other order is the subject- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Kumar Somani [1980] 125 ITR 756 (Delhi) and D. M. Manasvi v. CIT [1969] 72 ITR 17 (Guj.) which has been affirmed by the Hon'ble Supreme Court in the case of D. M. Manasvi v. CIT [1972] 86 ITR 557. In view of the aforesaid discussions, we are of the considered opinion that the Assessing Officer could not have validly initiated the penalty proceedings under section 271B after the completion of the assessment proceedings for the years under consideration. It may not be necessary for the Assessing Officer to issue show cause notice under section 271B prior to completion of the assessment but there has to be some material on records to indicate that such penalty proceedings had been initiated before completion of the assessments in question. Nothing has been pointed out by the departmental authorities or by the learned D. R before us showing that the penalty proceedings were initiated prior to completion of the relevant assessments. In fact the contention of the assessee that the penalty notices under section 271B were issued for the first time after a period of 16 months from the date of completion of the assessments has not been disputed by the departmental authorities or by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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