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C.I.T. v. M/S R.S. Distributors, Muzaffarnagar. - INCOME TAX REFERENCE No. 5 of 1995  RD-AH 1000 (7 April 2005)
INCOME TAX REFERENCE No.5 Of 1995.
Commissioner of Income-tax, Meerut. Applicant
M/S R.S. Distributors, Muzaffarnagar. Respondent.
Hon'ble R. K. Agrawal, J.
Hon'ble Rajes Kumar, J.
The Income Tax Appellate Tribunal, New Delhi has referred the following question of law under section 256 (1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court.
"Whether on the facts and in the circumstances of the case and in accordance with the provisions of law, the Tribunal was justified in canceling the penalty of Rs.50,720/- imposed on the assessee by the Income Tax Officer under section 271-B of the Income Tax Act, 1961?"
The reference relates to the Assessment Year 1989-90.
Briefly stated, the facts giving rise to the present reference are as follows.
The respondent-assessee in the present case filed its return of income on 21st November, 1989 as against the due date on 31st October, 1989. It also filed along with the return the audit report in the prescribed forms viz 3 CB and 3 CD. Penalty proceeding under section 271-B of the Act was initiated on the ground that it had not complied with the provisions of Section 44 AB and accordingly imposed penalty under the aforesaid provision. Feeling aggrieved, the respondent preferred appeal before the CIT (Appeals) who had confirmed the order. Later on, Respondent filed second appeal before the Tribunal which had been allowed on the ground that the respondent had obtained the audit report on 26th September, 1989 much before the specified date i.e. 31st October, 1989 and no penalty can be imposed under section 271 B read with section 44 AB of the Act if the audit report has not been filed along with the return before the due date of filing the return. The Tribunal has deleted the penalty on the following reasons:
"The penalty under section 271-B could not be sustained either in law or on the facts of the present case because the audit report dated 26.9.1989 was available with the assessee prior to the specified date i.e. 31.10.1989. This was the requirement of section 271-B read with section 44 AB, prior to the amendment brought about by the Finance Act, 1988 with effect from 1.4.1989. The change in the law with effect from assessment year 1989-90 provided that the audit report was required to be appended along with the return of income filed under section 139 (1) or filed in response to a notice under clause (i) of sub-section (1) of Section 142. Under the aforesaid two situations a penalty under section 271-B was provided for any lapse. Therefore, the penalty could not be sustained in as much as the return filed by the assessee on 21.11.1989 could not be treated as a return filed under section 139 (1) and it was not the department's case that notice under section 142 (1) (i) was issued to the assessee asking him to file a return. It was only under the aforesaid two situations that a penalty under sections 271B was attracted consequent to the non-filing of an audit report. Accordingly, the order of penalty could not be sustained."
We have heard Sri R.K.Upadhyaya, learned Standing Counsel for the Revenue and Sri R.R. Agarwal, learned counsel for the respondent assessee.
We find that this Court in the case of Commissioner of Income Tax Versus Jai Durga Construction Co. reported in (2000) 245 ITR 857 has held no penalty can be imposed for not filing the audit report along with the return.
Respectfully following the aforesaid decision, we answer the question referred to us in the affirmative i.e. in favour of the assessee and against the Revenue. However, there shall be no order as to costs.
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