Lucky Iron Scrap Co. V. Commissioner of Income-Tax (Appeals) Jalandhar and another

ITA/149/2001

AI Insights

The case revolves around an appeal by M/s. Lucky Iron Scrap Co. against the penalty imposed for non-compliance with the audit requirements under Section 44AB of the Income-tax Act, 1961, for the assessment year 1988-89. The penalty was initially imposed by the assessing officer and was upheld by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. The appellant contested that the penalty was unjustified due to the reasonable cause of delay in auditing their accounts, which was beyond their control. The High Court examined the timeline of events, including the completion of the audit and the filing of the tax return, and found merit in the appellant's arguments, leading to the allowance of the appeal.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 796598 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 18-11-2010
• Assessment Year: misc
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VIVEK SETHI
• Assessee Lawyers: HARMINDER SINGH
• Keywords: Audit; Delay; Laches; Penalty; Reasonable cause
• Section: 131; 44AB; 273B; 260A; 271B; 271(1)(a); 271(1)(i)

Judgement Text

" Income Tax Appeal No. 149 of 2001 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ---- Income Tax Appeal No. 149 of 2001 Date of decision: 18.11.2010 M/s. Lucky Iron Scrap Co., Jalandhar --- Appellant Versus Commissioner of Income-Tax (Appeals) Jalandhar and another --- Respondents ---- CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL ---- PRESENT: Mr. Harminder Singh, Advocate for the appellant. Mr. Vivek Sethi, Standing Counsel for the respondents. ---- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the assessee against the order dated 28.6.2000, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, (in short “the Tribunal”) in ITA No. 485/ASR/1994 relating to the assessment year 1988-89. The appeal raises the following substantial question of law for adjudication: “Whether in the facts and circumstances of the case, imposing of penalty under Section 271B of the Act was justified? Income Tax Appeal No. 149 of 2001 2 The challenge in this appeal is to the order of the Tribunal dated 28.6.2000 whereby it has confirmed the penalty imposed on the appellant-assessee under Section 271B of the Act. The assessing officer passed assessment order dated 13.11.1990 directing initiation of proceedings under Section 271(1)(a) and 271(1) (i) of the Act against the appellant but vide order dated 25.5.1993, he imposed a penalty of Rs. 27,523/- under Section 271B of the Act on the appellant for having violated the provisions of Section 44AB of the Act, without initiating any proceedings under that provision of the Act. The appeal preferred by the appellant against the order of imposition of penalty was dismissed by the Commissioner of Income Tax (Appeals), [hereinafter referred to as “CIT(A)”] vide order dated 19.2.1994 and that order was further confirmed by the Tribunal by the order under appeal here when the appeal was carried to it by the assessee. It is how the assessee has filed the instant appeal. We have heard learned counsel for the parties and perused the record. Learned counsel for the assessee has raised the plea that the penalty imposed under Section 271B of the Act was bad for the following reasons: (a) that no proceedings for imposition of penalty under Section 271B had been initiated during the pendency of assessment proceedings which culminated on 13.11.1990 whereas notice initiating penalty proceedings under Section 271B of the Act was issued on 25.11.1992 i.e. after two years of Income Tax Appeal No. 149 of 2001 3 passing of the order of assessment dated 13.11.1990. The same was bad on the ground of delay and laches. (b) Section 273B of the Act was inserted by Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 w.e.f. 10.9.1986 whereby no penalty under Section 271B was imposable on an assessee or any person where it was established that there existed reasonable cause for said failure. The appellant-assessee firm had sent the account books to its auditors in May 1988 for audit but the audit was not completed till the notice under Section 131 was issued to the assessee. The books of account on production before the ADI after getting them from the auditors were impounded on 20.10.1989. Photo copies of the books were obtained from the ADI in December, 1989 and supplied to new auditors who completed the audit on 26.4.1990 and the return of income was filed along with the audit report on the same date. It was urged, therefore, that reasonable cause existed and the delay was neither deliberate nor was there any fault on the part of the assessee. He submitted that in the totality of facts and circumstances, keeping in view the quantum of penalty being only Rs. 27,523/-, the discretion deserved to be exercised in favour of the assessee. Income Tax Appeal No. 149 of 2001 4 (c) The application in Form No. 6 submitted to the assessing officer on 9.1.1990 for extension of time for filing return of income was acknowledged vide receipt No. 6145 on the same date. The extension was sought up to 9.2.1990 but the said application was not rejected. (d) The counsel submitted that though, whether reasonable cause exists or not is ordinarily within the realm of appreciation of evidence but where the authorities act on mere presumption and conjecture a substantial question of law arises. Learned counsel for the Revenue supported the order of the Tribunal. A perusal of the record shows that assessment proceedings had culminated on 13.11.1990 and penalty proceedings under Section 271B had not been initiated during the course of those proceedings. However, it was initiated by issuance of notice on 25.11.1992, i.e. after passing of the assessment order on 13.11.1990. Further, as per averments of the assessee, the account books were handed over to the auditors in May, 1998 of which the auditors failed to conduct audit till the date, the same were impounded under Section 131 by the ADI (Investigation) on 20.10.1989. It was thereafter that the assessee in December, 1989, after obtaining photo copies of the record from the ADI, supplied the same to the auditors and the audit was thereafter completed on 26.4.1990. Income Tax Appeal No. 149 of 2001 5 Keeping in view the peculiar facts and circumstances of the case, and the explanation of the assessee in getting the accounts audited belatedly, which is a plausible one, it cannot be said that the delay was deliberate. In our considered opinion, this is not a case where penalty under Section 271B of the Act was called for. Accordingly, it is held that the Tribunal was not right in upholding the penalty. Consequently, the appeal is allowed and the substantial question of law is answered in favour of the assessee. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) November 18, 2010 JUDGE *rkmalik* "