Law:

Section:

Section 275 (as it stood prior to its amendment by Direct Tax Laws Amendment Act, 1987), read with section 271B, of the Income-tax Act, 1961 - Penalty - Bar of limitation for imposition - Assessment year 1986-87 - For relevant assessment year, assessee-company failed to get its accounts audited and to obtain audit report before specified date - Assessment was completed under section 143(3) by an order dated 30-3-1988 - Subsequently, on 16-1-1989 penalty proceeding under section 271B was initiated and by an order dated 23-10-1990, penalty was imposed upon assessee - Assessee contended that penalty order was barred by limitation - Whether since penalty proceeding was initiated on 16-1-1989, two years period as provided in section 275(1)(b) would come to an end on 31-3-1991 and, therefore, impugned penalty order dated 23-10-1990 was well within limitation - Held, yes FACTS For the relevant assessment year, the assessee was required to get its accounts audited and to obtain the audit report by 31-7-1986, but the same was obtained on 10-9-1986. The assessment was completed under section 143(3) on 30-3-1988. Later, penalty proceeding under section 271B was initiated on 16-1-1989 and by an order dated 23-10-1990, the assessing authority imposed a penalty under section 271B upon the assessee. The Commissioner (Appeals) as well as the Tribunal confirmed the penalty. On reference, the assessee contended that the order of penalty was barred by limitation as provided under section 275. HELD The amendment made to section 275 by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989 would not be applicable to the instant case in view of the specific provisions contained in section 275(2), as it stood before the amendment made by the Direct Tax Laws (Amendment) Act, 1987, as the penalty proceeding had been initiated on 16-1-1989. [Para 10] Section 44AB requires to get the accounts audited before a specified date. During the assessment year in question, the specified date was 31-7-1986. The audit report was, however, obtained on 10-9-1986. The assessment order was passed on 30-3-1988. In the assessment order, there was no mention of issuance of penalty notice…

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