Law:

Section:

Section 271B of the Income-tax Act, 1961 - Penalty - For failure to get accounts audited - Assessment years 1990-91 and 1991-92 - Assessing Officer initiated penalty proceedings against assessee as its turnover exceeded Rs. 40 lakhs and assessee failed to get its accounts audited before due date as per requirements of section 44AB in respect of relevant assessment years - Whether in view of facts that assessee needed time to adjust accounts for relevant assessment years in conformity with audit report of last assessment year and thereafter it was required to get accounts audited only from Accountant General (AG) office on which it had no control, assessee had reasonable cause for not submiting its accounts before due date - Held, yes - Whether, therefore, penalty imposed upon assessee could not be sustained - Held, yes FACTS The Assessing Officer initiated the penalty proceedings for the assessment years 1987-88 to 1991-92. The turnover of the assessee was more than Rs. 40 lakhs during those years and the assessee was obliged to file the report along with audited balance sheet, and profit and loss account with the return as per the requirement of section 44AB of the Act. As the assessee did not submit audit report along with return, the Assessing Officer levied the penalty for each of the assessment years under section 271B. On appeal, the Tribunal found that there was reasonable cause during first three years (i.e., from the assessment years 1987-88 to 1989-90) for not filing the audit report, and, hence, the Tribunal cancelled the penalty for said years, however, for the remaining two assessment years, penalty was confirmed. On appeal : HELD The assessee had received the audit report for the assessment year 1989-90 on 28-8-1990 for submission of the accounts for the assessment year 1990-91, and the process took time to adjust the accounts of the assessment year 1990-91 in conformity with the audit report received for the assessment year 1989-90, that took time and accounts were submitted on 29-12-1990. Considering the fact that the audit report for the assessment year 1989-90 was received on 28-8-1990, no fault was found on the part of the assessee. The…

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