SECTION 271B/INCOME-TAX ACT

[2006] 157 TAXMAN 49 (PUNJ. & HAR.)

HIGHCOURTOFPUNJABANDHARYANA
CommissionerofIncometax*,Jalandhar

v.
NeelKamalRubberIndustries
ADARSH KUMAR GOEL AND RAJESH BINDAL, JJ.
IT REFERENCE NO. 220 OF 1995
SEPTEMBER 5, 2006

Section271BoftheIncometaxAct,1961PenaltyForfailuretogetaccountsauditedAssessmentyear199091
Assesseefirmgotitsaccountsaudited,butfiledsamealongwithabelatedreturnAssessingOfficer,therefore,
imposedpenaltyuponassesseeundersection271BTribunal,however,deletedsaidpenaltyWhetherinviewof
decisionofHighCourtinITOv.KaysonsIndia[2000]246ITR489/[2001]116 Taxman 525FACTS
The assessee-firm derived income from manufacture and sale of cycle tyre tubes and auto tyres. The assessee
declared gross turnover of an amount in the return. The turnover being in excess of Rs. 40 lakhs, the accounts
were required to be audited under section 44AB and the audit report was required to be submitted before the
specified date mentioned in the Explanation 2 to the said provision. The assessee got the accounts audited
before the specified date but filed same along with a belated return. Thereafter, the Assessing Officer imposed
penalty on the assessee under section 271B. The Commissioner (Appeals) deleted the penalty by holding that
even though the assessee might have committed default of late filing of return, there was no non-compliance
of section 271B.
On further appeal, the Tribunal affirmed the order of the Commissioner (Appeals).
On reference :

HELD
In view of the decision of the High Court in ITO v. Kaysons India [2000] 246 ITR 489/[2001] 116 Taxman 525
(Punj. & Har.), the Tribunal was right in cancelling the penalty levied under section 271B. [Para 7]

CASES REFERRED TO
ITO v. Kaysons India [2000] 246 ITR 489/[2001] 116 Taxman 525 (Punj. & Har.) [Para 4], CIT v. Janta Service
Station [2001] 251 ITR 347/[2002] 121 Taxman 9 (Punj. & Har.) [Para 6], CIT v. Haryana Agro Services [2005]
279 ITR 113 (Punj. & Har.) [Para 6], CIT v. Jagat Rice Mills [2006] 150 Taxman 5 (All.) [Para 6], CIT v. Pawan
Rice Mills [2005] 198 CTR (Punj. & Har.) 694 [Para 6], CIT v. K.K. Spunpipe [2006] 200 CTR (Punj. & Har.) 107
[Para 6], CIT v. Ashoka Dairy [2005] 149 Taxman 732 (Punj. & Har.) [Para 6] and CIT v. S.S. Banga [2005] 279
ITR 107 (Punj. & Har.) [Para 6].
Dr. N.L. Sharda for the Applicant.

JUDGMENT
1. Following question has been referred for opinion of this Court by the Income-tax Appellate Tribunal, Amritsar
Bench, Amritsar, arising out of its order dated 17-11-1992, in respect of assessment year 1990-91:
"Whether on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalty
levied under section 271B of the Income-tax Act, 1961?"
2. The assessee is a registered firm deriving income from manufacturing and sale of Cycle Tyre Tubes and Auto
Tyres. The assessee declared gross turnover of Rs. 53,46,130. The turnover being in excess of Rs. 40 lakhs,
accounts were required to be audited under section 44AB of the Income-tax Act, 1961 (for short, the Act) and

audit report was required to be submitted before the specified date mentioned in Explanation 2 to the said
provision. The assessee got the accounts audited before the specified date but did not file the return within the
time specified under section 139(1) of the Act. The return was filed on 31-12-1990 along with audit report. The
penalty proceedings were initiated under section 271B on 31-1-1991 and penalty of Rs. 26,730 was imposed
by the Assessing Officer on 16-7-1991.
3. The CIT(A) allowed the assessees appeal and deleted the penalty. It was observed that though the assessee
may have committed default of late filing of return, there was no non-compliance of section 271B of the Act.
The Tribunal affirmed this view.
4. We find that the issue stands covered by judgment of this Court in ITO v. Kaysons India [2000] 246 ITR 489

(Punj.&Har.),Tribunalwasrightincancellingpenaltyleviedundersection271BHeld,yes
. After considering the relevant provisions, this Court observed at page 492:

"It is, therefore, evident that the default or failure to file the return along with the audit report on or before
the specified date is not hit by the provisions of section 271B. It is not the case of the revenue that the
assessee has failed to get the accounts audited or has failed to obtain the report of such audit in terms of
section 44AB before the specified date. It is also evident that no return had been filed either under subsection (1) of section 139 or in response to any notice under clause (i) of sub-section (1) of section 142 and
as such there could possibly be no default of not furnishing the audit report along with such a non existent
return. The return under sub-section (1) of section 139 in this case could be filed up to 30-11-1990.
However, the assessee had filed the return on 31-12-1990, which was a return filed under sub-section (4)
of section 139 and this return was duly accompanied by the audit report obtained by the assessee in
accordance with the provisions of section 44AB. Thus, according to us, the default for which penalty had
been levied was not covered by the provisions of section 271B and the Commissioner of Income-tax
(Appeals) and the Tribunal were justified in holding that no penalty was leviable." (p. 492)
5. This Court also noticed the amendment in section 44AB and section 271B of the Act, vide Finance Act, 1995
laying down requirement of submitting audit report before the specified date.
6. The same view has been expressed in the following cases:
(i) CIT v. Janta Service Station [2001] 251 ITR 3471 (Punj. & Har.)
(ii) CIT v. Haryana Agro Services [2005] 279 ITR 113 (Punj. & Har.)
(iii) CIT v. Jagat Rice Mills [2006] 150 Taxman 5 (All.)
(iv) CIT v. Pawan Rice Mills [2005] 198 CTR (Punj. & Har.) 6942
(v) CIT v. K.K. Spunpipe [2006] 200 CTR (Punj. & Har.) 107, CIT v. Ashoka Dairy [2006] 200 CITR (Punj. & Har.)
2113
(vi) CIT v. S.S. Banga [2005] 279 ITR 107 (Punj. & Har.)7. In view of the above, the question is answered in
favour of the assessee and against the revenue.