Clarification regarding penalty under section 271B for failure to comply with provisions of section 44AB for assessment year 1985-86

1. Vide Circular No. 422, dated 19th June, 1985 (Clarification 2), the Board had directed that the penalty proceedings under section 271B of the Income-tax Act, leviable for non-compliance of the provisions of section 44AB of the Act, should not be initiated for the assessment year 1985-86 in cases where :

(i)   the audit report prescribed under section 44AB, read with rule 6G has been obtained by 30th September, 1985; and—

(ii)   the self-assessment tax under section 140A of the Act has been paid within the normal period prescribed under section 139(1) of the Act for filing return of income.

2. Representations were subsequently received requesting the Board to clarify whether the conditions mentioned at (i) & (ii ) above were cumulative or independent.  The Revenue Audit has also raised objections that penalty under section 271B should have been levied in cases where self-assessment tax was not paid within the normal period prescribed under section 139(1) of the Act, but was paid within the extended period, i.e., 30th September, 1985.

3. Penalty under section 271 B of the Act is leviable only for non-compliance with the provisions of section 44AB of the Act and not for delay in payment of self-assessment tax.  Therefore, there seems to be an obvious anomaly in the said Circular No. 422 insofar as it linked imposition of penalty under section 271B with the payment of self-assessment tax.

4. It is, therefore, clarified that no penalty will be imposed for the assessment year 1985-86 under section 271B in cases where the audit report prescribed under section 44AB, read with rule 6G, has been obtained by 30th September, 1985.  This clarification applies only to assessment year 1985-86, being the first year of operation of section 44AB of the Act.

Circular : No. 582, dated 23-10-1990.

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