Case Law Details
ORAL JUDGMENT (PER DR. D.Y. CHANDRACHUD, J.)
1) The petitioner seeks to challenge orders passed by the Commissioner of Income Tax, Kolhapur on 28 September 1995 and on 25 March 1996. By the first of those orders, the Commissioner rejected an application filed by the petitioner under Section 264 questioning the imposition of a penalty on him under Section 271B. By the second of those orders, an application for rectification that was filed by the petitioner was dismissed.
2) The facts in so far as they are relevant fall within a narrow compass. The petitioner filed his return of income for assessment years 1990-91 to 1993-94 together with audit reports under Section 44AB, on 19 November 1993, 23 July 1993 and 30 December 1993. The position as it emerges from the record of this proceeding is that the petitioner had obtained the tax audit reports under Section 44AB before the specified date. The specified dates for the aforesaid four assessment years, for obtaining tax audit reports were 31 October 1990, 31 October 1991, 31 October 1992 and 31 October 1993 respectively. There is no dispute about the fact that the tax audit reports were obtained before these dates or about the fact that the tax audit reports were, as a matter of fact, filed with the return of income.
3) The petitioner was subjected to a penalty under Section 271B for the aforesaid four assessment years. The Commissioner while rejecting the representation filed by the petitioner has held that under Section 271B, it is obligatory to get the accounts audited, to obtain a report of audit as required under Section 44AB and to furnish the report.
4) The contention that was urged on behalf of the petitioner by learned Counsel is that the obligation to furnish the tax audit report under Section 44AB by the date specified was inserted by the Finance Act, 1995 with effect from 1 July 1995. It is urged that prior to the amendment the requirement was to obtain the tax audit report by the specified date under Section 44AB. This requirement, it was submitted, was complied with.
5) Section 44AB provides inter alia that every person carrying on business shall, if his total sales turnover or gross receipts, as the case may be, in business exceeds forty lakh rupees in any previous year, get his accounts of such previous years audited by an accountant before the specified date. Prior to the amendment of the provision by the Finance Act of 1995, there was an obligation to obtain by the specified date, a report of the audit in the prescribed form duly signed and verified by an accountant. By the Finance Act of 1995, the requirement of obtaining the audit report before the specified date was made more stringent and by the amendment it has now been provided that the report has to be furnished by the specified date. The word “furnish by” were substituted for the words “obtain before” by the Finance Act of 1995. Section 271B provides that if a person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or submit a report of such audit as required under Section 44AB, the Assessing Officer may impose a penalty as stipulated therein. In Section 271B, as it now stands, the requirement is that the tax audit report has to be furnished as required under Section 44AB. The requirement to furnish the report has been brought in by the Finance Act of 1995 with effect from 1 July 1995. Prior thereto, the requirement was that the tax audit report had to be obtained as required under Section 44AB and the assessee had to furnish the report along with the return of income filed under Section 139(1) or in response to a notice under Section 142(1)(i). The provision in Section 271B prior to its amendment was consistent with the obligation imposed by Section 44AB. At the material time to which the proceedings relate, the requirement of furnishing the tax audit report by the specified date had not been incorporated and it was brought in only later, by the Finance Act of 1995 with effect from 1 July 1995. As we observed earlier, in the present case, it has not been disputed on record that the assessee had, as a matter of fact, obtained the tax audit reports under Section 44AB by the specified date and that the reports were filed with the returns of income. In these circumstances, there is merit in the submission that the jurisdictional condition for the imposition of a penalty under Section 271B has not been fulfilled. 6) In his application for rectification, the petitioner had drawn the attention of the Commissioner to the fact that the requirement of furnishing the tax audit report by the specified date was introduced only with effect from 1 July 1995. The application was rejected on 25 March 1996 without recording any reasons. 7) In the circumstances, Rule is made absolute by quashing and setting aside the orders dated 28 September 1995 and 25 March 1996 passed by the Commissioner of Income Tax, Kolhapur. There shall be no order as to costs.
