M/S. Lucky Iron Scrap Co., Jalandhar v. Commissioner Of Income-Tax (Appeals)Jalandhar And Another

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ---- Income Tax Appeal No. 149 of 2001Date of decision: 18.11.2010 M/s. Lucky Iron Scrap Co., Jalandhar --- Appellant Versus Commissioner of Income-Tax (Appeals)Jalandhar and another --- Respondents ---- CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’BLE MR. JUSTICE AJAY KUMAR MITTAL ---- PRESENT:Mr. Harminder Singh, Advocate for the appellant. Mr. Vivek Sethi, Standing Counsel for the respondents. ---- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act,1961 (for short “the Act’”) has been filed by the assessee against theorder dated 28.6.2000, passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar, (in short “the Tribunal”) in ITA No.485/ASR/1994 relating to the assessment year 1988-89. The appeal raises the following substantial question oflaw for adjudication: “Whether in the facts and circumstances of the case,imposing of penalty under Section 271B of the Act wasjustified? The challenge in this appeal is to the order of the Tribunal dated 28.6.2000 whereby it has confirmed the penaltyimposed on the appellant-assessee under Section 271B of the Act.The assessing officer passed assessment order dated 13.11.1990directing initiation of proceedings under Section 271(1)(a) and 271(1)(i) of the Act against the appellant but vide order dated 25.5.1993, heimposed a penalty of Rs. 27,523/- under Section 271B of the Act onthe appellant for having violated the provisions of Section 44AB ofthe Act, without initiating any proceedings under that provision of theAct. The appeal preferred by the appellant against the order ofimposition of penalty was dismissed by the Commissioner of IncomeTax (Appeals), [hereinafter referred to as “CIT(A)”] vide order dated19.2.1994 and that order was further confirmed by the Tribunal by theorder under appeal here when the appeal was carried to it by theassessee. It is how the assessee has filed the instant appeal. We have heard learned counsel for the parties andperused the record. Learned counsel for the assessee has raised the pleathat the penalty imposed under Section 271B of the Act was bad forthe following reasons: (a)that no proceedings for imposition of penalty underSection 271B had been initiated during thependency of assessment proceedings whichculminated on 13.11.1990 whereas notice initiatingpenalty proceedings under Section 271B of the Actwas issued on 25.11.1992 i.e. after two years of (b) passing of the order of assessment dated13.11.1990. The same was bad on the ground ofdelay and laches. Section 273B of the Act was inserted by TaxationLaws (Amendment and Miscellaneous Provisions)Act, 1986 w.e.f. 10.9.1986 whereby no penaltyunder Section 271B was imposable on an assesseeor any person where it was established that thereexisted reasonable cause for said failure. Theappellant-assessee firm had sent the accountbooks to its auditors in May 1988 for audit but theaudit was not completed till the notice underSection 131 was issued to the assessee. The booksof account on production before the ADI aftergetting them from the auditors were impounded on20.10.1989. Photo copies of the books wereobtained from the ADI in December, 1989 andsupplied to new auditors who completed the auditon 26.4.1990 and the return of income was filedalong with the audit report on the same date. It wasurged, therefore, that reasonable cause existed andthe delay was neither deliberate nor was there anyfault on the part of the assessee. He submitted thatin the totality of facts and circumstances, keeping inview the quantum of penalty being only Rs.27,523/-, the discretion deserved to be exercised infavour of the assessee. (c) (d) (c) (d) The application in Form No. 6 submitted to theassessing officer on 9.1.1990 for extension of timefor filing return of income was acknowledged videreceipt No. 6145 on the same date. The extensionwas sought up to 9.2.1990 but the said applicationwas not rejected. The counsel submitted that though, whetherreasonable cause exists or not is ordinarily withinthe realm of appreciation of evidence but where theauthorities act on mere presumption and conjecturea substantial question of law arises. Learned counsel for the Revenue supported the order ofthe Tribunal. A perusal of the record shows that assessment proceedings had culminated on 13.11.1990 and penalty proceedingsunder Section 271B had not been initiated during the course of thoseproceedings. However, it was initiated by issuance of notice on25.11.1992, i.e. after passing of the assessment order on13.11.1990. Further, as per averments of the assessee, the accountbooks were handed over to the auditors in May, 1998 of which theauditors failed to conduct audit till the date, the same wereimpounded under Section 131 by the ADI (Investigation) on20.10.1989. It was thereafter that the assessee in December, 1989,after obtaining photo copies of the record from the ADI, supplied thesame to the auditors and the audit was thereafter completed on26.4.1990. Keeping in view the peculiar facts and circumstances of the case, and the explanation of the assessee in getting the accountsaudited belatedly, which is a plausible one, it cannot be said that thedelay was deliberate. In our considered opinion, this is not a casewhere penalty under Section 271B of the Act was called for.Accordingly, it is held that the Tribunal was not right in upholding thepenalty. Consequently, the appeal is allowed and the substantialquestion of law is answered in favour of the assessee. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) November 18, 2010 JUDGE*rkmalik*