Punjab Land Development & Reclamation Corporation Limited v. Deputy Commissioner Of Income Taxchandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 111 of 2001Date of decision: 7.12.2010 Punjab Land Development & Reclamation Corporation Limited through its Managing Director --- Appellant Versus Deputy Commissioner of Income TaxChandigarh. --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: None for the appellant. Ms. Urvashi Dhugga, Standing Counselfor the respondent. --- 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 31.7.2000, passed by the Income Tax Appellate TribunalChandigarh Bench ‘A’ Chandigarh (in short “the Tribunal”) in ITA No.1266/CHANDI/93, relating to the assessment year 1989-90. The following substantial questions of law have beenclaimed for determination of this Court: 1-Whether the Tribunal was justified in law in taking adifferent view in the same set of facts and circumstancesrelating to the same appellant for the assessment year1990-91 vis-à-vis 1989-90?different view in the same set of facts and circumstancesrelating to the same appellant for the assessment year1990-91 vis-à-vis 1989-90? 2- Whether the filing of the Tax Audit Report on the basis ofun-audited accounts is sufficient compliance of Section44AB, thus, giving reasonable cause to the appellant fornot filing the tax audit report along with return on the basisof statutory audit?un-audited accounts is sufficient compliance of Section44AB, thus, giving reasonable cause to the appellant fornot filing the tax audit report along with return on the basisof statutory audit? 3-Whether the non-appointment of statutory auditors wasbeyond the control of the appellant?beyond the control of the appellant? 4-Whether the penalty proceedings initiated against theappellant are barred by limitation as per Section 275(1)(c)of the Income Tax Act?appellant are barred by limitation as per Section 275(1)(c)of the Income Tax Act? 5-Whether the imposition of penalty is illegal and arbitraryand, thus, unsustainable in law?and, thus, unsustainable in law? The facts, in brief, necessary for adjudication, as narratedin the appeal are that assessee filed its return of income for theassessment year in question declaring loss of Rs. 61,16,677/-. Alongwith the return, the assessee had appended a provisional tax auditreport. The assessing officer observed that the said audit report wasdeficient and incomplete as per provisions of Section 44AB of the Act.The assessing officer initiated penalty proceedings under Section271B of the Act and vide order dated 29.9.1992, imposed a penalty ofRs. 1,00,000/- on the assessee. The appeal preferred by theassessee was dismissed by the Commissioner of Income-tax (Appeals) {in short “the CIT(A)”}, and consequently, imposition ofpenalty was upheld, vide order dated 6.7.1993. The assessee carriedappeal before the Tribunal. The Tribunal also dismissed the appeal ofthe assessee, vide order dated 31.7.2000. We have heard learned counsel for the respondent andhave perused the record. The learned counsel for assessee had pleaded that therewas a reasonable cause within the meaning of Section 273B, whichwas inserted by Taxation Laws (Amendment and MiscellaneousProvisions) Act, 1986 w.e.f. 10.9.1986, as the statutory auditors of theappellant Company were appointed belatedly by the Government ofIndia. It was further the case of the assessee that on a similaraccount, the penalty which was levied under section 271B for theassessment year 1990-91, the same explanation was found to bereasonable. It was argued that the Tribunal was not correct inupholding the penalty under section 271B of the Act. The point for consideration in this case is, whether theassessee was liable for penalty under section 271B of the Act forgetting its accounts audited belatedly. The learned counsel for assessee had pleaded that therewas a reasonable cause within the meaning of Section 273B, whichwas inserted by Taxation Laws (Amendment and MiscellaneousProvisions) Act, 1986 w.e.f. 10.9.1986, as the statutory auditors of theappellant Company were appointed belatedly by the Government ofIndia. It was further the case of the assessee that on a similaraccount, the penalty which was levied under section 271B for theassessment year 1990-91, the same explanation was found to bereasonable. It was argued that the Tribunal was not correct inupholding the penalty under section 271B of the Act. The point for consideration in this case is, whether theassessee was liable for penalty under section 271B of the Act forgetting its accounts audited belatedly. We find force in the submission of learned counsel for theassessee. The appellant-assessee had raised ground No.4 whichreads as under: “4.That the Ld. Tribunal in the same facts andcircumstances relating to the appellant but for a differentassessment year i.e. 1990-91 has dismissed the appeal of the Revenue against the deletion of the penalty by the CIT(Appeals). The Ld. Tribunal therein has categorically heldthat the appellant had a reasonable cause in notsubmitting the audit report u/s 44AB on the basis ofstatutory audited accounts as the Company Law Board didnot appoint the auditors in time.” Further, the assessee had produced a copy of the orderdated 13.3.2000 passed in Income Tax Appeal No. 166/Chandi/92,relating to the assessment year 1990-91, where the Tribunal heldunder similar circumstances that there existed reasonable cause forthe assessee in not getting its accounts audited within permissibletime. It was also recorded that in such a situation, no penalty underSection 271B of the Act was exigible. The relevant findings recordedin the context in paras 2.3 and 2.4 thereof read thus: “2.3. The learned counsel relied heavily on the orders ofthe learned CIT(A). He submitted that there is no defaultvis-a-vis the provisions of Section 44 AB and that theassessee had filed tax audit report along with the return ofincome. He further submitted that the assessee hadreasonable cause as it was consistently writing to theC&AG of India for appointment of auditors. He relied onthe decisions of the Tribunal reported in 68 ITD 560 and 71ITD 117 as also the decision of the Hon’ble Kerala HighCourt reported in 235 ITR 481. 2.4. I have carefully considered the rival submissions andhave perused the orders of the tax authorities. I have also seen the case law relied upon by both the parties. I maymention that similar issue had come up before the Tribunalin the case of DCIT Vs. Goindwal Industrial andInvestment Corporation of Punjab Ltd. In ITA No.1694/Chandi/92 for AY 1990-91 wherein under similarcircumstances the Tribunal held that the assessee hadreasonable cause as it filed return within due date and alsofiled the audit report u/s 44AB along with return. Thesubmissions of the ld. Counsel are also supported by thedecision of the Tribunal in the case of Solapur Zilla VinkarSahkari Fed. Niyamit Vs. DCIT (Pune Bench) 71 ITD 117.In view of the foregoing I decline to interfere with the orderof the Ld. CIT(A).” In view of the above, this Court is of the opinion that theauthorities below erred in holding that there was no reasonable causefor the assessee in not getting its accounts audited within permissibletime. Accordingly, the questions of law are answered in favour of theassessee and the appeal is allowed. No costs. (AJAY KUMAR MITTAL) JUDGE December 7, 2010*rkmalik* (ADARSH KUMAR GOEL) JUDGE