Income Tax Appellate Tribunal - Bangalore
P.C. Mohan vs Assistant Commissioner Of Income-Tax on 9 February, 1993
Equivalent citations: [1993]45ITD251(BANG)
ORDER
S. Kannan, Accountant Member
1. These two appeals by the assessee were heard together and are disposed of by a common order.
2. The data necessary for the resolution of the controversy before us are abstracted below :
Asst. year Asst. year
1989-90 1990-91
The data on which audit
report under Section 44AB of the
Act was obtained. 19-10-1989 24-10-1990
Due date for filing the
return of income. 31-10-1989 30-11-1990
(extended date)
Date of filing of the
return. 9-11-1989 24-12-1990
It is common ground that the audit report under Section 44AB of the Act was appended to each of the two returns referred to above.
3. As the returns in question were filed beyond the time allowed under Section 139(1) of the Income-tax Act, 1961, the Assessing Officer took the line that the audit reports in question could not be said to have been filed "along with the return of his (assessee's) filed under Sub-section (1) of Section 139" as stipulated by and under Section 271B of the Act. Further, no notice under Section 142(1) of the Act was issued in this case for both the assessment years and consequently the audit reports in question would not also be regarded as having been filed "along with the return of income furnished in response to a notice under Clause (i) of Sub-Section (1) of Section 142" as stipulated in Section 271B. He, therefore, put to the assessee on notice of his intention to levy suitable penalty under Section 271B of the Act.
4. In response to the said notice, it was pointed out on behalf of the assessee that that audit reports in question had been obtained on 19-10-1989 and 24-10-1990 respectively; that the audit reports were filed along with the assessee's returns of income; that there was no delay in getting the audit report under Section 44AB of the Act; that the delay in the filing of the returns was attributable to the delay in the payment of self-assessment tax under Section 140A of the Act; and that consequently this was not a fit case for levy of penalty under Section 271B of the Act.
5. None of the aforesaid contentions found favour with the Assessing Officer who proceeded to levy penalty under Section 271B of the Act for both the assessment years in question.
6. The Commissioner of Income tax (Appeals) declined to interfere in the matter. According to him, the provisions of Section 271B were clear and unambiguous. They spoke of the audit report being filed along with the return of income filed under Section 139(1) of the Act, or along with the return of income furnished by the assessee in response to a notice under Section 142(1)(i) of the Act. In the present case the returns of income were filed after the time limit stipulated under Section 139(1) and that, consequently, there was no question of treating them as returns filed under that section. It should, therefore, follow that the assessee has rendered himself liable to penalty under Section 271B of the Act. In this regard he referred to and relied upon the following cases :
(i) Brij Mohan v. CIT [1979] 120 ITR 1 (SC).
(ii) Metal India Products v. CIT [1978] 113 ITR 830 (All.) (FB).
(iii) CIT v. Shah Bros. [1988] 171 ITR 19 (Raj.).
(iv) Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. Judgments Today - [1987] (1) SC 246, and
(v) Keshavji Ravji and Co. v. CIT [1990] 49 Taxman 87 (SC).
It is in these circumstances that the assessee is now before us.
7. Shri Devaraj, the learned counsel for the assessee, took us through the facts of the case and contended that Section 271B contemplates three situations in which penalty is exigible under that section. These are :
(a) failure to get the accounts audited,
(b) failure to obtain an audit report as required under Section 44AB, and
(c) failure to furnish such audit report along with the return of income filed under Section 139(1)/142(1)(i).
The first two situations mentioned above do not arise in this case. The assessee not only got his accounts audited, but also obtained an audit report under Section 44AB of the Act.
It is also a matter of record that the assessee did furnish the said audit reports along with the returns of income filed by him for the assessment years 1989-90 and 1990-91. True, the returns of income in question were filed belatedly. Even so no penalty is exigible under Section 271B. In this behalf he referred to and relied upon the decision of the ITAT, Delhi Bench 'D' in the case of ITO v. Mohinder Kumar [1992] 42 ITD 384.
8. On his part Shri Gopalan, the" learned departmental representative, strongly supported the impugned order of the Commissioner (Appeals). Drawing our attention to the reported cases referred to and relied upon by the Commissioner (Appeals), Shri Gopalan contended that the failure on the part of the assessee to file his returns of income within the time allowed under Section 139(1) of the Act would ipso facto render the assessee liable to penalty under Section 271B of the Act. In other words, the belated returns might be valid under Section 139(4) of the Act, but that would not mean that the assessee had filed the audited reports along with the returns under Section 139(1) of the Act, He, therefore, urged that the impugned order of the Commissioner (Appeals) did not invite any interference.
9. We have looked into the facts of the case. We have considered the rival submissions.
10. At the outset, we may point out that, in matters relating to interpretation of statutes, the overdoing of literal interpretation of a section results in the undoing of the purpose or spirit of the section. We opt for the purposive approach to statutory interpretation which was adopted and advocated by Lord Diplock and which seeks "to promote general legislative purpose" by breaking the stranglehold of the purely literal interpretation. In Reg. v. Nat Ins. Commr. [1972] AC 944 Lord Diplock observed :
Meticulous linguistic analysis of words and phrases used in different contexts in particular sections of the Act should be subordinate to this purposive approach. It should not distract your Lordships from it.
11. Now, what is the purpose of Sections 44AB and 271B. The answer is, to quote from CBDT Circular No. 387 of 6-7-1984 :
17.1 Accounts maintained by companies are required to be audited under the Companies Act, 1956. Accounts maintained by co-operative societies are also required to be audited under the Co-operative Societies Act, 1912. There is, however, no obligation on other categories of taxpayers to get their accounts audited.
17.2 A proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they faithfully reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of the accounts before the tax authorities and considerably saving the time of Assessing Officers in carrying out routine verifications, like checking correctness of totals and verifying whether purchases and sales are properly vouched or not. The time of the Assessing Officers thus saved could be utilised for attending to more important investigational aspects of a case.
Given the aforesaid authoritative definition of the purpose behind the said sections, one could normally see some justification if penalty under Section 271B is levied in situation Nos. (a) & (b) supra. But the assessee's case is not covered by the said two situations. Here the assessee got the accounts audited and also obtained audit report. He also appended the audit reports to the returns filed by him for the assessment years 1989-90 and 1990 91. True, the returns were filed a few days after the stipulated due date for filing the returns. The question that arises for consideration is whether in such circumstances penalty under Section 271B would be justified. As we see it, on the facts and in the circumstances of the case before us, this is not a fit case to levy penalty under Section 271B. First, the purpose of Section 44AB, as we see it, has been achieved. Secondly, here we have a case of a venial infraction of the provisions of law. In this context the following observations of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 are apposite:
An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
In view of the foregoing, therefore, we hold that this is not a fit case to levy penalty under Section 271B of the Act. We, therefore, cancel the impugned penalties.
12. In the result, both the appeals are allowed.