Gauhati High Court
Assam State Warehousing Corporation vs Commissioner Of Income-Tax And Anr. on 22 November, 2006
Equivalent citations: (2007)1GLR603, [2007]288ITR25(GAUHATI)
Author: D. Biswas
Bench: D. Biswas, A. Hazarika
JUDGMENT D. Biswas, J.
1. This appeal under Section 260A of the Income-tax Act, 1961 was admitted for hearing on June 20, 2003, on the following question of law:
Whether, on the facts and in the circumstances of the case and in view of Section 271B read with Section 275 of the Income-tax Act, 1961, the learned Tribunal had erred in law in holding that penalty proceeding under Section 271B can be initiated after completion of the assessment proceedings?
2. The appellant is an authority within the meaning of Section 10(29) of the Income-tax Act, 1961, and its business activities are restricted by Section 34 of the Warehousing Corporations Act, 1962. The Corporation filed its return of income for the assessment year 1988-89 on August 30, 1988, showing a loss of Rs. 5,38,710. The Deputy Commissioner of Income-tax (Assessment), Special Range II, Guwahati, accepted the return of income and passed the assessment order under Section 143(1) determining the total loss at Rs. 5,38,710 and closed the proceeding by refunding the advance tax paid. After about one and a half years, respondent No. 2 issued a notice dated November 15, 1992, to the appellant-assessee to show cause as to why penalty under Section 271B of the Act should not be imposed for its failure to submit the audit report. In reply, the assessee informed the authority that the assessee was not required to get the accounts audited under Section 44AB of the Income-tax Act. The statutory audit report as per the provisions of the Warehousing Corporations Act, 1962, could not be submitted with the return as it was pending for consideration of the annual general body. However, along with the reply, the assessee forwarded a printed copy of the audit report authenticated by the managing director. Despite that, the Deputy Commissioner of Income-tax (Asst), Special Range-II, by order dated December 1, 1992, imposed a penalty of Rs. 1,00,000 under the provisions of Section 271B for failure of the assessee to submit the audited report in Form Nos. 3CA and 3CD. On appeal, the Deputy Commissioner of Taxes held that the penalty proceeding was void ab initio for want of jurisdiction and for that reason set aside the order passed by the Deputy Commissioner of Income-tax. This decision was passed relying upon a judgment in CIT v. Rajinder Kumar Somani and D.M. Manasvi v. CIT . The Revenue preferred an appeal. The learned Tribunal held that Section 271B does not provide for initiation of a penalty proceeding during the pendency of the assessment proceeding and such a proceeding could be initiated even after completion of the assessment. The Tribunal directed the Commissioner of Income-tax (Appeals) to decide the issue afresh after consideration of all the grounds raised by the assessee.
3. There is no dispute that the assessee is an authority within the meaning of Section 10(29) of the Income-tax Act, 1961. There is also no dispute that the assessee did not furnish the report of the audit in the prescribed form as is required under Section 44AB. The return submitted was processed and assessed. The question is, whether after lapse of a period of 18 months proceedings under Section 271B could be initiated. Section 271B reads as follows:
271B : If any person fails, to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under Section 44AB, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent, of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred thousand rupees, whichever is less.
4. A plain reading of the section would suggest that the provision of Section 271B is an enabling provision empowering the Assessing Officer to direct payment of penalty for non-compliance of the provisions of Section 44AB. There is nothing in Section 271B to show that such a proceeding should be simultaneous with the assessment proceeding under Section 139. There is also no doubt that the satisfaction for imposition of a proceeding for imposition of penalty under Section 271B has to be drawn in the course of any proceeding under the Act as observed by the hon'ble Supreme Court in D.M. Manasvi v. CIT . The Supreme Court in D.M. Manasvi while interpreting the provisions relating to proceeding under Section 271(1) held that the Income-tax Officer should have been satisfied in the course of assessment proceedings regarding matters mentioned in clauses of Sub-section (1). The Supreme Court further observed that it was not essential that the notice to the person proceeded against should have also been issued during the course of the assessment proceedings. "Satisfaction", according to the hon'ble Supreme Court, precedes the issue of notice meaning thereby that initiation of penalty proceedings may be at a subsequent date. The decision of the hon'ble Supreme Court shows that for initiation of a proceeding under Section 271(1), the Assessing Officer should draw his satisfaction during the course of the proceeding under the Act. Issuance of notice and action subsequent thereto may not be simultaneous. While interpreting Section 275, the Delhi High Court in CIT v. Rajinder Kumar Somani observed that imposition of penalty must be initiated in the course of assessment proceedings. In view of the decision of the hon'ble Supreme Court in D.M. Manasvi , the law stood settled that Section 271(1) requires that it is the satisfaction of the Assessing Officer which should be drawn during the course of proceedings and action in pursuance of the satisfaction may be deferred. The learned Tribunal noticed the distinction between Sections 271(1) and 271B of the Act and relied upon the decision of the hon'ble Supreme Court that there should be at least satisfaction before completion of the assessment proceedings regarding default. This is with regard to the provisions in Section 271(1) of the Act. The language employed in Section 271B is completely different from that in Section 271 and is not par with Section 271. Requirement of satisfaction is not a sine qua non for initiation of a proceeding under Section 271B.
5. Section 275 provides for limitation for imposition of penalty. The provisions of Section 275 of the Income-tax Act as it stood then provided that no order imposing a penalty under Chapter XXI could be passed after the expiration of the period of limitation prescribed therein. In the instant case, the period of limitation is two years. The proceedings were initiated within two years from the date of assessment. That apart, the bar of limitation is not an issue in the instant case.
6. In view of the above discussion, the order of the learned Tribunal calls for no interference. The learned Tribunal remanded the matter of the Commissioner of Income-tax (Appeals) for decision afresh on certain other issues raised which were not addressed by it. We find no reason to disturb the findings of the learned Tribunal. The question formulated accordingly stands answered against the assessee and in favour of the Revenue.
7.The appeal is dismissed.