High Court Of Gauhati
Assam State Warehousing Corporation vs. CIT & ANR.
Sections 271B, 275
Asst. Year 1988-89
D. Biswas & Smt. A. Hazarika, JJ.
IT Appeal No. 51 of 2003
22nd November, 2006
Counsel Appeared :
V.K. Bhatra & R.K. Bhatra, for the Appellant : U. Bhuyan, for the Respondents
JUDGMENT
D. Biswas, J. :
This appeal under s. 260A of the IT Act, 1961, was admitted for hearing on 20th June, 2003, on the following question of law : “Whether, on the facts and in the circumstances of the case and in view of s. 271B r/w s. 275 of the IT Act, 1961, the learned Tribunal had erred in law in holding that penalty proceeding under s. 271B can be initiated after completion of the assessment proceedings ?”
The appellant is an authority within the meaning of s. 10(29) of the IT Act, 1961, and its business activities are restricted by s. 34 of the Warehousing Corporations Act, 1962. The corporation filed its return of income for the asst. yr. 1988-89 on 30th Aug., 1988, showing a loss of Rs. 5,38,710. The Dy. CIT (Asst.), Special Range II, Guwahati, accepted the return of income and passed the assessment order under s. 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 dt. 15th Nov., 1992, to the appellant assessee to show cause as to why penalty under s. 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 s. 44AB of the IT 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 Dy. CIT (Asst.), Special Range-II, by order dt. 1st Dec., 1992, imposed a penalty of Rs. 1,00,000 under the provisions of s. 271B for failure of the assessee to submit the audited report in Form Nos. 3CA and 3CD. On appeal, the Dy. CIT held that the penalty proceeding was void ab initio for want of jurisdiction and for that reason set aside the order passed by the Dy. CIT. This decision was passed relying upon the judgments in CIT vs. Rajinder Kumar Somani (1980) 125 ITR 756 (Del) and D.M. Manasvi vs. CIT 1972 CTR (SC) 437 : (1972) 86 ITR 557 (SC). The Revenue preferred an appeal. The learned Tribunal held that s. 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 CIT(A) to decide the issue afresh after consideration of all the grounds raised by the assessee.
There is no dispute that the assessee is an authority within the meaning of s. 10(29) of the IT 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 s. 44AB. The return submitted was processed and assessed. The question is, whether after lapse of a period of 18 months proceedings under s. 271B could be initiated. Sec. 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 s. 44AB, the AO 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 s. 271B is an enabling provision empowering the AO to direct payment of penalty for non-compliance of the provisions of s. 44AB. There is nothing in s. 271B to show that such a proceeding should be simultaneous with the assessment proceeding under s. 139. There is also no doubt that the satisfaction for imposition of a proceeding for imposition of penalty under s. 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 vs. CIT (supra). The Supreme Court in D.M. Manasvi (supra) while interpreting the provisions relating to proceeding under s. 271(1) held that the ITO should have been satisfied in the course of assessment proceedings regarding matters mentioned in clauses of sub-s. (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 s. 271(1), the AO 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 s. 275, the Delhi High Court in CIT vs. Rajinder Kumar Somani (supra) 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 (supra), the law stood settled that s. 271(1) requires that it is the satisfaction of the AO 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 ss. 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 s. 271(1) of the Act. The language employed in s. 271B is completely different from that in s. 271 and is not par with s. 271. Requirement of satisfaction is not a sine qua non for initiation of a proceeding under s. 271B. Sec. 275 provides for limitation for imposition of penalty. The provisions of s. 275 of the IT 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.
In view of the above discussion, the order of the learned Tribunal calls for no interference. The learned Tribunal remanded the matter of the CIT(A) 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.
The appeal is dismissed.
[Citation : 288 ITR 25]
