ORDER
Maratha, J.M.
This appeal has been filed by the assessee against the order of the CIT (A) dated 21-6-1994 pertaining to assessment year 1988-89.
2. The only effective issue before us is whether the penalty levied under section 271B of the Income Tax Act, 1961 (hereinafter referred to as the Act), for not obtaining the audit report as required under section 44AB in the given facts and circumstances of the case is sustainable in the eyes of law.
3. The brief and relevant facts are that the Income Tax Officer levied the penalty for non-filing of the audit report along with return. The penalty was levied by the Income Tax Officer for not obtaining the audit report as required under section 44AB of the Act by the assessee within the stipulated time. The case of the assessee is that the audit report dated 30-6-1988 was obtained and as such it had complied with the statutory obligation envisaged under section 44AB of the Act. According to the learned AR, levy of penalty under section 271B is not tenable in the eyes of twain this case because it was based on surmises and conjectures, since the assessee had obtained the audit report in time but failed to file the same along with return. According to the learned authorised representative, the only technical breach has been committed by the assessee which is exonerable under the given facts and circumstances of the case. On the other hand, the learned Departmental Representative heavily relied on the orders of the authorities below and further submitted that the assessee did not obtain the requisite report within the stipulated time and the report placed before the department was antedated.
4. We have heard the rival submissions and perused the material on record. The assessee-company was dealing in the ginning and processing of kapas-narma and selling its products during Aug. 1987 to May 1988 only. The case of the assessee is that due to non-taxable income during the year ending 31-3-1988, despite the fact that there was negligible profit, the assessee did not file voluntarily its return for the year under consideration. The assessee-firm was duly registered under the Sales Tax laws and for the period ending 31-3-1988, the ST assessment was concluded on 22-8-1989 at a total turnover of Rs. 1,32,94,815. Subsequently, the ST assessment was reopened by the ST authorities and it was found by the department that the assessee had evaded tax in respect of the sales. It is the case of the assessee that the relevant books including the audit report got lost in transit while going back from Hanumangarh to Ellenabad and for that FIR was lodged with the concerned Police Station. During the course of income-tax proceedings, the Income Tax Officer recorded the statement of Sh. Pawan Kumar partner on 17-9-1991, wherein he stated that the audit of the firms accounts was got done by the munim Sh. Sunder Singh, who was no longer in India and had gone to Nepal. The Income Tax Officer completed the best judgment assessment on 18-3-1994 and the statement of the auditor was also recorded by the Income Tax Officer during assessment proceedings, wherein he confirmed that he had audited the accounts as per the records given. It is a fact that notice under section 48 was issued to the assessee by the Income Tax Officer after gathering knowledge from the ST Department as mentioned above. The assessee produced the audit report dated 30-6-1988 which, according to the assessee, was got done within the stipulated time but the same could not be filed as the assessee had chosen not to file the return since its taxable income was below the taxable limit. The learned authorised representative has taken the objection that the assessment order was passed on 18-3-1994 but the penalty order was passed on 27-4-1992, so the penalty levied even before the assessment order was passed, is not tenable in the eyes of law. We reject this objection of the learned authorised representative summarily as the two proceedings, one relating to the levy of penalty under section 271B and the other assessment proceedings, are two different things, which do not have any bearings on each other. In case the assessee fails to obtain the requisite audit report, it has committed a default and the penalty is exigible, even if no assessment order is passed. The second objection taken by the learned authorised representative is that the penalty proceedings under section 271B were initiated for not filing of the audit report along with return but ultimately the penalty has been levied for not obtaining the audit report within due time. So, according to the learned authorised representative, the levy of penalty is illegal and against the law. Again, we do not accept this objection of the learned authorised representative for deleting the penalty because in substance it does not effect the rights of the assessee where obtaining of the requisite report under section 44AB is concerned but this action of the assessing officer can help the assessee in another way that he was not definite about the audit report if it was not obtained within the stipulated time or he was levying the penalty only for not filing of the same along with return. This is undisputed fact in this case that the assessee did not want to file the return, considering the income below taxable limit. The only fact now remains is whether the assessee had obtained the requisite report or not. The case of the department is that the assessee did not obtain the report at all and even if the report dated 30-6-1988 is considered to be genuine, it is ante-dated. But we are unable to accept the Income Tax Officers version because he cannot be allowed to blow hot and cold together. Either he is to stick to the fact that no audit report was obtained at all until the time when the assessee was confronted with the same or he should have confined to the fact that the audit report was not obtained within due time. In the given facts and circumstances of the case, we are of the considered opinion that the default in this case is exoncrable even if the report was not filed along with return. We do not find any mala fide on the part of the assessee in this way. Any penalty levied on technicalities cannot be sustained in the eyes of law.
4.1 The learned authorised representative had relied on the decision in the case of Asstt. CIT v. Kamdhenu Food Products (IT Appeal No. 478 (Pn) of 1994, dated 12-1-2000), wherein it has been held that where there was delay in obtaining the audit report and there was reasonable cause that the records and accounts were destroyed in a fire, there was reasonable cause for delay which lasted for 4 months and also in that case penalty proceedings were initiated much before the assessment order was completed and not during the course of assessment proceedings. So, the penalty cannot be sustained. This decision of the Pune Bench helps the case of the assessee, in view of the fact that this decision was also rendered not solely on the ground that in case the penalty proceedings were completed before the assessment proceedings. In that eventuality alone, penalty could not be levied but this case has to be read as a whole. In that case also, several facts and circumstances were coupled with the reasons of penalty proceedings having been completed before the assessment order. So, all these circumstances together make out a reasonable cause for deletion of penalty. in that view of the matter, this case helps the case of the assessee. In this case, it seems that the department did not do full homework to discharge its duty. The department did not go into the fact that the records were lost in transit and when the auditor was examined by the department, he also categorically stated that he had given the audit report as required under section 44AB in the case of the assessee. It is not worth to doubt the genuineness of the report and the time of its filing.
5. In the result, we delete the impugned penalty and accept the appeal filed by the assessee.