The central legal point established in the judgment is the importance of a bona fide and reasonable cause for the delay in filing audit reports, as emphasized by the provisions of Section 271B and Section 273B of the Income Tax Act, 1961, and supported by relevant case laws.

(Appeals under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'A' Bench dated 15.6.2005 in I.T.A.Nos.1476, 1477 and 1493/Mds/2000 for the assessment years 1996-97, 1997-98 and 1998-99 respectively.)

P.D. Dinakaran, J.

The above tax case appeals are directed against the common order of the Income-tax Appellate Tribunal in I.T.A.Nos.1476, 1477 and 1493/Mds/2000 dated 15.6.2005.

2. The Revenue is the appellant. The above appeals relate to assessment years 1996-97, 1997-98 and 1998-99 respectively. According to the assessee, the tax audit reports for the relevant assessment years were filed in time along with necessary forms. But, the assessing officer finding that there was no tax audit reports enclosed with the necessary forms and further, finding from the tax returns, which were filed much later, i.e. only on that the audit reports were prepared only on 28.2.97 for the year ending 31.3.1996, 28.2.98 for the year ending 31.3.1997 and 25.2.1999 for the year ending 28.2.98, concluded that the tax audit reports had been reduced to a "ritualistic exercise" and accordingly, by proceedings dated 24.1.2000, levied penalty under Section 271B of the Income-tax Act.

3. In response to the said proceedings, the assessee offered its explanation, which is summarised as follows:-

" ... that tax audit for the relevant assessment years were filed well within the time; that while the audit report should cover the accounts of any branch office as per Section 227(3)(bb) of the Companies Act, though the accounts of the branch officer at USA were received in time, the relevant audit reports were not received in time; that having finished the audit with the information received from the branch, the report was made ready as of 30.8.96 and 97; that since the audit reports were not received before the said dates, it necessitated the audited accounts to be considered on a later date; that the first date on which the accounts were to be approved by the Board was inadvertently mentioned, which do not cause any loss to the Revenue; that except inclusion of a sentence, there were no other changes in the audit report; and hence, pleaded that the matter to be reconsidered.

Accordingly, the assessee pointed out that the first audit reports, which were filed, were not carrying the audit report of the branch at USA and therefore, the completed audit report was filed later.

4. However, not satisfying with the above explanation offered by the assessee, the assessing officer imposed penalty to the tune of Rs.1 lakh under Section 271B of the Act, which was also confirmed by the Commissioner of Income-tax (Appeals) by order dated 3.6.2000. On appeal by the assessee, the same was reversed by the Income-tax Appellate Tribunal by order dated 15.6.2005, which is being challenged in the present appeals by the Revenue raising the following substantial question of law:-

"Whether in the facts and circumstances of the case, the Tribunal was right in deleting the penalty under section 271B?"

5.1. To decide the above question of law, it is apt to refer Section 271B of the Act, which reads as follows:

"271B. Failure to get accounts audited.

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."

5.2. While Section 271B of the Act empowers the assessing officer to impose penalty for the failure to get the accounts audited, cases where penalty need not be imposed are governed by Section 273B of the Act, which reads as follows:-

"273B. Penalty not to be imposed in certain cases.

Not