1. This appeal of the assessee for asst. yr. 1997-98 filed against the order of the CIT(A), dt. 4th March, 2005, raises only one issue, i.e., in case the audit report under Section 44AB which was obtained by the assessee within time, but was not produced before the learned AO within specified time, would necessarily lead to a levy of a penalty under Section 271B of the IT Act, 1961 (hereinafter referred to as 'the Act' for short). Meaning thereby, that if the assessee failed to produce this report as directed due to some reason, his action is not at all exonerated after the amendment in the provisions of Sections 44AB and 271B.2.1 have heard the rival submissions and perused the evidence on record.
3. The assessee was required to obtain an audit report under Section 44AB before the specified date, i.e., 31st Oct., 1997. The firm did obtain this report on 30th Oct., 1997. It was within stipulated time.
The only default committed by the firm was that this report was not filed with the learned AO until 31st Oct.,1997, because it filed the same along with the return of income on 16th Oct.,1998. The reason given by the assessee was that it had made a declaration under VDIS and that it was under a bona fide belief that no return was required to be filed once the declaration under VDIS was filed.
4. Shri Mertia, the learned Authorised Representative, has invited my attention to question No. 32 of Circular No. 755, dt. 25th July, 1997, which clarifies that no penalty under Section 271(1)(c) can be levied for the assessment year to which the disclosure of income relates to.
5. After considering the rival submissions, in the light of the available material on record, I am of the considered opinion that the levy of penalty should never be for pedantic reasons. The intention and purport of a provision of a particular Act is to be considered in its correct perspective. In this case the assessee had obtained the requisite audit report within the stipulated period. It was not filed within the stipulated time, because of a reason. Now, it is to be seen as to whether the reason given by the assessee is a reasonable and sufficient which can exonerate the assessee from its committed default.
Let me make it clear that every penalty provision admits a mitigating circumstance, and cannot be absolute and automatic. The reason given by the assessee in this case seems to be a sufficient cause for not filing the report in time although it had obtained the same in time.
Therefore, a mitigating circumstance does exist in this case and the assessee cannot be punished merely on technicalities.