Clarification regarding penalty under section 271B for failure to comply with provisions of section 44AB for assessment year 1985-86
Circular No. 422 was issued by the Central Board of Direct Taxes on 19 June 1985. Its subject is Clarification regarding penalty under section 271B for failure to comply with provisions of section 44AB for assessment year 1985-86.
This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.
Holds back penalty under section 271B for the first year of the tax audit. Section 44AB requires a person carrying on business with sales, turnover or gross receipts above Rs. 40,00,000, or a profession with gross receipts above Rs. 10,00,000, to get the accounts audited and obtain the report by the specified date, which the Explanation defines as four months from the end of the previous year or 30 June of the assessment year, whichever is later. Rule 6G, prescribing the manner and forms, was inserted with effect from 1-4-1985 but notified only on 31-1-1985. The Board decides that for assessment year 1985-86 penalty proceedings under section 271B are not to be initiated where the audit report under section 44AB read with rule 6G was obtained by 30-9-1985 and the self-assessment tax under section 140A was paid within the normal period prescribed under section 139(1) for filing the return.
A number of representations came from assessees and trade associations about the difficulty of getting accounts audited by the specified date in the first year of the section's operation, the relevant rule having been notified only on 31-1-1985.
Clarification regarding penalty under section 271B for failure to comply with provisions of section 44AB for assessment year 1985-86
1. Section 44AB lays down that every person carrying on business, whose sales, turnover or gross receipts exceed rupees forty lakhs or carrying on a profession, whose gross receipts exceed rupees ten lakhs, shall get his accounts of such previous year audited before the specified date and obtain before that date the report of such audit in the prescribed form.
2. Under Explanation of this section, "specified date" means the date of the expiry of four months from the end of the previous year, or where there are more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year or 30th day of June of the assessment year, whichever is later.
3. Rule 6G of the Income-tax Rules, 1962 inserted by the Income-tax (Amendment) Rules, 1985 with effect from 1-4-1985, prescribes the manner and Forms in which the audit report required under section 44AB is to be submitted. These rules were notified on 31-1-1985.
4. A number of representations have been received from assessees and various trade associations expressing their difficulties in getting the accounts audited by the "specified date" this year. The matter has accordingly been considered by the Board. This being the first year of the operation of the section and considering that the relevant rule was notified only on 31-1-1985, the Board has decided that the penalty proceedings under section 271B for failure to comply with the provisions of section 44AB should not be initiated for the assessment year 1985-86, in cases where :
(i ) the audit report prescribed under section 44AB read with rule 6G has been obtained by 30-9-1985; and
(ii) the self-assessment tax under section 140A has been paid within the normal period prescribed under section 139(1) for filing return of income.
Circular : No. 422 [F. No. 201/156/85-IT(A-II)], dated 19-6-1985.
Note : The above circular was referred to in ITO v. Arun Kumar Bhuwalka [1992] 40 ITD 373 (Cal.) 377.
On a section 271B penalty notice for the first year of the tax audit requirement.
Rules it names. Rule 6G of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.
