R.K.AGRAWAL,J. - (1.) THE Income Tax Appellate Tribunal, Allahabad, has referred the following questions of law under section 256(l) of the Income Tax Act, 1961 (hereinafter referred to as the Act) for opinion to this Court: 'Whether, on the facts and in the circumstances of the case, the Tribunal were justified in cancelling the order under section 263 of the Income Tax Act when the order of the Income Tax Officer was erroneous and prejudicial to the interests of the revenue on account of his failure to initiate penalty proceedings under section 271B which attracted in the assessee's case due to contravention of the provisions of section 44AB
(2.) THE Reference relates to the assessment year 1987 -88. Briefly stated the facts giving rise to the present reference are as follows: The respondent is a firm engaged in the execution of the civil contract work. It was required to obtain audit report in terms of section 44AB of the Act by a particular date. The respondent did obtain the report and the same was enclosed with the return for the assessment year in question. The assessment was completed by the Income Tax Officer but he failed to initiate the penalty proceedings as envisaged under section 271B of the Act for the respondent's failure to obtain audit report within the specified period. The assessment records and other records were called for and examined by the Commissioner of Income -Tax and he being prima facie of the view that the order failing to initiate penalty proceedings is erroneous and prejudicial to the interest of the revenue, accordingly issued notice under section 263 of the Act and after giving an opportunity of hearing had remanded the matter to the assessing authority with the direction that feasibility in initiation of proceedings under section 271B of the Act has to be examined in accordance with law.
(3.) FEELING aggrieved, the respondent preferred an appeal before the Tribunal. The Tribunal has set aside the, order passed by the Commissioner of Income -Tax under section 263 of the Act on the ground that failure to initiate penalty proceedings at the time of passing of the assessment order does not render the order erroneous or prejudicial to the interest of the revenue.;