C I T vs. MATHANA MODEL COOP. CREDIT AND SERVICE SOC.

ITA/476/2007HC Punjab & HaryanaPHHC01073178200701 February 2008Author: MR. JUSTICE SATISH KUMAR MITTAL,MR JUSTICE RAKESH KUMAR GARG8 pages
AI SummaryDismissed

What were the facts?

The appeals by the Commissioner of Income Tax (Revenue) challenge the ITAT's order setting aside penalties imposed under Section 271B of the Income Tax Act, 1961. The assessees are Co-operative Credit & Service Societies. For Assessment Year 2004-05, the societies' gross receipts exceeded Rs. 40 lakhs, necessitating an audit under Section 44AB. However, they failed to submit audited accounts by the due date (October 31, 2004). The societies contended that they were required to have their accounts audited by an auditor appointed by the Registrar of Co-operative Societies under the Haryana Co-operative Societies Act, 1984, and the delay was due to the Registrar not appointing an auditor in time. The Assessing Officer imposed penalties, which were upheld by the CIT(A). The ITAT, however, found the explanation satisfactory and granted relief under Section 273B.

What did the High Court hold?

The High Court held that the ITAT's conclusion that the explanation provided by the societies for the delay in furnishing the audit report was satisfactory was not illegal. The Court reasoned that co-operative societies are governed by the Registrar of Co-operative Societies and are required to have their accounts audited by an auditor appointed by the Registrar under Section 77 of the Societies Act. The delay in this case was due to the Registrar's failure to appoint an auditor, which was beyond the societies' control. Therefore, there was a reasonable cause for the delay, making the provisions of Section 273B applicable, which exempts assessees from penalty if they prove a reasonable cause. The Court rejected the Revenue's argument that the societies could have opted for an audit by a Chartered Accountant, stating that the societies were bound to get their accounts audited only by the auditor appointed by the Registrar. Consequently, the ITAT's order setting aside the penalty was upheld. No substantial question of law arose.

What were the issues?

1. Whether the ITAT erred in holding that the explanation provided by the assessee societies for the delay in furnishing the audit report under Section 44AB was sufficient, thereby warranting no penalty under Section 271B, considering the provisions of Section 273B of the Income Tax Act, 1961? Assessee's Contention (as understood from the High Court's reasoning): The assessees argued that as registered co-operative societies governed by the Haryana Co-operative Societies Act, 1984, they were mandated to have their accounts audited by an auditor appointed by the Registrar of Co-operative Societies. The delay in submitting the audit report was solely attributable to the Registrar's failure to appoint an auditor within the stipulated time, a matter over which the societies had no control. Therefore, they had a reasonable cause for the delay, and no penalty should be levied. Revenue's Contention: The Revenue argued that the ITAT's decision to cancel the penalty was unjustified. They contended that if the auditor appointed by the Registrar was not available, the societies could have opted for an audit by a Chartered Accountant as an alternative, as provided by the second proviso to Section 44AB, and submitted the report by the specified date. The explanation provided by the societies was not reasonable, and the orders of the Assessing Officer and CIT(A) should have been upheld.

Which sections of the Income-tax Act were involved?

Section 44AB,Section 271B,Section 273B,Section 288,Section 77

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.476 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANT Versus The Mathana Model Co-op.Credit & Service Society Ltd. V&PO Mathana, Kurukshetra ....RESPONDENT ITA No.477 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANT Versus The Kaulapur Co-op.Credit & Service Society Ltd. V&PO Kaulapur (Kurukshetra) ....RESPONDENT ITA No.478 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANT Versus The Umri Co-op.Credit & Service Society Ltd. V&PO Umri, Distt. Kaithal ....RESPONDENT ITA No.479 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANT Versus The Ratangarh Kakroli Co-op.Credit & Service Society Ltd. V&PO Rattangarh Kakroli, Kurukshetra ....RESPONDENT

ITA Nos.476 to 480 of 2007 -2- ITA No.480 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANT Versus The Masana Model Co-op.Credit & Service Society Ltd. V&PO Masana, Kurukshetra ....RESPONDENT DATE OF DECISION: FEBRUARY 01, 2008 CORAM:

The order continues below.

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