C I T vs. KAILRAM COOP. CREDIT AND SERVICE SOC. LTD.

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 537 of 2007 The Commissioner of Income tax, Karnal .....APPELLANT Versus The Kailram Co-op. Credit & Service Society Ltd. V&PO Kailram Distt.Kaithal ....RESPONDENT I.T.A. No. 538 of 2007 The Commissioner of Income tax, Karnal .....APPELLANT Versus The Bata Co-op. Credit & Service Society Ltd. V&PO Bata Distt.Kaithal ....RESPONDENT I.T.A. No. 539 of 2007 The Commissioner of Income tax, Karnal .....APPELLANT Versus The Chaushala Co-op. Credit & Service Society Ltd. V&PO Chaushala Distt.Kaithal ....RESPONDENT I.T.A. No. 540 of 2007 The Commissioner of Income tax, Karnal .....APPELLANT Versus The Kalayat Co-op. Credit & Service Society Ltd. V&PO Kalayat Distt.Kaithal ....RESPONDENT I.T.A. No. 541 of 2007 The Commissioner of Income tax, Karnal .....APPELLANT Versus The Kurar Co-op. Credit & Service Society Ltd. V&PO Kurar Distt.Kaithal ....RESPONDENT DATE OF DECISION: FEBRUARY 26, 2008

I.T.A.

No. 537 of 2007 etc.

-2- CORAM: HON'BLE MR.JUSTICE SATISH KUMAR MITTAL HON'BLE MR.JUSTICE RAKESH KUMAR GARG --- Present: Mr. Yogesh Putney, Advocate, for the appellants. .. SATISH KUMAR MITTAL, J. This order shall dispose of the aforesaid five appeals, i.e. ITA No.537 to 541 of 2007 filed by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as `the Act') against the common order dated 28.02.2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench (A), Chandigarh (hereinafter referred to as `the ITAT') in ITA No.472/Chandi/2006 and the other connected appeals viz. ITA Nos.473,474,475 and 476/Chandi/2006 in case of different respondent-assessees for the Assessment Year 2004-05 by raising the following substantial questions of law:- (i) Whether on the facts and in the circumstances of the case the Ld. ITAT was right in deleting the penalty imposed u/s 271B of the I.T. Act without deliberating upon, discussing and analyzing the reasons as spelt out and discussed in para 3 of the penalty order and further ignoring the fact that there was no reasonable cause for the assessee for not furnishing the audit report by a Chartered Accountant within the specified period in view of the facts that the assessee was engaged in business activity and the gross turnover of the assessee which included the total sales and the interest income on account of business activity of the assessee exceeded Rs.40 lacs? (ii) Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in giving the benefit of section 273B without discussing the reasonable cause for not furnishing the audit report by Chartered Accountant within the specified period? The brief facts giving rise to file the present appeal are that the respondent-assessees are Co-operative Credit and Service Societies

I.T.A.

No. 537 of 2007 etc.

-3- deriving income from fertilizer, pesticides, seeds etc. to its members and also from interest etc. For the Assessment Year 2004-05, the respondent- assessees filed returns declaring their income at nil after claiming exemption under Section 80P of the Act. The return was accompanied by trading account, profit and loss account and balance sheet which were not audited. During the course of assessment proceedings, it was noticed that the gross turnover of the assessees exceeded Rs.40.00 lacs, therefore, the assessees were required to get their accounts audited by a Chartered Accountant before the stipulated date i.e. 31.10.2004 and furnish by that date the report of such audit in the prescribed form duly signed and verified as required under Section 44AB of the Act. Therefore, for failure to get the accounts audited by the Chartered Accountant within the specified period and furnish the audit report by the stipulated date as per the provisions of Section 44AB of the Act, penalty proceedings under Section 271B of the Act were initiated against the assessees. Before the Assessing Officer, the assessees took the plea that their sales turnover were much less than Rs.40.00 lacs, but after including receipts of interest, it exceeded Rs.40.00 lacs. Therefore, the assessees did not get their accounts audited as per the requirement of Section 44AB under a bona fide belief that their sales turnover were less than Rs.40.00 lacs and as such they were prevented from doing so by sufficient cause, therefore, they prayed that the penalty be not imposed on them. The Assessing Officer did not accept the contentions of the assessees and imposed the penalty of different amounts as mentioned in its orders Annexure A-1.

I.T.A.

No. 537 of 2007 etc.

-4- Feeling aggrieved against the said order, the assessees filed appeals before the Commissioner of Income Tax (Appeals) which were dismissed on 14.03.2006 while holding that the Assessing Officer was justified in imposing the penalty under Section 271B of the Act. Aggrieved against the aforesaid order, the assessees filed appeals before the Tribunal which were accepted and the impugned penalty levied by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals) was ordered to be deleted while holding that the assessees under a bona fide belief did not get their accounts audited from the Chartered Accountant or from the Inspector of Co-operative Societies because the sales turnover of the assessees were less than Rs.40.00 lacs excluding the receipts of interest. Similar issue was raised by the Commissioner of Income tax, Karnal in ITA No.427 of 2007 before this Court. While coming to the conclusion that the Tribunal had recorded a pure finding of fact which did not require any interference, the appeal of the revenue was dismissed by this Court vide order dated February 22, 2008. In these appeals also, the same substantial questions of law have been formulated by the revenue and the facts are also exactly the same. Thus, in view of the decision taken by this Court in ITA No.427 of 2007, the instant appeals are liable to be dismissed. Ordered accordingly. (SATISH KUMAR MITTAL) JUDGE

February 26, 2008 (RAKESH KUMAR GARG) vkg JUDGE