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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
PER MAHAVIR PRASAD, JUDICIAL MEMBER:
This appeal has been preferred by the assessee appellant against order of ld. CIT(A) dated 16.08.2016 for the Assessment Year 2012-13. The appellant has taken following grounds of appeal :-
“1. The learned CIT(A) has erred in confirming the penalty of Rs.1,00,000/- levied by A.O. under section 271B of the Act. 2. The assessee craves for liberty to amend, modify and add any grounds of appeal or file additional evidences.”
Facts of the case are that the case of the assessee was reopened and notice u/s.148 of the Act was issued to the assessee company on 18.11.2014. In response to the notice u/s.148 of the Act, the assessee company has submitted reply on 25.03.2015 in which the assessee company has submitted paper return of income for the A.Y. 2012-13 and stated that which is considered the same in response to the notice u/s. 148 of the Act. Thereafter, the assessee company has e-filed its return of income for A.Y. 2012-13 on 09.09.2015, declaring total income of Rs. NIL. During the assessment proceedings details was submitted, perusal of details shows that the total
ITA No.2236/Ahd/2016 Assessment Year: 2012-13 Page 2 of 4 sales receipts/turnover of the assessee company is shown in the P&L Account at Rs.5,07,23,128/. It is noticed that the assessee-company has failed to comply with the provisions of section 44AB of I.T. Act, 1961. Accordingly, a notice u/s 271B of the Act was issued on 23.10.2015, which was duly served upon the assessee company. The hearing was fixed on 30.10.2015. In response to notice, the assessee company has not filed any reply. The assessee company did not bother to comply with the notice by personal attendance or through its A.R or through any submission in this regard. As per the provisions of section 44AB of the Act "every person carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds sixty lakhs rupees in any previous year; get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such".
2.1 It was noticed that the assessee-company itself had shown its gross receipts of Rs.5,07,23,128/- during F.Y. 2011-12 relevant to AY 2012-13. Hence, the assessee was required to get its accounts audited by a chartered accountant as provided in section 44AB of the Income-tax Act, 196Ion or before 30.09.2012. However, the accounts of the company were not audited. The company has failed to comply with the provision of section 44AB of the Act for the F.Y. 2011-12 relevant to A.Y. 2012-13. Hence, the assessee-company has made the contravention to the provision of section and is liable for penalty u/s. 271B of the Act.
2.2 The reliance was placed on judicial pronouncement in the case of K. Ravindranathan Nair (2009), 319 ITR 108 (Kerala) wherein it was held that :
"Where appellant did not adduce any evidence to justify delay in filing audit report as required under section 44AB, in absence of any evidence adduced by appellant at least before Tribunal, there was no ground to interfere with minimum penalty imposed under section 27IB for admitted delay of filing audit report”
2.3 Further, reliance was also placed on the judgment in the case of Madhuban Chemicals & Fertilizers Ltd. vs. CIT, Jaipur-I [157 Taxman 374(Raj)] wherein it was held that
"Section 271B, read with section 44AB, of the Income-tax Act, 1961 - Penalty - For failure to get accounts audited - Whether where assessee obtained audit report within specified date but did not file same with return, conduct of
ITA No.2236/Ahd/2016 Assessment Year: 2012-13 Page 3 of 4 assessee in withholding audit report, though it was obtained in time would create suspicion and doubt and, therefore, penalty under section 27IB was rightly levied"
2.4 Considering all the above facts, circumstances of the case and judicial pronouncements, the Assessing Officer observed that he was satisfied that the assessee has without any cause failed to get his accounts audited in time as required under the aforesaid provision. The turnover of the company as per the record discussed above arrived at Rs.5,07,23,128/-. As per the provisions of the Act, the penalty leviable u/s.271B of the Act is either one-half percent of the total sales, turnover or gross receipts, or sum of Rupees one hundred thousand rupees whichever is less. However, one-half percent of total turnover works out at Rs. 2,53,615/-, [0.5% of 5,07,23,128]. Accordingly, the Assessing Officer has levied penalty of Rs.1,00,000/- u/s. 271B of the Act.
Against the penalty order the appellant preferred first statutory appeal before the ld. CIT(A) who dismissed the appeal of the appellant. Now appellant company is before us.
We have gone through the relevant records and the impugned order. In this case there was dispute of the company with the statutory auditors about payment of court fee as well as current fee due to, and due to sickness of the appellant company could not pay the professional pay regularly. Hence, the auditor was reluctant to carry out the company audit under the Companies Act and tax audit under the Act. The company has gone to BIFR and in assessee’s own case ITAT for assessment year 2004-05 in ITA No.1634/Ahd/2007 has given relief to the appellant and relevant paragraphs of ITAT order is reproduced hereunder :-
“5. None appeared on behalf of the assessee. We have heard the ld. D.R. who mainly relied on the order of ld. CIT(A). In our considered view, once assessee has been declared as a sick unit by BIFR and it is also held that entire net worth Rs.2060.87 lacs as on 31.3.99 was eroded on account of accumulated losses of Rs.2415.23 lacs, the assessee could not be expected to incur expenditure on compulsory audit. Even though statutorily it is required that an assessee, having turnover of Rs.40 lacs and above should get its accounts audited under section 44AB and in the event of non-compliance penalty under section 271B can be imposed, but before levy of penalty it has to be seen whether assessee has a reasonable cause or not. Levy of penalty is
ITA No.2236/Ahd/2016 Assessment Year: 2012-13 Page 4 of 4 not automatic and cannot always be presumed that once turnover is above the prescribed limit compulsory audit has necessarily to be got done and on failure penalty will be automatic. Provisions of compulsory audit has been inserted in the Statute so as to save the time of AO from examination of large number of account books, vouchers etc. in a case of heavy turnover made by the assessee. In fact, compulsory audit is only an assistance of AO. It is by itself not an assessment of income. Whether compulsory audit is done or not done, the AO is always at liberty and in law within his power to carry out investigation in addition to compulsory audit. Thus in a case such compulsory audit is not done AO has a statutory duty to investigate into the accounts and bring his own conclusion on the basis of his findings.
In the present case declaration of the assessee company as-a sick, unit and its assertion it has retrenched the staff is a sufficient and reasonable proof for not getting accounts audited. We are unable to agree with the Id. CIT(A) and the Id. DR that order of the BIFR, a copy of which is placed on record declaring the assessee as a sick unit has no relevance. In our considered view this is a reasonable cause for not getting the accounts audited. Accordingly levy of penalty of AO and sustained by Id. CIT(A) is cancelled.”
Since the company has gone to BIFR and the appellant’s staff have been retrenched and there was dispute with the Statutory Auditor and under similar circumstances ITAT has deleted the penalty in assessee’s own case. Thus respectfully following the order of ITAT in assessee’s own case for A.Y. 2004-05, we delete the penalty of the appellant.
In the result, appeal filed by the assessee allowed. Order pronounced in the open Court on this 29th day of November, 2018.
Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) Accountant Member Judicial Member Ahmedabad, the 29th day of November, 2018 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY
Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad