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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI A. K. GARODIA & SHRI LALIET KUMAR
Per Laliet Kumar, Judicial Member
These are the three appeals arising out of the common order passed by the CIT dated 28.11.2013 confirming the imposition of the penalty for violation of Section 44AB under section 271B of the Income Tax Act.
Brief facts of the case in
2. Assessment year : 2006-07
A search was conducted under section 132 of the Income Tax Act on 16.09.2008 and the AO found that the gross receipts on sale of site of G. L. Residency Projects was Rs.65,06,118/- and for Air City Projects is Rs.1,49,22,440/- for the financial year ending 31.03.2007. The AO also noted that the assessee was required to get the assessee’s account audited under section 44AB of the Act and however assessee had failed to do so. Therefore, the notice was issued on 31.12.2010 and 28.01.2011.
The assessee, in response to the notice filed reply to the show cause notice and in the reply it was submitted by the assessee that the assessee was following project completion method and the receipts were below the limits prescribed under section. However, with a view to mitigate the litigation, the assessee had declared the income before the AO and the revised profit and loss account and balance sheet was filed before the AO. It was submitted on behalf of assessee that he was under genuine belief that the accounts are not required to be audited and it is only required to be audited at the end of the project as the assessee was consistently following the project completion method. The assessee relied upon the following judgments for the purpose of proving the case:
Koramangala Club Vs. ITO in dated 26.02.2016.
CIT Vs. tea King (2000) 158 CTR 0413 3. APL (India) Pvt. Ltd., Vs. JCIT in ITA No.4796/M/2012 datd 25.10.2013. 4. Nandi Housing (P) Ltd., Vs. DCIT (2003) 80 TTJ 0750.
On the other hand, the learned counsel for the revenue has submitted that the assessee has not complied with the provision of section 44AB and has thus subjected for the penalty under section 271B of the Act were rightly levied on him and Ld Dr relied upon following 2 judgments. 1 DCIT Vs. Gopal Krishan Builders (2004) 91 ITD 124 Luck 2 CIT Vs. S. C Naregal (2010 )329 ITR 615 5. We have heard the rival contentions of the parties and perused the record. . The search has taken place under section 132 of the IT Act on 16.09.2008 and the notice under section 153A was issued for the AY 2006-07 on 02.02.2010 and thereafter the assessee in response to the notice had filed the return of income under section 153A on 29.07.2010. The original return of income was filed on 31.07.2007. In the revised return filed pursuant to section 153A, the assessee had declared an additional income of Rs.32,43,094/-. The assessee has shown to us the audited report at page 93 dated 30.09.2009 and during the course of argument, it was submitted that the audited reports were filed by the assessee during the assessment proceedings or in the penalty proceedings of the AO. We have gone through the assessment order dated 31.12.2010 assed under section 153A wherein there is no whisper of the filing of audited report dated 30.09.2009 before the AO. The AO in the assessment order has categorically mentioned for initiation of penalty under section 271(1)(c) and 271B separately. The imposition of penalty under section 271B provides as under: “If any person fails 5[* * *] to get his accounts audited in respect of any previous year or years relevant to an assessment year or 6[furnish a report of such audit as required under section 44AB], the 7[Assessing] Officer may direct that such personal shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of 8[one hundred fifty thousand rupees], whichever is less.]
The penalty under section 271B is imposable under the Act if the assessee fails to prove that there was a reasonable cause for failure on the part of the assessee for not complying the mandatory provision of section 44AB in terms of 273B of the Act. In our view, the assessee was required to get its accounts audited at the time of filing of the return of income at the first instance i.e., on 30.07.2007 and in any case the assessee was having an opportunity to file the audited reports after receipt of the notice under section 153A of the Act when the assessee was called upon to file the return of income. However, despite receipt of notice issued under section 153A, the assessee had failed to file the audited accounts report. In our view, the claim of the assessee that the assessee was following the project completion method, therefore the assessee had bonafide belief for not getting its accounts audited, is not sustainable as the application of section 44AB is independent and is not depended upon the method of accounts adopted by the assessee under section 145 of the Act whether it is project completion method or percentage completion method. In our view, the requirement under section 44AB is based on the total sales, turnover or gross receipt as the case may be of the assessee and . If it exceeds the threshold limit as provided under the Act, then the assessee is required to compulsorily get its accounts audited before the specific date. Since, the assessee has failed to do so, therefore, we have no other option but to confirm the order passed by the CIT in imposing the penalty. Even otherwise, the case of the revenue (confirming the imposition of penalty) is also covered by the judgment of the Lucknow Tribunal in the matter of DCIT Vs. Gopal Krishan Builders (2004) 91 ITD 124 Luck wherein the Tribunal has noted as under:
“8. The other plea of the ld. counsel for the assessee was in respect of the very object, for which Section 44AB of this Act was brought on statute. The philosophy behind the compulsory audit is stated in para 17.2 of circular 387 dated 6.7.1984 and reproduced by ld. CIT(A). There is no dispute about the very object of bringing provisions of Section 44AB and the same had further been laid down in the case of Rajkot Engineering Association and Ors. v. Union of India (supra) to the effect that object of Section 44AB of the Act read with Rule 6G of Income Tax Rules is to safeguard against tax evasion and tax avoidance which will ensure that the economic system does not result in concentration of wealth to the common detriment. The ld. CIT(A), while disposing off the appeal of the assessee, had referred to the guidelines issued by the Institute of Chartered Accountants. The same is quoted in para 6 of her order. The ld. counsel has not brought before me the said audit guidelines. Even if, for the sake of argument, the same may be treated as in existence, then the same will be against the very object behind Section 44AB of the Act. In case it is taken that assessee is following the system in which income is returned on completion of the project and in case project goes on for more than 5 years and assessee gets its books of account audited for last year in which project is completed, then from where A.O. will be able to verify the figures of expenses and receipts etc. of earlier years. So, it is against the very principle of Section 44AB that in project completion assessee would get the books of account audited in the last year and not in earlier years when he is debiting the expenses and showing sundry debits and different types of receipts are also there. On the basis of above, I am of the view that assessee at the outset had not been able to bring before me the audit guideline and even if such guideline is there, the same is against the very provisions of Section 44AB.”
Moreover, the judgment of the jurisdictional High Court in the matter of CIT Vs. S. C Naregal (2010 )329 ITR 615is squarely applicable to the case in hand . In the said judgment the jurisdictional High Court held as under:
This substantial question of law does not arise for consideration in this appeal as it is clear from the provisions of section 44AB of the Act that whenever the turnover exceeds rupees forty lakhs, the accounts are required to be audited and the question as to whether the assessee was receiving commission and not profit would not in any way affect the liability of the assessee in getting the accounts audited under section 44AB of the Act.”
In view of the above, the appeal of the assessee is required to be dismissed. We may notice that none of the judgment cited by the assessee deals with the issue of imposition of penalty under section 271B for not getting its accounts audited under section 44AB. , 272/Bang/2014 9. The appeal Nos. 271 and 272 has the facts similar to the facts of the appeal No. 270 which we have decided herein above. Therefore, these 2 appeals are also dismissed by following the analogy and ratio which we have laid down in the appeal ITA No. 270/2014. Accordingly, these two appeals are also dismissed.
In the result, the appeals are dismissed.
Pronounced in the open court on this day of 7th February, 2017.