I.T.O., WARD-8(4), KOLKATA, KOLKATA vs. M/S. JALAN INTERCONTINENTAL, KOLKATA

The captioned appeal filed by the Revenue, pertaining to assessment year 2005-06, is directed against the order passed by the ld. Commissioner of Income Tax(Appeals)- VI, Kolkata, in Appeal No. 421/08-09/CIT(A)-VI/Wd-8(4)/Kol, dated 23.06.2014, which in turn arises out of an order passed by the Assessing Officer u/s 143(3) of the Income Tax Act 1961, (hereinafter referred to as the ‘Act’), dated 26.02.2007.

Brief facts of the case qua the assessee are that the assessee filed its return of income for assessment year 2005-06 declaring the total income of Rs. 1,55,290/-. During the year under consideration, the assessee company derived income from the following sources: i) Interest :Rs. 66,370/- ii) Commission &Brokerage :224/- iii) Dividend on Units :39,11,198/- iv) Long Term Capital Gain :8,31,185/- v) Short Term Capital Gain :2,73,527/- Total 50,82,504/- The Ld. Assessing Officer observed that since the gross receipts of the assessee is more than Rs. 40 Lakhs, therefore he is required to get his accounts audited under section 44AB of the Income Tax Act, 1961. During the assessment year 2005-06 the assessee`s gross receipts was at Rs. 50,82,504/- which is more than Rs.40,00,000/-, therefore the assessee is required to get his accounts audited U/s 44AB of the I.T.Act and furnish the audit report in the prescribed form before the specified date 31.10.2005 but the assessee has failed to do so therefore, AO imposed penalty U/s 271-B of the Act at Rs.25,413/-

Aggrieved with the order of the Assessing Officer the assessee filed an appeal before the Commissioner of Income-tax (Appeal). The Ld. CIT(A) held that the provisions of Section 44AB is applicable to the assessee under consideration if the turnover or gross receipts exceeds during the previous year by Rs. 40,00,000/- . In assessee’s case under consideration the Ld. CIT(A) found that the total received in the P& L account was at Rs. 50,82,504/-. Out of this gross receipts, the major component of the income was dividend income of Rs. 39,11,198/-. This dividend was claimed and accepted as 3 Jalan Intercontinental. exempt from income tax. Even otherwise, as per provision of Section 56(2) of the Act, dividend if taxable, is chargeable under the head income from other sources, and not under the head business income. The receipts of the assessee also included long term and short term capital gain which was either exempt or chargeable under the head ‘Capital Gains’. The business income of the assessee, which is assessable under the head ‘Income from Business’ was interest of Rs. 66,370/-, and commission and brokerage of Rs. 224/- . Therefore, the Ld. CIT(A) observed that these business receipts ( that is, Rs. 66,370/- and Rs. 224/-), are much less than monetary limit of Rs. 40 Lakhs, therefore, the provision of Section 44AB of the Act to get the accounts audited is not applicable to the assessee. Because in the instant case, the assessee gross receipts under the head business or professions were below Rs. 40 lakhs. Therefore, the assessee was not required to get its account audited in terms of Section 44AB of the Income-tax Act, 1961 and consequently, the provision of Section 271B was not attracted in its case. Therefore, the Ld. CIT(A) observed that it is not a fit case for levying penalty u/s 271B of the Income-tax Act and delete the addition accordingly.

Now the Revenue is an appeal before us and objected that the assessee is liable to get its accounts audited u/s 44AB because the gross receipts of the assessee is at Rs.50,82,504/- which is more than Rs. 40,00,000/-.

We have heard both the parties and perused the material available on record and we notice that in the assessee’s case under consideration the business receipts are below Rs. 40,00,000/-.The business income of the assessee, which is assessable under the head ‘Income from Business’ was interest of Rs. 66,370/-, and 4 Jalan Intercontinental. commission and brokerage of Rs. 224/-, which is below Rs. 40,00,000/-, therefore, the tax audit provisions are not applicable to the assessee. That is, the assessee is not required to get its account audited u/s 44AB and hence, not liable for penalty u/s 271B of the Act. Accordingly, we delete the penalty u/s 271B of the Act.