2004 (7) TMI 61 - HC - Income Tax

Audit of accounts - Considering the business turnover of the assessee he was under an obligation to comply with the provisions of section 44AB and get all its accounts audited and was required to submit the audit report in the prescribed form, along with the returns. That has not been done, therefore, the penalty was initiated u/s 271B - facts are not in dispute that the survey was conducted on January 29, 1991 and books for the assessment years 1989-90 and 1990-91 were impounded, but on the request of the assessee, photocopies of the relevant documents of the assessment years 1989-90 and 1990-91 were supplied to the assessee on June 28, 1991 - This fact has not been disputed by the assessee nor the Tribunal has considered this aspect - There was no justification for not completing the accounts for the assessment years 1991-92 and 1992-93 and get them audited on due dates. No other reason has been given by the assessee for not completing the accounts and getting them audited, as required u/s 44AB Thus, Tribunal has committed error in cancelling the penalty.

Summary

Issues:
1. Tribunal's cancellation of penalty under section 271B
2. Compliance with the provisions of section 44AB regarding audit reports and accounts submission

Analysis:
1. Tribunal's Cancellation of Penalty under Section 271B:
The High Court considered the issue of whether the Tribunal erred in canceling the penalty imposed under section 271B of the Income-tax Act. The assessee contended that due to a survey and impounding of books, it was unable to get the accounts audited and submit the report within the specified time. The Assessing Officer imposed penalties for multiple years, and the Commissioner of Income-tax (Appeals) upheld the penalties. The Tribunal, however, canceled the penalty based on the assessee's argument that it could not complete the accounts due to circumstances beyond its control. The High Court disagreed with the Tribunal's decision, stating that the photocopies of relevant documents were provided to the assessee in time for compliance. The Court reinstated the penalty, emphasizing that the assessee failed to provide a valid reason for non-compliance with the audit requirements.

2. Compliance with Section 44AB Provisions:
Regarding compliance with section 44AB, the High Court noted that the assessee's inability to complete the accounts and get them audited for certain years was attributed to the impounding of books during a survey. The Tribunal cited the delay in releasing the impounded books as a reason for non-compliance with the audit deadline. However, the High Court highlighted that the relevant photocopies were available to the assessee for closing the accounts, indicating no valid reason for the delay in audit submission. The Court held that the assessee's failure to complete the accounts and obtain audits on time was not justified under section 44AB. Consequently, the High Court set aside the Tribunal's decision, reinstating the penalties imposed by the Assessing Officer and the Commissioner of Income-tax (Appeals).

In conclusion, the High Court allowed the appeals filed by the appellant, overturning the Tribunal's cancellation of penalties under section 271B and emphasizing the importance of complying with audit requirements specified under section 44AB of the Income-tax Act.