2002 (7) TMI 45 - HC - Income Tax

Penalty imposed under section 271B - Compulsory Audit Of Accounts - Tribunal, Jaipur, was of the view that since the auditor had not been appointed before the specified dates, as such, the accounts could not be got audited before the specified dates, even then the penalty levied by the Assessing Officer is justified. - The assessee was under the obligation to get its accounts audited by the auditor appointed by the Registrar, Co-operative Societies, Jaipur. When the auditor had not been appointed by the Registrar, Co-operative Societies, the assessee can only make request to the Registrar to appoint the auditor and repeated requests were made by the assessee. In spite of repeated requests made by the assessee to the Registrar, the auditor had not been appointed and the delay in auditing the accounts took place because the appointment of the auditor was not made by the Registrar and for that the assessee should not be punished. We are of the view that the Tribunal had committed an error in setting aside the order passed by the Commissioner of Income-tax (Appeals) by restoring the order passed by the Assessing Officer by which penalty was imposed under section 271B

Summary

Issues:
Penalty under section 271B of the Income-tax Act, 1961 for assessment years 1986-87 and 1988-89.

Analysis:
The appeals were directed against the order passed by the Income-tax Appellate Tribunal, Jaipur, relating to penalties imposed under section 271B of the Income-tax Act, 1961 for the assessment years 1986-87 and 1988-89. The common issue in both appeals was the penalty imposed for not getting the accounts audited before the specified dates. The appellant, a cooperative society, argued that the power to appoint the auditor lies with the Registrar, Cooperative Societies, under the Co-operative Societies Act, and the delay in audit was due to the Registrar not appointing an auditor despite repeated requests. The Commissioner of Income-tax (Appeals) accepted this explanation and canceled the penalties imposed by the Assessing Officer. However, the Income-tax Appellate Tribunal upheld the penalties, stating that since the auditor was not appointed before the specified dates, the penalties were justified.

In the subsequent appeal, the appellant's counsel argued that without the statutory audit by the Registrar-appointed auditor, the cooperative society could not get its accounts audited. The counsel highlighted the Registrar's directive that no tax audit certificate shall be issued without the audit by the appointed auditor. The Revenue's counsel contended that while the law allows audit under any relevant statute, it must be completed before the specified date, which was not the case here. The court agreed that the audit should have been completed before the specified dates for compliance.

However, considering that the delay was due to the Registrar's failure to appoint an auditor despite the appellant's repeated requests, the court found the penalty under section 271B unjustified. The court emphasized that the cooperative society was obligated to have its accounts audited by the Registrar-appointed auditor, and the delay was beyond the appellant's control. The court noted the appellant's efforts to comply with the law and concluded that the Tribunal erred in reinstating the penalties. Therefore, the court allowed both appeals, setting aside the penalties imposed under section 271B of the Income-tax Act, 1961 for the assessment years 1986-87 and 1988-89.