2011 (2) TMI 1399 - AT - Income Tax

Provisions of section 44AB - penalty proceedings u/s 271B - In present case AO from the search operation and the statement recorded u/s 132(4) noted that the modus operandi adopted by the assessee was that he first received cash from entry seekers which were deposited in the bank account of one of the group companies and after depositing the cash in the bank accounts a cheque was issued and the equal amount in favour of entry seekers. The assessee thus returned the cash of the entry seekers in the guise of cheque after retaining commission. Since the assessee had failed to get its accounts audited and furnish a copy of the same before the specified date the AO initiated penalty proceedings u/s 271B by issuing the show-cause notice. He therefore levied the penalty. HELD THAT - In case of the assessee he had himself received the money through the concerns in his control and in exchange thereof had issued cheques. Therefore the transaction was principle to principle basis and not as agent. Therefore in our view in case of the assessee gross amounts received in connection with entry business have to be considered for the purposes of ceiling of Rs. 40 lacs u/s 44AB. The circular No.452 of the CBDT relied upon by the assessee is also distinguishable as the same related to kachha arithia. The decision of the tribunal in case of R.Wadiwala Co. Vs ACIT 2000 (11) TMI 277 - ITAT AHMEDABAD-B is obviously distinguishable as the same related to share transactions and not accommodation bills. It may also be pointed out that the assessee has not raised any ground that he was not liable for audit u/s 44AB. Therefore the case of the assessee was covered u/s 44AB and the accounts were required to be audited and audit reports were required to furnished within the prescribed date which had not been done. Penalties were therefore leviable and the same had been rightly levied by the authorities. The order of CIT(A) is accordingly upheld. all the appeals of the assessee stand dismissed.

Summary

Issues:
Levy of penalty under section 271B for non-compliance with audit requirements under section 44AB.

Analysis:
1. The appeals by the assessee contested the penalty of Rs. 1 lac imposed by the Assessing Officer (AO) for the assessment years 2002-03, 2006-07, and 2007-08, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The penalty was initiated due to the failure of the assessee to get the accounts audited and furnish them within the specified date as required under section 44AB of the Income-tax Act.

2. The assessee's argument was that since the commission earned was below Rs. 40 lacs, which is the threshold for compulsory audit of accounts, and the received amount belonged to the entry seekers, it should not be considered as the assessee's income. However, the CIT(A) rejected these contentions, emphasizing that section 44AB focuses on total sales, turnover, or gross receipts, not just income elements. The CIT(A) distinguished a tribunal decision related to share transactions, stating that the present case involved accommodation bills, not genuine transactions.

3. The Tribunal upheld the authorities' findings that the assessee's case fell under section 44AB, requiring audited accounts to be furnished by the due date. The Tribunal noted that the audited accounts were not submitted within the prescribed time, even if the argument that they were filed later with the return of income was considered. The Tribunal also rejected the comparison to share brokers, highlighting that the nature of transactions in the present case was different, and gross amounts received had to be considered for the audit threshold.

4. Regarding the additional evidence presented by the assessee during the appeal, the Tribunal found it inadmissible under ITAT rules, as no substantial cause was shown for its admission. The Tribunal concluded that penalties were rightly levied by the authorities below, upholding the CIT(A)'s decision. The appeals of the assessee were dismissed, affirming the penalty under section 271B for non-compliance with audit requirements.

This detailed analysis provides a comprehensive overview of the issues involved in the legal judgment, the arguments presented by the parties, and the Tribunal's final decision based on the interpretation of relevant provisions of the Income-tax Act.