2013 (11) TMI 1670 - AT - Income Tax

Penalty imposed u/s. 271B - reasonable cause in not getting accounts audited before prescribed date as per provisions of section 44AB - Held that - According to assessee, income pertaining to this had been credited in Profit and Loss Account after survey on account of declaration of additional income. This income has been credited much later after specified date of audit and under no circumstances, assessee could have got books of accounts audited by 31.10.2006. Assessee could not anticipate on specified date that turnover of the assessee exceeded ₹ 40 lakhs. The assessee at the relevant point of time was prevented by reasonable cause for not getting its accounts audited as per provisions of section 44AB. He was under the bonafide belief at relevant point of time that his income has not exceeded the prescribed limit as per provisions of section 44AB of I.T Act. In view of facts and circumstances of the case, we are of the view that assessee was prevented or reasonable cause in not getting accounts audited before prescribed date as per provisions of section 44AB. Accordingly, Assessing Officer is directed to delete the penalty imposed u/s. 271B of I.T Act.

Summary

Issues:
- Confirmation of penalty under section 271B of the Income Tax Act, 1961 without proper consideration of facts
- Rejection of explanation of reasonable cause for not getting accounts audited before the specified date
- Applicability of section 44AB in relation to turnover exceeding Rs. 40 lakhs
- Deletion of penalties for A.Y. 2006-07 and 2007-08

Analysis:

Confirmation of Penalty:
The appellant challenged the penalty confirmed by the Commissioner of Income Tax (Appeals) under section 271B of the Income Tax Act, 1961. The appellant argued that the penalty was unjustified, as the facts of the case were not properly considered. It was contended that the reasons provided for the penalty were unreasonable and illogical. The appellant sought relief by asserting that the penalty was not in accordance with the law. The Tribunal analyzed the facts and circumstances of the case and concluded that the penalty should be deleted as the appellant was prevented by reasonable cause from getting the accounts audited before the specified date.

Rejection of Reasonable Cause Explanation:
The appellant submitted an explanation of reasonable cause for not getting the accounts audited before the specified date as required by section 44AB of the IT Act. The appellant argued that the turnover did not exceed Rs. 40 lakhs, and therefore, the provisions of section 44AB were not applicable. The Assessing Officer disagreed with the appellant's stand and imposed the penalty under section 271B. However, the Tribunal found that the appellant had a valid reason for not getting the accounts audited before the prescribed date, as the turnover had not exceeded the threshold amount. Consequently, the penalty was directed to be deleted for both assessment years.

Applicability of Section 44AB:
The Assessing Officer imposed the penalty under section 271B as the appellant failed to get the accounts audited within the specified time, despite the turnover exceeding Rs. 40 lakhs during the survey. The appellant contended that the additional income declared was credited in the books after the specified audit date and, therefore, should not be considered for the turnover calculation. The Tribunal examined the provisions of section 44AB and found that the appellant had a reasonable cause for not meeting the audit deadline, as the turnover did not exceed the threshold amount at the relevant time.

Deletion of Penalties:
Considering the facts and circumstances of the case, the Tribunal directed the Assessing Officer to delete the penalties imposed under section 271B of the IT Act for both assessment years, 2006-07 and 2007-08. The Tribunal found that the appellant had a valid and reasonable cause for not getting the accounts audited before the prescribed date, as the turnover did not exceed the threshold amount as required by section 44AB. As a result, both appeals of the appellant were allowed, and the penalties were deleted.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the penalties under section 271B should be deleted for both assessment years due to the reasonable cause presented by the appellant for not meeting the audit requirements as per section 44AB of the Income Tax Act, 1961.