2010 (7) TMI 494 - AT - Income Tax

Penalty - Assessee had the turnover of Rs. 43,49,986 in the share business which was not considered for auditing of accounts required under section 44AB of the Act, 1961 - . The only issue for consideration which is common in the Revenue s appeal as well as cross-objection filed by the assessee relates to levy of penalty under section 271B of the Income-tax Act - The Assessing Officer, considering the provisions of section 44AB of the Act, levied the penalty at half per cent, of the total turnover of both businesses subject to maximum of Rs. 1,00,000 - on the decision of the hon ble Supreme Court in the case of R.B. Jodha Mal Kuthiala v. CIT (1971 -TMI - 6273 - SUPREME Court) wherein it has been held that there was no presumption as to the tax By the plain reading of the provision of the Section 44AB It was held that the assessee, is not in dispute that the assessee had not got tax audit report in respect of share trading business having turnover of Rs. 43,49,986 - levy of penalty confirmed.

Summary

Issues:
Levy of penalty under section 271B of the Income-tax Act for failure to get accounts audited as required under section 44AB.

Analysis:
The appeal and cross-objection arose from the order of the Commissioner of Income-tax (Appeals) regarding the imposition of a penalty under section 271B of the Income-tax Act for the assessment year 2004-05. The dispute centered around the failure of the assessee to get the accounts audited for the share trading business, despite auditing the export business accounts. The Revenue contended that penalty should be based on the total turnover of both businesses, while the assessee argued that penalty should only apply to the turnover of the share trading business.

The Commissioner of Income-tax (Appeals) upheld the penalty, considering that the assessee was duty-bound to get both business accounts audited as per section 44AB. The Commissioner relied on the Supreme Court's decision in R.B. Jodha Mal Kuthiala v. CIT, emphasizing the need for compliance with tax laws. The Revenue appealed against the deletion of penalty for the turnover of the other business, while the assessee contested the penalty on the entire turnover.

The Tribunal analyzed the provisions of section 44AB, emphasizing that all businesses' turnover exceeding the prescribed limit must be audited. However, the law did not specify the penalty application when accounts of one business are audited but not of others. It was noted that penalty cannot be imposed if there is no failure on the part of the assessee. As the export business accounts were audited on time, penalty was upheld only for the share trading business turnover, not the total turnover of both businesses.

Ultimately, the Tribunal dismissed the Revenue's appeal and the assessee's cross-objection, upholding the penalty imposition on the share trading business turnover. The decision was based on the principle that penalty cannot be applied where accounts have been audited and filed on time, in line with the provisions of the Income-tax Act.

In conclusion, the Tribunal affirmed the imposition of penalty under section 271B of the Income-tax Act for the failure to get the share trading business accounts audited, while dismissing the appeals and cross-objections from both parties.