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2012 (10) TMI 807 - HC - Income TaxPenalty u/s 271-B - failure to get accounts audited - violation of the provisions of Section 44-AB & its 2nd proviso - ITAT deleted the levy - Held that - Apart from the fact that the audit of the respondent-society under Section 64 of the U.P. Cooperative Societies Act, 1963, has to be carried out by the Accountant appointed by the Registrar of societies, who has specific qualifications, there was an order passed by the High Court directing that no cooperative society in the State of U.P., will get its account audited through the private Chartered Accountants. Thus it cannot be concluded that Tribunal committed any error in law in observing that in view of the order issued by the High Court, which was binding upon all the cooperative societies in the State of U.P. including the respondent-assessee, the respondent cooperative society could have got its account audited through a chartered accountant - in favour of assessee. Under Section 271B there is discretion with the income tax authorities to award penalty and this discretion has to be exercised fairly and reasonably on the facts and circumstances in accordance with the settled judicial principles.
Issues:
1. Defective appeal filed under Section 260A of the Income Tax Act, 1961. 2. Justification for deleting penalty under Section 271-B of the Act. 3. Compliance with the provisions of Section 44-AB and its 2nd proviso. 4. Filing of statutory audit report in Form 3-CD for compliance with 2nd proviso to Section 44-AB. 5. Discretion of income tax authorities in imposing penalty under Section 271B. Issue 1: The appeal was reported as defective due to the absence of a certified copy of the order of the Tribunal and the requirement of a typed copy of the judgment. However, the appeal was considered regular after the certified copy issued by the Income Tax Appellate Tribunal was enclosed. Issue 2: The Commissioner of Income Tax, Bareilly, filed an appeal questioning the deletion of a penalty of Rs.1,00,000 imposed under Section 271-B of the Act. The CIT (A) canceled the penalty, stating that the cooperative society had filed an audit report of its internal auditors as per the Cooperative Society Act, which could be considered as compliance with Section 44AB of the I.T. Act. Issue 3: The respondent-assessee, a cooperative society engaged in banking business, had not complied with the provisions of Section 44AB of the Act requiring accounts to be audited by a Chartered Accountant. The penalty imposed was contested, and the ITAT dismissed the appeal, citing a previous judgment related to the audit of cooperative societies in the state. Issue 4: The Tribunal noted that a High Court order restrained cooperative societies in the state from conducting audits through private Chartered Accountants. The respondent was bound by this order and, therefore, could not have their accounts audited by a Chartered Accountant, as required by Section 44AB. Issue 5: The Tribunal emphasized that income tax authorities have discretion in imposing penalties under Section 271B, which must be exercised fairly and reasonably based on the facts and circumstances. In this case, it was concluded that the penalty was not justified, considering the compliance with the U.P. Cooperative Societies Act and the High Court order. In conclusion, the High Court dismissed the income tax appeal, ruling in favor of the respondent-assessee, based on the compliance with the U.P. Cooperative Societies Act, the High Court order, and the discretionary powers of income tax authorities in imposing penalties under Section 271B.
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