2012 (10) TMI 852 - AT - Income Tax

Penalty u/s 271B - assessee had not got its account audited u/s 44AB - Held that - As decided in ACIT Versus Smt. Bharti Sharma 2010 (7) TMI 494 - ITAT, NEW DELHI the assessee cannot be penalized for the act for which there is no failure on his/her part - for the purpose of sec. 44AB, turnover of all the businesses has to be considered but the provisions of sec. 271B will be pressed in operation in respect of the failure only and not in respect of accounts which have been audited. Setting aside the orders of the authorities giving directions to AO to delete the penalty levied in respect of M/s. Rex Engineering & Shares whose accounts were admittedly audited under sec. 44AB and audit report thereof was filed well within the prescribed time limit - partly in favour of assessee.

Summary

Issues:
Penalty under section 271B of the Income-tax Act, 1961 for failure to get accounts audited under sec. 44AB and file audit report.

Analysis:
The appellant contested the penalty imposed by the Assessing Officer under section 271B of the Income-tax Act, 1961, for not getting the accounts audited under sec. 44AB and not filing the audit report in the case of M/s. Rex Overseas Corporation. The appellant argued that since the sales of M/s. Rex Overseas Corporation were 'Nil', they did not get the accounts audited under sec. 44AB for that entity. However, the accounts of M/s. Rex Engineering and Sales were audited and the audit report was filed due to a total turnover of Rs. 23,69,49,229/-. The Assessing Officer disagreed with the appellant's explanation, stating that all businesses' turnover must be considered for sec. 44AB purposes. The Commissioner of Income-tax (Appeals) upheld the Assessing Officer's decision.

The appellant cited a decision of the Delhi Bench of the Tribunal in the case of ACIT vs. Smt. Bharti Sharma, where a similar issue was addressed. The Tribunal in that case held that a penalty cannot be imposed if there was no failure on the assessee's part. It was clarified that the penalty under sec. 271B applies only to failures and not to audited accounts. In the referenced case, the assessee had two businesses with turnovers exceeding Rs. 40 lakhs. While one business's accounts were audited, the other was not, leading to a penalty imposition. The Tribunal ruled that penalties should only apply to unaudited accounts. Following this precedent, the Tribunal directed the Assessing Officer to delete the penalty imposed under section 271B for M/s. Rex Engineering & Shares, as their accounts were audited under sec. 44AB within the specified time limit.

In conclusion, the Tribunal partially allowed the appeal, setting aside the penalties imposed and directing the deletion of the penalty levied under section 271B for the audited accounts of M/s. Rex Engineering & Shares. The decision was pronounced in open court on 19th October 2012.