2009 (2) TMI 45 - HC - Income Tax

Failure to get account audited as required u/s 44AB - penalties imposed u/s 271 B assessee (co-operative society) pleaded that it was under the bona fide belief that it was not required to get the audit report submitted, as the income of the assessee unit was exempted u/s 80 P - no any sufficient reason to interfere with the satisfaction recorded by the tribunal as to the finding of fact that the assessee had no intention to cause any loss to Revenue and as such, the penalty was not imposable

Summary

Issues:
1. Appeal against penalty imposed under Section 271 B of the Income Tax Act, 1961 for failure to submit audit report under Section 44 AB.
2. Interpretation of whether penalty justified when income is deductible under Section 80 P and audit report not submitted on time.

Analysis:
1. The case involved an appeal against a penalty imposed under Section 271 B of the Income Tax Act, 1961, for the failure to submit an audit report under Section 44 AB. The appellant, a cooperative society engaged in promoting and supplying sugarcane, failed to get its accounts audited within the prescribed time. The Assessing Officer imposed a penalty despite the appellant's belief that the income was exempted under Section 80 P of the Act. The Commissioner of Income Tax (Appeals) upheld the penalty, leading to an appeal before the Income Tax Appellate Tribunal, which set aside the penalty in 2006, resulting in the current appeal.

2. The key issue revolved around whether the penalty under Section 271 B was justified when the income of the appellant was deductible under Section 80 P, even though the audit report was not submitted on time. The appellant argued that ignorance of the law is not an excuse and that the penalty was correctly imposed. Conversely, the respondent contended that since no tax was payable due to the income being exempt under Section 80 P, there was no intention to cause loss to the revenue, thus justifying the setting aside of the penalty.

3. The High Court analyzed the facts and circumstances, emphasizing that the appellant's income was deductible under Section 80 P, and an audit was required under Section 44 AB regardless of the income's deductibility. However, the Court noted the absence of any intention by the appellant to conceal income or harm revenue. As no tax was payable due to the exemption under Section 80 P, the Court agreed with the Tribunal's finding that the penalty was unjustified. The Court held that while non-compliance with Section 44 AB could attract a penalty, the absence of tax liability justified the Tribunal's decision to set aside the penalty, affirming that the Tribunal did not err in its judgment.

4. In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision to set aside the penalty imposed under Section 271 B. The Court emphasized that the absence of tax liability, coupled with the appellant's lack of intention to cause revenue loss, justified the Tribunal's ruling. The Court upheld that in such circumstances, the penalty was not warranted, thereby resolving the raised legal question and dismissing the appeal.