2008 (2) TMI 29 - HC - Income Tax

Assessee replied to the SCN stating that it being a co-operative society was required to get its accounts audited by the auditor appointed by the Registrar Co-operative Societies under the provisions of the Societies Act - since the auditor was not appointed by the Registrar within the stipulated time - so the audit report could not be submitted in time Above reason is reasonable so penalty not imposable u/s 271B or 44AB

Summary

Issues:
Penalty under section 271B of the Income-tax Act for violation of section 44AB provisions.

Analysis:
The judgment pertains to the disposal of Income-tax Appeals concerning penalties imposed under section 271B of the Income-tax Act for non-compliance with section 44AB provisions. The case involved a co-operative credit and service society deriving income from various sources, including supplying goods and services to members. The society filed its return declaring nil income for a specific year but failed to get its accounts audited by a chartered accountant and furnish the report by the prescribed date, leading to a penalty notice under section 271B. The society argued that it was required to have its accounts audited by an auditor appointed by the Registrar under the Societies Act, and the delay was due to the auditor not being appointed in time.

The Assessing Officer imposed a penalty, which was upheld by the Commissioner of Income tax (Appeals) but later overturned by the Income-tax Appellate Tribunal. The Tribunal found the society's explanation satisfactory, leading to the cancellation of the penalty. The Revenue appealed, arguing that the society could have availed an alternative method to comply with the audit requirements under section 44AB. However, the Tribunal's decision was upheld as the society acted under the control of the Registrar, Co-operative Societies, and submitted the necessary audit report within a reasonable time.

The judgment highlighted the provisions of section 44AB, which mandate auditing by a chartered accountant if certain thresholds are met. It was emphasized that the society's compliance with the Societies Act requirements, under the control of the Registrar, justified the delay in submitting the audit report. The Tribunal's decision was deemed legally sound, as the society's explanation was found satisfactory, invoking the protection under section 273B for reasonable cause of delay. The Court dismissed the appeals, concluding that no substantial question of law arose, and upheld the Tribunal's decision to cancel the penalty based on the satisfactory explanation provided by the society.