2023 (9) TMI 671 - AT - Income Tax

Penalty u/s. 271B - assessee failed to get its accounts of the previous year - HELD THAT - According to sub-clause (a) to Section 44AB of the Act, the audit is mandatory for every person carrying business if its turnover of the said assessee exceeds rupees sixty lakhs. Since in the present case, the turnover of the assessee was below rupees sixty lakhs, we are of the considered opinion that the audit u/s. 44AB of the Act in Form 3CA had to furnish the particulars in form 3CD are not required. Thus according to the provisions of sub-clause (a) to Section 44AB of the Act, the assessee is out of the ambit of mandatory requirement of audit u/s. 44AB of the Act. Therefore, the question of imposing penalty u/s. 271B of the Act for not getting the accounts audited u/s. 44AB of the Act, does not arise in the present case. Appeal of assessee allowed.

Summary

Issues involved: Appeal against penalty order u/s 271B of the Income Tax Act, 1961 for assessment year 2013-2014.

1. The appellant challenged the penalty imposed u/s 271B of the Act, contending that the turnover was below the prescribed limit for mandatory audit u/s 44AB.
- The assessee, engaged in manufacturing and trading, failed to upload the audit report on time, leading to penalty proceedings.
- The AO imposed a penalty of Rs. 1,50,000 for not auditing accounts as required u/s 44AB, despite the assessee's turnover being below the limit.
- The assessee argued that as per Section 44AB, audit was not mandatory due to turnover being below Rs. 60 lakhs for the relevant assessment year.
- The CIT(A) dismissed the appeal due to non-compliance with notices, upholding the penalty, which the appellant contested.

2. The interpretation of Section 44AB regarding mandatory audit requirement based on turnover.
- The AO insisted on mandatory audit u/s 44AB for all companies, disregarding the turnover threshold mentioned in the provision.
- The Tribunal observed that as per Section 44AB, audit is compulsory only if turnover exceeds Rs. 60 lakhs, which was not the case for the appellant.
- The Tribunal found that the appellant's turnover was below the threshold, hence the penalty u/s 271B for non-compliance with audit requirements was unjustified.
- The Tribunal directed the AO to delete the penalty, ruling in favor of the appellant.

3. Compliance with statutory provisions and interpretation of audit requirements u/s 44AB.
- The AO and CIT(A) emphasized the mandatory nature of audit for all companies, overlooking the turnover criteria specified in Section 44AB.
- The Tribunal highlighted that the audit under Section 44AB is obligatory only if turnover exceeds the prescribed limit, which was not the case for the appellant.
- Due to non-compliance with notices, the CIT(A) upheld the penalty, but the Tribunal found in favor of the appellant based on the turnover criteria specified in Section 44AB.
- The Tribunal allowed the appeal, directing the deletion of the penalty imposed u/s 271B.

This judgment clarifies the interpretation of Section 44AB regarding mandatory audit requirements based on turnover, emphasizing compliance with statutory provisions and ensuring penalties are imposed in accordance with the law.