2003 (10) TMI 246 - AT - Income Tax

Summary

Issues:
1. Imposition of penalty under section 271B of the IT Act for failure to get accounts audited.
2. Applicability of audit requirements under the Co-operative Societies Act, 1912 or State Acts.
3. Interpretation of section 44AB in the case of co-operative societies.
4. Justification of penalty under section 271B and compliance with legal provisions.

Analysis:
The appeal was against the penalty of Rs. 90,000 imposed under section 271B of the IT Act for the assessment year 1992-93. The assessee, a co-operative society, failed to get its accounts audited under section 44AB of the Act. The assessee argued that being a co-operative society, its accounts were audited under the Co-operative Societies Act, 1912 or State Acts, and thus, no further audit under section 44AB was necessary. The audit report was submitted to the Assessing Officer (AO) during assessment proceedings. However, the CIT(A) upheld the penalty, citing the second proviso to section 44AB, which requires accounts to be audited under any other law and a further report in the prescribed form. The CIT(A) found the explanation unsatisfactory and confirmed the penalty.

During the hearing, the assessee's counsel contended that the audited account copy was obtained before the due date of the return of income and submitted during assessment proceedings. The counsel argued that obtaining the audited copy before 1st July 1995 was compliant with section 44AB. Additionally, it was claimed that the appellant bank, part of the U.P. State Co-operative Bank Ltd., believed the statutory audit report was sufficient for tax audit compliance. The U.P. State Co-operative Bank Ltd. was responsible for obtaining the tax audit report. The tribunal found merit in these arguments and allowed the appeal, ruling in favor of the assessee.

In conclusion, the tribunal held that the assessee's actions were in compliance with the legal requirements, considering the audit report submission and the genuine belief regarding audit compliance. The penalty under section 271B was deemed unjustified, and the appeal of the assessee was allowed based on the provided explanations and legal interpretations regarding audit obligations for co-operative societies.