2000 (5) TMI 162 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee was required to get its accounts audited u/s 44AB of the Income-tax Act, 1961.
2. Whether the penalty u/s 271B was justified.

Summary:

Issue 1: Requirement of Audit u/s 44AB

The assessee filed its return of income declaring a total income of Rs. 11,604. The Assessing Officer (AO) found that the gross receipts, including T.D.S., amounted to Rs. 57,47,422, which exceeded the threshold of Rs. 40 lakhs specified u/s 44AB, necessitating an audit. The assessee contended that it acted as a transport booking agent, earning only commission, and thus, its turnover should be considered as commission income only, similar to a Kuchha Arhatia. The CIT(A) accepted this argument, noting that the assessee's business nature was not in dispute and that the AO had accepted the declared commission income. The CIT(A) referred to the CBDT Circular No. 452, which clarifies that for agents like Kuchha Arhatias, turnover includes only commission and not sales on behalf of principals. The Tribunal upheld this view, stating that the assessee's position was similar to that of a Kuchha Arhatia, and hence, the provisions of section 44AB were not applicable.

Issue 2: Justification of Penalty u/s 271B

The AO imposed a penalty of Rs. 42,205 u/s 271B for the failure to get accounts audited. The CIT(A) deleted the penalty, considering the assessee's bona fide belief that it was not required to audit its accounts, supported by the Board's Circular and the nature of its business. The Tribunal agreed, emphasizing that the issue of whether the freight receipts were the assessee's own was debatable, and the assessee's belief was reasonable. Furthermore, there was no difference between the returned and assessed income, and no revenue loss occurred. The Tribunal highlighted that the discretion to impose a penalty should be exercised judicially, especially in cases of technical or venial breaches. Citing the Supreme Court's decision in Hindustan Steel Ltd., the Tribunal concluded that no penalty should be imposed for a bona fide belief or minor default.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order to cancel the penalty u/s 271B, based on the assessee's reasonable cause and the nature of its business as a transport booking agent, similar to a Kuchha Arhatia.