1993 (5) TMI 50 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under Section 271B of the Income-tax Act, 1961.
2. Failure to obtain an audit report under Section 44AB of the Income-tax Act, 1961.
3. Reasonable cause for delay under Section 273B of the Income-tax Act, 1961.

Detailed Analysis:

1. Levy of Penalty under Section 271B:
The primary issue is the imposition of a penalty under Section 271B of the Income-tax Act, 1961, due to the assessee's failure to obtain an audit report as required under Section 44AB. Section 271B stipulates a penalty of 0.5% of the turnover or receipts, subject to a maximum of Rs. 1 lakh, for non-compliance with Section 44AB. The assessee argued that the penalty should not apply to delays but only to failures to obtain the audit report.

2. Failure to Obtain an Audit Report under Section 44AB:
Section 44AB mandates that every person carrying on business with a turnover exceeding Rs. 40 lakh or professional receipts exceeding Rs. 10 lakh must get their accounts audited by a specified date. For the assessment year 1988-89, the specified date was 30th June 1988. The assessee obtained the audit report on 25th March 1989 and filed it on 1st June 1989, thus missing the deadline by eight months. The assessee contended that the delay was due to the auditors taking eight months to complete the audit, despite the accounts being made available to them in June 1988.

3. Reasonable Cause for Delay under Section 273B:
Section 273B provides that no penalty shall be imposed if the assessee proves that there was a reasonable cause for the failure. The assessee cited several reasons for the delay, including the complexity of the accounts written in Gujarati script by 'Mehtaji,' who was not familiar with tax laws, and the large volume of transactions requiring significant clerical work and scrutiny. However, the Income-tax Officer (ITO) and the Commissioner of Income-tax (Appeals) [CIT (A)] found these reasons unsatisfactory. The ITO noted that the accounting year ended on 30th April 1987, giving the assessee 14 months to comply, yet the audit was completed only on 25th March 1989.

The CIT (A) upheld the penalty, referencing earlier decisions that were not applicable to the present case. The assessee's reliance on the Calcutta High Court decision in Calcutta Chromotype (P.) Ltd. and the Allahabad High Court decision in CIT v. Anchor Pressing (P.) Ltd. was deemed irrelevant as these cases pertained to different tax laws not in pari materia with the Income-tax Act.

The Tribunal found that the obligation under Section 44AB is to obtain the audit report before the specified date. Failure to do so, even if delayed, constitutes a failure within the meaning of Section 271B. The Tribunal distinguished the provisions of the Companies (Profits) Surtax Act and the Super Profits Tax Act from the Income-tax Act, noting that the former allowed for filing returns before assessment, unlike Section 44AB, which mandates obtaining the audit report within a specified period.

The Tribunal also rejected the assessee's new evidence attributing the delay to the auditors, as it was introduced at the second appellate stage. The Tribunal found no merit in the argument that the non-initiation of penalty proceedings under Section 271(1)(a) for delayed return filing should affect the penalty under Section 271B.

Conclusion:
The Tribunal upheld the penalty under Section 271B, finding that the assessee failed to obtain the audit report within the specified time and did not demonstrate a reasonable cause for the delay. The appeal was dismissed, affirming the CIT (A)'s order.