2005 (6) TMI 223 - AT - Income Tax

Summary

Issues:
- Imposition of penalty under s. 271B for failure to get accounts audited under s. 44AB
- Whether transportation receipts form part of total turnover
- Applicability of case law in the given scenario

Imposition of Penalty under s. 271B:
The appellant appealed against the penalty imposed by the AO under s. 271B, contending that the penalty was unjustified as they believed that transportation receipts from sister-concerns were not to be accounted towards their income. The AO observed that the appellant's gross receipts, including transportation receipts, exceeded Rs. 40 lakhs, necessitating audit under s. 44AB. As the appellant failed to get the accounts audited and furnish the audit report, the penalty was imposed. The CIT(A) upheld the penalty, stating that the transportation receipts form part of the total turnover, and the appellant was in default under s. 44AB. The Tribunal concurred with the CIT(A) and upheld the penalty, rejecting the appellant's appeal.

Inclusion of Transportation Receipts in Turnover:
The appellant argued that transportation receipts from specific mills should not be considered part of the turnover as no profit was earned from those transactions. However, the CIT(A) held that the transportation receipts, regardless of profit earned or passed on to other concerns, form part of the total turnover. The Tribunal agreed with the CIT(A) that the transportation was directly done by the appellant, making the receipts integral to the turnover calculation. As the total turnover exceeded Rs. 40 lakhs and the accounts were not audited as required by s. 44AB, the penalty under s. 271B was deemed justified.

Applicability of Case Law:
The appellant cited case law to support their argument that since their turnover was below Rs. 40 lakhs, audit under s. 44AB was not mandatory. However, the Tribunal found that the case law referenced was not applicable to the specific circumstances of the appellant's case. The absence of documented proof or agreements to exclude the transportation receipts from turnover led to the rejection of the appellant's argument. The Tribunal upheld the CIT(A)'s decision and confirmed the penalty imposed by the AO, emphasizing the direct involvement of the appellant in transportation activities and the consequent inclusion of receipts in the turnover calculation.

In conclusion, the Tribunal dismissed the appellant's appeal, upholding the penalty imposed under s. 271B for failure to comply with the audit requirements of s. 44AB and confirming that transportation receipts formed part of the total turnover.