2004 (7) TMI 305 - AT - Income Tax

Summary

Issues:
- Imposition of penalty under section 271B of the IT Act, 1961 based on non-compliance with section 44AB.

Analysis:
The appeal was filed by the assessee against the order of the CIT(A) imposing a penalty under section 271B of the IT Act, 1961. The assessee disclosed gross commission from freight receipts but did not get the accounts audited as required by section 44AB. The Assessing Officer (AO) imposed a penalty for non-compliance. The CIT(A) upheld the penalty, leading to the appeal.

The assessee contended that the freight receipts were not the turnover but only the commission income. The audited accounts supported this claim. The assessee argued that there was no violation of section 44AB and cited a Tribunal decision to support the position. It was asserted that the assessee genuinely believed that the freight receipts were not part of the turnover, constituting a reasonable cause for non-compliance.

On the other hand, the Departmental Representative supported the decisions of the lower authorities. The Tribunal considered the nature of the assessee's business, where commission income was earned on booking trucks for others. It was clarified that the commission constituted turnover, not the gross freight receipts. Referring to a circular, it was established that in the case of agents, the commission was considered turnover. The Tribunal found that the assessee's belief that the receipts were not turnover was genuine and constituted a reasonable cause for non-compliance with section 44AB.

Ultimately, the Tribunal allowed the appeal, canceling the penalty imposed under section 271B. It was concluded that the commission income, not the freight receipts, constituted the turnover of the assessee. The genuine belief held by the assessee regarding the treatment of receipts as turnover was considered a reasonable cause for the non-compliance with section 44AB.