1991 (12) TMI 109 - AT - Income Tax

Summary

Issues:
- Penalty imposed under section 271B of the IT Act for failure to get accounts audited and obtain a tax audit report as per section 44AB.
- Whether there was a reasonable cause for the delay in furnishing the audit report.
- Applicability of penalty considering the circumstances and compliance with statutory requirements.

Analysis:

Issue 1: Penalty under section 271B
The appeal was against the penalty order imposed by the ITO under section 271B of the IT Act for failure to obtain a tax audit report as required by section 44AB. The penalty was imposed at 1/2% of the turnover, amounting to Rs. 55,520. The CIT(A) allowed the appeal, canceling the penalty.

Issue 2: Reasonable cause for delay
The CIT(A) considered the delay in obtaining the audit report, noting that the assessee and his accountant were not familiar with the audit procedure due to it being the first year of operation of section 44AB. The delay was deemed unintentional and unavoidable, with no benefit to the assessee as the income was non-taxable. The CIT(A) held that there was a reasonable cause for the delay and canceled the penalty.

Issue 3: Compliance with statutory requirements
The Asstt. CIT argued that the assessee was a habitual defaulter and neglected to provide an explanation for the delay. However, the counsel for the assessee argued that the delay was due to uncertainties surrounding the new provisions of section 44AB and the first-time operation of these rules. The Gujarat High Court's decision was cited to support the argument that failure to comply without a reasonable cause should not lead to a penalty.

Conclusion
The Appellate Tribunal upheld the CIT(A)'s decision, stating that considering the circumstances, uncertainties, and the minimal taxable income, there was a reasonable cause for the delay in complying with section 44AB. The penalty was deemed unjustified, and the appeal by the Revenue was dismissed.