1996 (1) TMI 172 - AT - Income Tax

Summary

Issues:
1. Whether the penalty under section 271B, amounting to Rs. 84,763, should be cancelled or upheld.

Analysis:
1. The issue in this case revolves around the cancellation of a penalty under section 271B of the Income Tax Act, 1961, amounting to Rs. 84,763. The Assessing Officer found that the turnover of the assessee-company exceeded the threshold requiring an audit report under section 44AB. The assessee argued that the delay in appointing an auditor under the Companies Act was a reasonable cause for not furnishing the audit report. However, the A.O. held that the appointment of a Chartered Accountant for audit under section 44AB was not hindered by the delay in appointing a statutory auditor under the Companies Act.

2. The CIT(A) relied on a precedent and cancelled the penalty, but the revenue appealed the decision. The Departmental Representative argued that the Income Tax Act is self-contained, and the delay in statutory audit under the Companies Act does not justify the failure to comply with section 44AB. The assessee contended that the provisions of section 44AB allow for audit under any other law, but failed to provide evidence of efforts made for the appointment of a statutory auditor by the Central Government.

3. The Tribunal analyzed the provisions of section 44AB and emphasized that the onus is on the assessee to prove reasonable cause for failure to comply. The Tribunal held that the delay in statutory audit under the Companies Act does not excuse the failure to conduct an audit under section 44AB. Additionally, the Tribunal noted the lack of evidence regarding efforts to appoint a statutory auditor, leading to the restoration of the penalty. The Tribunal distinguished a previous case where the penalty was upheld due to non-compliance despite repeated opportunities.

4. Ultimately, the Tribunal found that the penalty should be restored as the assessee failed to discharge the onus of proving reasonable cause for non-compliance with section 44AB. The Tribunal also highlighted the importance of timely audit compliance and the need for proper documentation of efforts made to appoint auditors. The decision to restore the penalty was based on the failure to meet the statutory requirements despite available alternatives and lack of evidence of efforts to comply with audit obligations.