2009 (12) TMI 583 - AT - Income Tax

Transportation business - Two vehicles - declaration of higher income than prescribed in section 4AE - Income declared Rs. 8,88,610/- Gross Turnover Rs. 91,33,192/- Held that - the provisions of section 44AB (tax audit) are not applicable in so far as they relate to the business referred to in sub-section (1) and in computing the monetary limits under those sections, the gross receipts or, as the case may be, the income from the said business shall be excluded The assessee with two numbers of light goods carriages referred to in 44AE(2)(ii) and when declared the income higher than the Rs.3,150/- per vehicle per month as per the provision of sub-section 2(ii) of section 44AE, the assessee is rightly entitled to the benefits of section 44AE. The fact that the provisions of section 44AE(5) expressly provided for the exclusion of the relatable turnover for the purposes of monetary limits provided in section 44AB(1) of the Act and the revenue authorities have not provided any specific reason on the applicability of provisions of sub-section (5) of section 44AE, the relevant turnover of Rs.63,93,234/- should be excluded for the purpose of section 44AA and 44AB as per the provisions of section 44AE(5) of the Act.

Issues Involved:
1. Levy of Penalty under Section 271B for non-compliance with Section 44AB of the Income Tax Act, 1961.
2. Applicability of Section 44AE(5) in determining the turnover limit for Section 44AB.
3. Interpretation of Section 44AE in the context of composite business activities involving both owned and hired vehicles.

Detailed Analysis:

Issue 1: Levy of Penalty under Section 271B for Non-Compliance with Section 44AB
The assessee, a proprietor of a transportation business, was penalized under Section 271B for failing to get accounts audited as required by Section 44AB. The annual gross receipts exceeded Rs. 40 lakhs, triggering the audit requirement. The assessee argued that the turnover from owned vehicles should be excluded under Section 44AE(5), thus falling below the audit threshold. The Assessing Officer (AO) rejected this contention and imposed a penalty of Rs. 45,666.

Issue 2: Applicability of Section 44AE(5) in Determining Turnover Limit for Section 44AB
The core issue revolved around whether the turnover from the business of plying, hiring, or leasing goods carriages owned by the assessee should be excluded when calculating the Rs. 40 lakh limit under Section 44AB. The assessee claimed that Section 44AE(5) allowed for such exclusion, as it specifies that gross receipts from the business of plying, hiring, or leasing goods carriages should not be included for the purpose of Section 44AB.

Issue 3: Interpretation of Section 44AE in Composite Business Activities
The CIT(A) upheld the AO's decision, stating that the assessee, engaged in a composite business of both owned and hired vehicles, could not avail the benefits of Section 44AE. The CIT(A) argued that Section 44AE was intended only for those exclusively engaged in the business of plying, hiring, or leasing goods carriages, and not for composite business activities.

Tribunal's Findings:
1. Facts and Legal Provisions: The Tribunal noted that the assessee owned two light commercial vehicles, meeting the criteria under Section 44AE(1) and declared income higher than the minimum specified under Section 44AE(2)(ii). The Tribunal examined the statutory provisions and relevant circulars, including Circular No. 684 of 1994 and Circular No. 3 of 2001, which supported the assessee's interpretation.

2. Circulars and Case Law: The Tribunal referred to Circular No. 684 of 1994, which clarified that the scheme under Section 44AE was applicable to persons owning not more than ten trucks and excluded those who did not own any trucks. The Tribunal also considered the case law cited by the assessee, including Paras Transport Co. vs. ITO and CIT vs. Anil Kumar Arya, which supported the exclusion of turnover from owned vehicles for determining the audit requirement under Section 44AB.

3. Statutory Interpretation: The Tribunal held that Section 44AE(5) explicitly provided for the exclusion of turnover from the business of plying, hiring, or leasing goods carriages owned by the assessee when computing the monetary limits under Section 44AB. The Tribunal found that the CIT(A) had erred in not considering this provision and that the assessee was entitled to exclude the turnover from owned vehicles.

4. Conclusion: The Tribunal concluded that the relevant turnover of Rs. 63,93,234/- from the business of plying owned vehicles should be excluded for the purpose of Section 44AB, thereby nullifying the penalty under Section 271B. The appeal was allowed in favor of the assessee.

Separate Judgment for ITA No. 616/PN/08:
For the appeal in ITA No. 616/PN/08, the Tribunal noted that the issues were identical to those in ITA No. 633/PN/08. Consequently, the decision in the latter was applied to the former, and the appeal was also allowed.

Final Outcome:
Both appeals were allowed, and the penalties under Section 271B were set aside, recognizing the applicability of Section 44AE(5) in excluding the turnover from owned vehicles when determining the audit requirement under Section 44AB.

← Previous Next →