2013 (7) TMI 88 - HC - Income Tax

Audit of accounts u/s 44AB - delay in appointing auditor and getting audit report - Penalty imposed on Assessee u/s 273B - Held that - Relief was given by the Tribunal to the respondent under Section 273B of the Income Tax Act holding that, in that matter of delaying in completing the audit and signing the audit report, respondent has been able to establish that there was reasonable cause therefor, inasmuch as, neither appointment of the auditor was within its domain and, at the same, time, it was also not within his domain to have the auditor to be appointed by the Registrar or such other person to be appointed by the State Government to complete the same within the time as provided for in the Income Tax Act - Decided against Revenue.

Summary

Issues:
1. Interpretation of Section 44AB of the Income Tax Act regarding audit requirements for co-operative societies.
2. Imposition of penalty under Section 271B for delay in conducting audit and signing the audit report.
3. Application of Section 273B of the Income Tax Act for granting relief based on reasonable cause for the delay.

Analysis:
1. The judgment revolves around the interpretation of Section 44AB of the Income Tax Act in relation to audit requirements for co-operative societies. The provision mandates that businesses with turnover exceeding one crore rupees must get their accounts audited by a specified date. In this case, the respondent co-operative society's turnover exceeded the threshold, necessitating an audit. However, the audit was not completed before the specified date, leading to penalty proceedings under Section 271B.

2. The penalty under Section 271B was imposed on the respondent for the delay in conducting the audit and signing the audit report within the prescribed timeline. Despite losing before the Commissioner of Appeals, the respondent succeeded before the Tribunal. The Tribunal granted relief under Section 273B of the Income Tax Act, citing reasonable cause for the delay. It was argued that the respondent had no control over the appointment of the auditor, as it was the Registrar's responsibility, and thus, the delay was justified.

3. The Tribunal's decision to provide relief under Section 273B was upheld by the High Court. The court found that the respondent had demonstrated a reasonable cause for the delay in completing the audit and signing the audit report. Since the appointment of the auditor was not within the respondent's control, and it was also not responsible for the auditor's timely completion as per the Income Tax Act, the court dismissed the appeal and upheld the relief granted by the Tribunal.

In conclusion, the judgment clarifies the audit requirements for co-operative societies under the Income Tax Act, addresses the penalty for delayed audits under Section 271B, and highlights the application of Section 273B for granting relief based on reasonable cause for the delay in audit completion.