2015 (10) TMI 1386 - AT - Income Tax

Penalty u/s.271B - non furnishing of tax audit report u/s 44AB - determination of turnover - Held that - The notice of penalty and the basis for the A.O. in levying the penalty was that the assessee s work-in-process (WIP) had witnessed an increase during the year for an amount beyond the prescribed limit. Though, therefore, we do not regard the ld. CIT(A) to have, in confirming the penalty, based it on a different cause; the default being the same, it does amount to a different view being adopted on the same set of facts, confirming the view, if one was required, that the matter is liable to be considered in more ways than one. The inclusion of purchases , as stated by the A.O. with reference to the Sales Tax Act, for the purpose of invoking s. 44AB, is without merit. This is for the simple reason that the word turnover stands clearly and separately defined under the sales-tax legislation to include purchases as well. Even following the legal principles on the basis of the legal maxims ejusdem generis and noscitus A Sociis would operate to exclude purchases from forming part of the qualifying criterion. Rather, a provision, for the purpose of levy of penalty, is to be even otherwise strictly construed. It is perhaps for the reason of the same not finding approval of the ld. CIT(A) that she chose not to advert thereto in the impugned order. As explained by the apex court in Hindustan Steel Ltd. vs. State of Orissa 1969 (8) TMI 31 - SUPREME Court a penalty, even where the provision stands attracted, may lawfully be not levied where the default is not found to be a result of a conscious disregard by the tax payer of his legal obligations or a conduct contumacious, which is clearly not the case in the instant case. In view of the foregoing, we are of the clear and unambiguous view that the assessee s case, despite a default of s. 44AB of the Act, is not liable in law for penalty u/s.271B in the facts and circumstances of the case. We, accordingly, direct its deletion. - Decided in favour of assessee.

Summary

Issues:
1. Condonation of delay in filing appeal.
2. Levy of penalty u/s.271B of the Income Tax Act, 1961 for non-compliance with audit report filing requirements.
3. Interpretation of 'gross receipts' under section 44AB of the Act.
4. Applicability of penalty u/s.271B in the case.

Detailed Analysis:
1. The Appellate Tribunal considered the delay in filing the appeal and decided to condone it after reviewing the condonation petition and affidavit, deeming it a case of honest and bona fide delay to serve substantial justice. The delay was condoned, and the appeal was admitted for hearing.

2. The case involved the levy of a penalty under section 271B of the Income Tax Act for the assessment year 2005-06 due to the assessee's failure to file a separate audit report in Form 3CA as required under section 44AB of the Act. The Assessing Officer imposed the penalty based on the increase in work-in-progress exceeding the turnover limit. The Commissioner of Income Tax (Appeals) upheld the penalty citing relevant case law and circulars.

3. The Tribunal analyzed the definition of 'gross receipts' under section 44AB, emphasizing that it includes amounts received by the assessee-builder from customers for construction, regardless of the profit element. The Tribunal acknowledged the revenue nature of these receipts and the distinction between 'sales', 'turnover', and 'gross receipts'. While agreeing with the Revenue on the nature of receipts, the Tribunal found the case debatable, constituting a reasonable cause under section 273B, thus saving the assessee from penalty.

4. Despite agreeing with the Revenue on the interpretation of 'gross receipts', the Tribunal held that the assessee was not liable for penalty under section 271B. The Tribunal noted that the audit report under the Companies Act partially fulfilled the requirements of section 44AB, and the non-filing of Form 3CA was due to a genuine belief regarding turnover limits. The Tribunal also disagreed with the inclusion of 'purchases' for penalty purposes and cited legal principles to support its decision to delete the penalty.

In conclusion, the Appellate Tribunal allowed the assessee's appeal, directing the deletion of the penalty under section 271B, based on the detailed analysis and interpretation of the legal provisions and case law presented in the judgment.