2022 (1) TMI 884 - AT - Income Tax

Penalty u/s. 271B - absence of auditing u/s. 44AB - assessee contended before the authorities below that it had maintained proper books of account as prescribed under the provisions of Maharashtra Cooperative Societies Act, 1960 which were duly audited as per the provisions of that Act - HELD THAT - Section 271B requiring imposition of penalty for failure to get the accounts audited u/s. 44AB, is covered u/s. 273B, which, in turn, prescribes that no penalty shall be imposed if reasonable cause for the failure is established. We are confronted with a case of a Cooperative Society dealing with small farmers having turnover of less than ₹ 1.00 crore with the exclusion of the amount of grant-in-aid. The very fact that the assessee got its accounts audited under the Cooperative Societies Act prima facie shows that it entertained a bona fide belief that the amount of grant-in-aid received from Government of Maharashtra was not includible for the purposes of computing turnover u/s. 44AB. Had it been otherwise, it would have got the accounts audited u/s. 44AB apart from the auditing for the purposes of Cooperative Society Act. Considering all there was a reasonable cause in the assessee not getting the accounts audited u/s. 44AB resulting in attracting of section 271B of the Act. Since the penalty section is covered u/s. 273B, we hold that the penalty was not required to be levied and confirmed. The same is hereby directed to be deleted. - Decided in favour of assessee.

Summary

Issues:
Assessment of penalty under section 271B of the Income Tax Act for failure to get accounts audited under section 44AB.

Analysis:
The judgment pertains to a batch of appeals by different assesses challenging the sustainability of the penalty imposed under section 271B of the Income Tax Act for the assessment year 2014-15. The primary issue revolves around the requirement of getting accounts audited under section 44AB and the consequent penalty for non-compliance. In the case of Raje Dudh Utpadak Sahakari Sanstha Ltd., the assessee, a Cooperative Society engaged in the sale and purchase of milk and milk products, declared Nil income and did not get its accounts audited as required by the Assessing Officer due to receipts amounting to ?1.65 crore. The penalty imposed by the AO was affirmed in the first appeal, leading the assessee to approach the Tribunal.

Upon examination, it was found that the assessee's receipts, excluding the grant-in-aid received from the Government of Maharashtra, were below the statutory turnover limit requiring audit under section 44AB. The Cooperative Society had maintained proper books of account as per the Maharashtra Cooperative Societies Act, which were duly audited. The grant-in-aid received was utilized for a fodder camp for drought-hit farmers, and the turnover was within limits when excluding the grant amount. The Tribunal noted that the assessee's belief that the grant-in-aid was not includible for turnover calculation under section 44AB was reasonable, given the audit conducted under the Cooperative Societies Act. As section 271B allows for penalty waiver if a reasonable cause for failure to audit accounts is established under section 273B, the Tribunal held that the penalty was unjustified and directed its deletion.

The Tribunal further observed that the circumstances in other appeals were similar to the Raje Dudh Utpadak Sahakari Sanstha Ltd. case, involving Cooperative Societies dealing with small farmers and engaging in the sale of milk. Consequently, the penalty was deleted in all the appeals. The judgment emphasizes the importance of considering the specific circumstances of each case and the reasonableness of the assessee's actions in determining the applicability of penalties under the Income Tax Act.

In conclusion, the Tribunal allowed all the appeals, holding that the penalty under section 271B was not warranted in the cases of Cooperative Societies engaged in the sale and purchase of milk from small farmers. The judgment highlights the need for a nuanced approach in assessing penalties under tax laws, taking into account the bona fide beliefs and specific conditions of the assessees to ensure fair treatment and compliance with legal provisions.