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TMI Blog1992 (10) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... e prescribed Forms, 3CA and 3CD. The ITO was, therefore, of the view that the assessee-company had failed to perform the statutory obligation. He accordingly issued a show-cause notice to the assessee and after giving an opportunity of being heard to the assessee, he was of the view that the assessee failed without reasonable cause to meet the requirements of s. 44AB. He, therefore, levied a penalty of Rs. 1,00,000 under the provisions of s. 271B of the IT Act. 3. In appeal before the CIT(A), it was pleaded by the assessee that the assessee had got its accounts audited under s. 227(4A) of the Companies Act, 1956, which was completed on 27th July, 1985. The assessee was required to obtain the audit report under the provisions of s. 44AB of the IT Act by the extended date of 30th Sept., 1985. Since the audit had been done under s. 227(4A) of the Companies Act, there was no further necessity for the assessee to get the accounts audited under the provisions of s. 44AB of the IT Act. It was, therefore, pleaded before the CIT(A) that the levy of penalty under s. 271B of the IT Act was not called for. The CIT(A), on these facts, held that in view of the proviso to s. 44AB of the IT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has, therefore, been made to vacate the order of the CIT(A) and restore the order of the ITO. 5. On the other hand, the learned counsel for the assessee, Sri K.K. Viswanatham, supports the decision of the CIT(A). He contends that the assessee filed the return of income for the year under consideration on 30th Sept., 1985 along with the statutory audit report as required under Company Law, along with Annexures. The assessee was under the impression that the report submitted along with the return of income was sufficient compliance under s. 44AB as clearly laid down under the proviso to that section. He urges that s. 44AB provides that in addition to the statutory report, a further report is also required from the statutory auditors to be obtained. Nowhere in the Act it is stipulated that this should be submitted along with the return of income. As per the provisions of the IT Act, the duty of an assessee is only to obtain a statutory audit report and the further report in the prescribed form, but for the assessment year under consideration, it has nowhere been laid down that such a statutory audit report or the further report in the prescribed form has to be submitted before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also to be filed before the ITO. In this regard, he draws our attention to the ITO's letter dt. 20th Feb., 1987 in which the ITO observes: "During the year under consideration the total sales effected by you is Rs. 2,02,87,090.85 Ps. Under the provisions of s. 44AB of the IT Act, 1961, you are required to furnish the Audit Report in Form Nos. 3CA and 3CE. I find that the same is not enclosed to the return of income. Please show cause why the same has not been enclosed? You are hereby directed to furnish the Audit Report immediately." Thus, the ITO was of the view that the further report in the prescribed form was to be furnished before him. The learned counsel has also drawn our attention to the penalty order under s. 271B of the ITO and points out that in the said order also, the ITO has mentioned that the audit report and the further report were to be furnished by the assessee before 30th Sept., 1985. The ITO was thus under the impression that the assessee was required to furnish the audit report and the further report in prescribed forms for the failure of which he levied penalty under s. 271B. This being not a requirement of law and since the assessee was only required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o get their accounts audited, firstly, accounts maintained by a limited company were required to be audited under the Companies Act, 1956; similarly, accounts maintained by a co-operative society were also subjected to audit under the Co-operative Societies Act, 1912. There was no obligation no other assessee to submit their accounts for the purpose of audit. However, s. 44AB of the IT Act has made it mandatory for certain businesses and professions to get their accounts statutorily audited. The provision was introduced with a view to ensure that books of account and other records are properly maintained and that the books of account maintained during the course of the business faithfully reflect the income of a taxpayer and claims for deductions are correctly made by him. Such an audit would also help in checking fraudulent practices. It can also facilitate administration of tax laws by a proper presentation of the accounts before the tax authorities and considerably save the time of the Assessing Officer in carrying out the routine verifications like checking the correctness of totals and verifying whether purchases and sales are properly vouched or not. The time of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of the business. If the true profit of the business could be arrived at by the ITO on the basis of the audit report itself, we do not find any necessity for sustaining a penalty for the failure to obtain the further report in the prescribed forms. 13. It is settled that before a penalty is imposed, the assessee must be apprised of the precise charge brought against him. He must be told that he has contravened the provisions of a particular section. In the case before us, for the assessment year under appeal, the statute required the assessee only to get its accounts audited and obtain the report thereof and a further report in the prescribed forms. In this year, there was no requirement that such audit report or further report in the prescribed forms was to be submitted to the ITO. The furnishing of such a report along with the return of income was introduced w.e.f. 1st April, 1989 and, therefore, it was not mandatory for the year under appeal. The ITO, however, as per his letter dt. 20th Feb., 1987, proposed penalty on the assessee for the default of failure to file the audit report and further report in the prescribed forms. Even in the penalty order, the ITO has mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capable of two alternative meanings the Court should lean in favour of the assessee; if the provision lacks in clarity and no meaning is reasonably clear, the courts will be unable to regard it as of any effect and naturally the assessee cannot be penalised. The provisions of s. 271B as reproduced above do not make it abundantly clear that the failure to obtain the addition report in the prescribed forms is liable to be penalised under s. 271B of the IT Act. Though s. 44AB speaks of "and a further report in the form prescribed in this section", s. 271B envisages penalty only for the failure to get the accounts audited and obtain a report thereof. As already mentioned, the assessee has already got the accounts audited under Company Law and, therefore, in our view, the provisions of s. 271B are not at all attracted. 15. Considering all the facts and circumstances of the case, we are, therefore, of the view that the CIT(A) was justified in cancelling the penalty order. We accordingly uphold his order. The Revenue's appeal is dismissed. 16. Coming to the cross objection by the assessee, it is seen that the cross objection has been filed to support the order of the CIT(A). Since, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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