9911796707
TMI Blog1994 (2) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... section 271B on account of default on the part of the assessee in not complying with the statutory requirements under section 44AB, at the minimum levels of Rs. 28,510, Rs. 34,235 and Rs. 52,560 respectively. 3. The appeals filed by the assessee before the Commissioner of Income-tax (Appeals) against imposition of the abovementioned penalties were disposed of by the CIT(A). The CIT(A) brushed aside the contention of the assessee that its partners were not much agitated and that the work of filing the returns of income and complying with the other statutory requirements had been entrusted to the auditors of the assessee M/s. Singhvi Associates, Bangalore, and that there was a failure on the part of the said auditors to actually comply with the said requirements. She emphasised on the survey conducted by the Department under section 133A of the Act. She also stated that apart from stating that the auditors had delayed the matter, the assessee had not been able to file any convincing evidence or proof to substantiate its contention. In that view, she dismissed the appeals. 4. The assessee has now come up in further appeals before us. The learned counsel for the assessee has trie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tirely rests with the former auditors of the assessee viz, M/s. Singhvi Associates and the assessee should therefore be considered as absolved of any liability towards penalty in that regard. In support of the above contention, the assessee has filed on our record an affidavit stating all the abovementioned facts sworn by one of its partners viz., Shri Mohammad Mustaq, another affidavit filed by Shri Hyderali Jeewabhai, new auditor, copy of the bill raised by M/s. Singhvi Associates dated 9-12-1985 relating to sales-tax matters of the assessee for the year 1983 and also a copy of the letter addressed by the said M/s. Singhvi Associates dated 30-3-1987 to the ITO in support of the claim that M/s. Singhvi Associates had earlier been employed by the assessee as its auditors and tax consultants and also the xerox copies of the unsigned reports in Form 3CB dated 25-6-1986 prepared by M/s. Singhvi Associates. The learned counsel for the assessee has relied on the decision of the ITAT, Hyderabad Bench, in the case of Progressive Constructions (P.) Ltd. v. ITO [1987] 20 ITD 182 and also on another decision of the Madhya Pradesh High Court in the case of Addl. CIT v. B.K. Sethi [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT (Appeals) to the effect that there had been no substantiation of the fact that the delay had occurred on account of any negligence on the part of the Chartered Accountant. Emphasis was also laid on the fact that the assessee had even failed to file applications in Form 6 asking for extension of time for filing the returns. Mainly on these two grounds, the Tribunal had come to the conclusion that there was no reasonable cause behind the delay in filing the returns and had upheld the levy of penalties. However, so far as the present appeals are concerned, the assessee has tried to substantiate the version about the delay occurring on account of the negligence on the part of its erstwhile auditors M/s. Singhvi Associates, by filing affidavits of its partner as well as of the new auditor as discussed above. Other evidences like copy of bill and also copy of the letter addressed to the ITO have also been filed on our record to show that M/s. Singhvi Associates had earlier been appointed to look after the tax matters of the assessee-firm. It cannot also be denied that the partners of the assessee-firm are not much educated and, hence, are not supposed to be acquainted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd verified by such accountant and setting forth such particulars as may be prescribed:" In the Explanation to the above section, "specified date" was stated to be date of the expiry of four months from the end of the previous year or, where there was more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or the 30th day of June of the assessment year, whichever was later. 8. Section 271B, being the charging section relating to imposition of penalty for non-compliance of the provisions of section 44AB, as it stood at the relevant time, read as below: "271B. If any person fails, without reasonable cause, to get his accounts audited in respect of any previous year on years relevant to an assessment year or obtain a report of such audit as required under section 44AB, the Income-tax Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred thousand rupees, whichever is less." It may thus be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be, etc." It may be found that in section 271(1)(a), the failure on the part of the assessee to file the return of income and also to do the same within the time limit as mentioned in section 139, were both mentioned. Thus, in accordance with the said penal provisions, a defaulting assessee was liable to be penalised both for his absolute failure to file the return of income at all and also for his failure to file the return of income in time. In the instant case, however, the lack of mention of the time-frame in section 271B seems to make it a penal provision only in respect of the absolute failure on the part of the assessee to get his accounts audited or to obtain a report of such audit as required under section 44AB. We, therefore, feel inclined to agree with the contention of the learned counsel for the assessee on this issue that a belated act on the part of the assessee to get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uire into what was the purpose of enacting both the sections 44AB and 271B with effect from 1-4-1985 and what prevailing mischief did the enactment of these two sections tried to get rid of. For this purpose, paras 15 to 20 of the memo explaining provisions in Finance Bill, 1984, relating to the new measure introduced in the Income-tax Act of compulsory audit of accounts of certain persons carrying on business or profession, may be taken into consideration. The relevant paragraphs are being reproduced as below: "15. Accounts maintained by companies are required to be audited under the Companies Act, 1956. Accounts maintained by co-operative societies are also required to be audited under the Co-operative Societies Act, 1912. There is, however, no obligation on other categories of taxpayers to get their accounts audited. 16. A proper audit for tax purposes would ensure that the books of account and other records are properly maintained and that they faithfully reflect the income of the taxpayer and claims for deductions are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year, whichever is later. 20. If any person fails, without reasonable cause, to get his accounts audited in respect of any accounting year or years relevant to an assessment year or to obtain a report of such audit as required under the aforesaid provision, the Income-tax Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in the business or of the gross receipts in the profession, in such accounting year or years, subject to a maximum of one lakh rupees." It may be found from above that the Memo explaining the provisions of the Finance Bill simply takes into consideration the necessity of getting the accounts of big businesses audited so that such audited accounts might be taken help of by the ITO at the time of assessing the income of such big businesses. Although a time schedule was mentioned in the said enactment, yet, not much emphasis was laid on that time schedule. The Memorandum explaining the penal provision relating to this issue also did not speak anything about the failure on the part of the assessee to adhere to the said time schedule. It may ..... X X X X Extracts X X X X X X X X Extracts X X X X
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