TMI Blog2013 (1) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... st year (i.e., A.Y. 2006-07) in spite of the default in complying with the provision of s. 44AB, which the said (former) section seeks to penalize, and accordingly direct its deletion. A.Y. 2006-07 - The return for the second year (i.e., A.Y. 2007-08) was filed on 24-09-2007, even as, the show-cause notice for the levy of penalty u/s. 271B for the first year (A.Y. 2006-07) stood issued to it on 13-06-2007. As such, ignorance of law, i.e., of it being required to get its accounts audited u/s. 44AB irrespective of the quantum and nature of its income, including the tax status, tax-exempt or otherwise, thereof, which forms the edifice of the assessee's case, completely breaks down for the second year, i.e., A.Y. 2007-08. Having been served with a legal notice for the levy of penalty u/s. 271B, it was incumbent on the assessee to cause to comply with the provision, at least for the second year and, in any case, seek legal opinion in its respect. Rather, it could have, on its own, requested the AO not levy the penalty for that year (i.e., A.Y. 2006-07), explaining that the non-audit of its accounts u/s. 44AB stood caused only due to its ignorance of law, acting though in good faith, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit of its accounts by a private firm of Chartered Accountants, so that the same were audited only by its statutory auditors, namely, the District Audit Officer. The same was found not acceptable by the Assessing Officer and penalty u/s. 271B levied at Rs. 33,438/-vide order dated 28/03/2008. The facts for the following year, i.e., assessment year 2007-2008, are much the same, and the penalty stood levied at Rs. 44,458/- vide order dated 28/05/2008. 2.2 In appeal, the assessee raised several contentions. Firstly, that the penalty order was invalid as the penalty proceedings were initiated prior to the completion of the assessment. Secondly, that due to the delayed finalization of its accounts for the immediately preceding year, it could not get its accounts audited by a firm of Chartered Accountants u/s. 44AB, i.e., besides the statutory audit, and hence the filing of its return without an audit report there-under. Further, that its entire income was exempt u/s. 80P(2)(a) of the Act and, as such, there was no loss to the Revenue. The same did not find favour with the first appellate authority, who also observed lack of bona fides on the assessee's part. The assessee's legal conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier initiation of penalty proceedings, et. al., are without basis and/or of no moment, and rightly rejected by them. Each of the said contentions, which though were not raised before us, stand suitably addressed and met by the authorities below; the ld. CIT(A) in particular. The statutory audit for the first year (A.Y. 2006-07) stood completed well before the due date of the filing of the return for that year. Where, then, does the question of non-finalization of accounts for the preceding year (f.y. 2004-05) arise, much less for the following year - the assessee having raised this plea for both the years under reference. The U.P Co-operative Societies Act, under which the assessee is purportedly constituted, does not bar or in any manner prevent the assessee, a society registered there-under, from getting its accounts audited u/s. 44AB of the Act, and obtaining a report there-under. In fact, section 44AB itself contemplates such a situation, i.e., of the accounts of the assessee being required to be statutorily audited under its governing Act/Rules and, accordingly, prescribes obtaining an additional report u/s. 44AB in such cases, submitting both these reports, i.e., the statutor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section. Explanation.-For the purposes of this section,- (i) "accountant" shall have the same meaning as in the Explanation below sub-section (2) of section 288; (ii) "specified date", in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the 30th day of September of the assessment year.' Section 271B of the Act reads as under: 'If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under section 44AB, the Assessing 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.' So, however, we could still understand and admit such a plea, where such a view is shown to have been advanced by its counsel, or such a plea is raised with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the degree of general and legal awareness; the knowledge of the concerned person/s as also those in the assessee's ambit, et. al. It is thus difficult to state of the afore-going, by way of a general proposition or as a ratio or a matter of rule. In a given case, an assessee may well be aware of the legal requirement (as apparent from its own past conduct or otherwise), so that the said proposition or ratio would be to no consequence. At the same time, however, there does not appear to be much difference in the facts and circumstances of the present case vis-a-vis those under reference. Further, though a reasonable cause, which mitigates penalty (section 273B), is to be proved by the assessee, and which it has not in the instant case, i.e., by leading any positive evidence, we have no reason to doubt the assessee when it states that it was under a bona fide belief that it was not required to get its accounts audited u/s. 44AB in view of its entire income being exempt u/s. 80P of the Act. Its' statutory audit was completed well in time, so that it was definitely in a position to obtain an additional report u/s. 44AB from a firm of Chartered Accountants, i.e., were it to be in its k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable time. The assessee cannot take a stand that it shall not, for that would be a contravention of law, and a deliberate one at that, making it liable to penalty u/s. 271B of the Act. That, however, is not the same thing, or equivalent to stating that where audit u/s. 44AB has not been caused and audit report consequently not obtained, penalty for the said contravention, irrespective of circumstances, has to be necessarily levied. In other words, our reason for directing the deletion of penalty is not a legal one but purely one of fact. As clarified by the hon'ble apex court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, penalty for a failure to carry out a statutory obligation will not ordinarily be imposed even where it is legal to do so, unless the defaulter acts in conscious disregard of its obligations. Further, this is precisely why we have accepted the assessee's case only for first year, i.e., A.Y. 2006-07. The return for the second year (i.e., A.Y. 2007-08) was filed on 24-09-2007, even as, as afore-stated, the show-cause notice for the levy of penalty u/s. 271B for the first year (A.Y. 2006-07) stood issued to it on 13-06-2007. As such, ignor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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