TMI Blog2014 (1) TMI 1582X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) has erred in confirming the above penalty levied by the A.O. vide his appeal no. IT/CIT(A) 8/Cir.4/54/08-09. 3.The order appealed against is bad in law and is against the principle of natural justice. 4. The order appealed against is based on surmises and conjectures. 5.Your petitioner reserves the right to add, to delete and/or amend any of the foregoing grounds. 2.Assessee, an individual, filed her return of income on 01.11.2004 declaring total income of Rs. 77.43 lacs.Assessing Officer(AO) finalised the assessment u/s. 143(3) of the Act on 04.12.2006 determining the total income of the assessee at Rs. 1, 00, 76, 850/-.During the course of assessment proceedings, AO found that assessee had shown profit for speculative business at Rs. 17.14 lacs, that the amount shown was the Net Profit amount, that the gross amount of turnover ran into Crores of rupees, that even total of profit/loss put together exceeded Rs. 40 lacs, that assessee had not submitted any Tax Audit Report as required u/s. 44AB of the Act.AO initiated penalty proceedings u/s.271B of the Act and a notice was issued to the assessee on 04.12.2006, after considering the submissions of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 44AB and 271B of the Act as both the sections are inter-related.It is said that tax-audit contributes to expeditious and accelerated assessments and it ensures proper maintenance of accounts in addition to helping in detection of fraudulent practices. 5.a.Keeping in mind the importance and necessity of audit of the books of accounts, Section 271B of the Act was introduced into the statute book along with Section 44AB by the Finance Act 21of 1984, with effect from 01.04.985.It was held as a measure to drive unearth black money. By the Taxation Laws(Amendment and Miscellaneous Provisions)Act, 1986, the phrase without reason -able cause was omitted w.e.f.10.09.1986.By the said Act section 273B was introduced in the Act. The obligation created by section 44AB of the Act as it stood prior to 01.07.1995was merely to get the accounts audited before the specified date.There was no obligation to furnish that audit report before the AO before the specified date.This obligation was created by substituting the words furnish by for the words obtain before by the Finance Act, 1995.Thus, prior to the amendment the obligation of an assessee, to whom section 44AB applied, was merely to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gins with the phrase 'if any person fails without reasonable cause', to get his accounts audited within the time stipulated, then the concerned income-tax authority may direct that such person shall pay by way of penalty, the sum mentioned therein.It is clear that provisions of the section consist of two limbs.The first limb speaks of the failure of an assessee to get his accounts audited whereas the second limb speaks of the failure on his part to furnish a report of such audit.In other words the expression 'as required under section 44AB' appearing in section 271B governs both limbs. 5.1.Here we would like to refer the judgment delivered by the Hon'ble High Court of Rajasthan in the matter of Bajarang Oil Mills (295ITR314), which reads as under: "It may be noticed that the "sales", "turnover" or "gross receipts" are not words of art used in relation to any individual transaction independently but have been used as "sales", "turnover" or "gross receipts". The expression "total" qualify all the other three expressions, viz., "sales", "turnover"and "gross receipts".Total sales indicate the aggregate price of the sale of commodities carried out by the assessee as a trading busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pliance cannot be inquired into without reading the provisions of sections 271B and 273B together as both are integrally connected.As the proof relating to reasonable cause is a matter of factual details, so burden has been cast upon the assessee to produce evidence in this regard.In the case of Khuda Wood Products P. Ltd., (297ITR383)Hon'ble Gauhati High Court had held that there was no evid -ence on record to show that any effort was made by the assessee to get the accounts duly audited within the scheduled time and therefore imposition of penalty u/s.271B of the Act was justified. 6.1.Now we would like to high light some of the principles relevant for imposing penalty under the section: i).The quantum of penalty under section 271B does not depend on the length of the delay beyond the'specified date' in getting the accounts audited and furnishing a report of such audit. The base for computation of penalty is the turnover of sales or gross receipts, as the case may be. It is true that there is no specific reference to 'specified date' made in the section, however, section clearly mentions that the violation of the provisions of section is punishable under the Act.The time-fram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71B can be levied.In such cases it becomes clear that compulsory audit of the books of accounts of the assessee was not over till due date of finalsing the audit report, . ix).Even after amendments, section 44AB does not require filing of such return along with the audit report within the time specified under sub-section (1) of section 139 and consequently no penalty for such a default has been provided in section 271B.In other words if no notice is issued under section142(1) asking the assessee to file the return of income and assessee furnishes the audit report along with the return u/s.139(4) he is not liable to penalty. x).In the case of Shri Swastik Steels Private Ltd., dispute between directors of assessee- company was not considered a reasonable cause for default in furnishing the audit report by the Hon'ble Bombay High Court. xi).Imposition of penalty is justified in a case where photo copies of the impounded books of account of earlier years are supplied by the income tax authorities to assessee and even then it fails to file audit report for subsequent assessment years. xii).Not receiving audit reports from branch offices located outside India can be considered a ..... 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