TMI Blog2005 (5) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... 990-91. The assessee Co-operative Society has been constituted for safeguarding the interest of the Cane growers and member unions. The activities of the assessee society included printing and supply of the forms, registers and stationery etc. for which it was maintaining Press Account . The assessee s main function was to provide credit facilities to its members. It did not deal in sale of goods. The activities of the society were spread over the whole of the State. The assessee filed the return on 30-11-1990 declaring an income of ₹ 86,83,906 for the assessment year 1990-91. The gross turnover of the assessee was ₹ 6,38,00,000, as such, in view of the provisions contained in section 44AB of the Income-tax Act, the assessee was required to obtain the audit report before the specified date and to furnish it along with the return, before the specified date, but the assessee in this case failed to obtain the said report resulting in (sic) levy of penalty of Rs. One lakh under section 271B of the Act by the Assessing Authority. The penalty imposed was affirmed in appeal by the Appellate Authority but in the second appeal preferred before the Income-tax Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the audit of the accounts but failed to get the report within time. After finding that no fault can be attributed on the part of the assessee in not preparing and filing the report under section 44AB, and that there was reasonable cause for doing so, the Tribunal intervened with the orders passed by the Assessing Authority and the Appellate Authority by allowing the appeal. Before us it has been reiterated by the counsel for the appellant (Revenue) that section 271B allowed the Assessing Authority to impose a penalty as admittedly the final audit report as required under section 44AB was not filed within time and that the cause shown by the assessee could not have been treated to be a reason able cause for the purpose, particularly when the amended provi sion of section 271B does not give any discretion or liberty to the Assessing Officer of not imposing the penalty in case of default, in compliance of the provisions of section 44AB. 7. Learned counsel, however, did not support his submission by any authority but placed reliance upon the very provision of section 271B of the Income-tax Act. He submitted that prior to the amendment in the aforesaid section there was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be appointed by the Government and that the assessee had no control over State Government appointed auditors, it also filed the copies of various letters showing its correspondence as also various dates of audit reports ending for different years, which were made available late despite repeated reminders. 10. The accounts were to be audited by the Chief Audit Officer, U.P. Co-operative Audit and Panchayati Raj Department who was to take its own time to complete the audit of the Co-operative Societies of the State. The action thus, of the Chief Audit Officer, U.P. was not under the control of the assessee and it was not possible for the assessee to obtain statutory audit report within the prescribed time. For the year ending 30th June, 1987 the audit report of the Account was received by the assessee on 30th March, 1990 from the Chief Audit Officer, U.P. and no further report from the auditors was received till date, i.e., 3rd May, 1991. The copy of the certificate of auditors dated 31-3-1992 was also filed to show that the audit of accounts for the year ending on 31-3-1989 was completed on 31-3-1992. The copy of the letter E(3) also shows that the audit work for the accounts ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said provision, has to be tested in the light of the relevant provisions of the Act. 14. Section 271B of the Act is a specific provision giving power to the Assessing Officer to impose prescribed penalty, in case 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 maximum penalty which can be levied is one hundred thousand rupees. Section itself says that if any person fails to get his accounts audited or fails to furnish such audit report as required under section 44AB the Assessing Officer may direct that such person may pay the penalty in the given manner. The words may direct themselves speak about the inherent discretion of the Assessing Officer in the matter of imposing penalty. The provision, thus, does not make out obligatory for the Assessing Officer to impose penalty for such failure but gives liberty to the Assessing Officer either to impose or not to impose the penalty after considering the reasonable cause and more so when this provision of section 271B has to be read with section 273B. 15. Section 273B which starts wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring before imposing the penalty. The necessity of affording reasonable opportunity of being heard before imposition of penalty would naturally and reasonably mean that it is for the purpose of giving an opportunity to the assessee to put his defence or a reasonable cause for not being subjected to any penalty. If the cause is sufficient, the Assessing Authority may do away with the penalty but if the cause is not sufficient as per the decision of the assessment of the Assessing Authority, the penalty may be imposed. 18. The imperativeness of the provision of section 274, requiring prior opportunity of being heard be given to the assessee before imposing penalty establishes that though the penalty can be imposed for violation of provisions of section 44AB by invoking provisions of section 271B but on reasonable explanation being given by the assessee, if the Assessing Officer comes to the conclusion that the assessee has been able to prove that there was a reasonable cause for failure in compliance of the aforesaid provision, no penalty would be imposed on such an assessee in terms of section 273B of the Act. 19. Section 275 is the power for imposition of penalty under Chapt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner rightly relied upon the decision of the Apex Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26. The Apex Court, in the case of Smt. Harbans Kaur v. CWT [1997] 224 ITR 4181 with respect to levy of penalty or, waiver thereof by the Commissioner, observed that ...if the conditions stipulated in the section are satisfied the Commissioner has a discretion in the matter. In exercise of that discretion, the Commissioner can either reduce the amount of the penalty or he may even waive the entire penalty. It is for the Commissioner to decide on the facts of a particular case whether a waiver in entirety or a reduction alone is warranted. The Madras High Court also observed that while considering the case of co-operative society in which it observed that it is true that there was no escape for the society but to file its audit report within time. But by mere failure alone, levy of penalty is not warranted nor justified . 23. Similar view was taken by the Rajasthan High Court in the case of Rajasthan Co-operative Dairy Federation Ltd. v. Dy. CIT [2003] 259 ITR 1262 Rajasthan wherein the Court observed that there was repeated requests but the Registrar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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