TMI Blog1986 (11) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... 44AB of the Act within the specified date. In this year the time for filing the audit report was extended up to 30-9-1985. The ITO issued notice under section 271B in response to which the assessee filed an explanation. It was stated therein that the auditors of company Anjaneyulu Co., Hyderabad resigned on 16-8-1985 and another auditor, namely, C. Venkata Krishna Co. was appointed on 28-8-1985 who commenced the work of audit by the end of September 1985 and the audit report was submitted in January 1986 which was filed later. It was urged that there was reasonable cause for not filing the audit report within the specified date and so the penalty proceeding should be dropped. The ITO held that the company did not take any steps to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uary 1986. The assessee's works were in Andhra Pradesh, Madhya Pradesh and Orissa and the books were in different places. It is on account of the delay on the part of the previous auditor in taking up the audit work in time that there was delay and after their resignation another auditor was appointed who completed the audit in January 1986. Thus, there was reasonable cause for the delay in filing the audit report. Until the statutory audit under the Companies Act is complete, the audit report under section 44AB cannot be filed. There was delay in auditing accounts in view of the resignation of the previous auditor. He submitted that there was reasonable cause for the delay in filing the audit report and so no penalty is leviable. He submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o get the books audited but the previous auditor did not audit the accounts. He ultimately resigned and a new auditor has been appointed who completed the audit in January 1986. He urged that there was no contumacious conduct on the part of the assessee. He submitted that unless the books are audited no auditor would furnish the audit report. He strongly urged that there was reasonable cause for the delay in filing the audit report and no penalty is leviable. 3. We have considered the rival submissions. Section 44AB has come into force from 1-4-1985. It applies for the assessment year 1985-86. Under this provision every person carrying on business whose turnover or gross receipts exceed Rs. 40 lakhs shall get his accounts audited by an ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson fails to get his accounts audited and obtain a report of such audit as required under section 44AB. So, the question for consideration is whether there was a reasonable cause for the delay on the part of the assessee in obtaining the audit report under section 44AB. Originally, Anjaneyulu Co., chartered accountants were appointed as auditors for the statutory audit under the Companies Act as well as for the audit report under section 44AB. They resigned on 16-8-1985. In their letter of resignation dated 16-8-1985 they had stated that due to pressure of work they are unable to continue and undertake the company's audit work. Thereafter the assessee appointed on 28-8-1985 C. Venkata Krishna Co. who started the audit work in Septembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the delay in filing the audit report as required under section 44AB. 4. Under section 271(1)(a) also if any person has without reasonable cause failed to furnish the return within the time, the ITO has power to levy penalty. Both in section 271(1)(a) and in section 44AB the words 'without reasonable cause' occur. Section 271(1)(a) was considered in some cases. In Sulekha Works (P.) Ltd.'s case the Calcutta High Court held that unless the audit is completed and the auditors' report and balance sheet are made available, a company cannot furnish its return of income and so there was reasonable cause for the delay in filing the return till the audit report was received on 10-9-1964 and no penalty would be leviable up to that date under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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