TMI Blog1993 (3) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... s), there was a reasonable and bona fide belief for the assessee in not getting the accounts audited as the assessee is a kachha arahatia and sales were made on commission basis, there was no obligation to get the accounts audited. 2. Revenue has taken grounds to urge that on the facts and circumstances of the case, the CIT (Appeals) erred in cancelling the penalty levied under section 271B and therefore, his order should be vacated and that the Assessing Officer should be restored. 3. The assessee has shown a turnover of Rs. 39,69,599 in sadi business said to have been carried on adat basis. The assessee has also shown interest income and adat receipts of Rs. 40,507 and Rs. 75,388 respectively. Including interest and adat receipt to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration of the sale of goods. The alternative submission made by the assessee was not acceptable for the reason that section 44AB specified a time limit and the audit report was to be filed alongwith the return of income. Further the alternative submission also amounted to admission of default under section 44AB. Therefore, the Assessing Officer was satisfied that the assessee has committed default by not getting the books of accounts audited as required by section 44AB and consequently, a penalty of Rs. 20,427 was levied. 5. On appeal, same contentions were urged by the assessee before the CIT (Appeals). Written submissions were also filed which were reproduced in para 4 of the appellate order of the CIT (Appeals). The CIT (Appeals) hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w on the part of the assessee and the assessee was even prepared to get the accounts audited if so advised by the Assessing Officer as alternatively pleaded by the assessee in the written submission before the Assessing Officer. For all these reasons, he held that it was not a fit case for imposition of penalty under section 271B of the Income-tax Act, 1961. Accordingly, he cancelled the penalty. 6. At the time of hearing, the learned departmental representative has been duly heard and he has vehemently supported the order of the Assessing Officer and justified the penalty imposed. 7. The learned counsel for the assessee filed a paper compilation and referred to page 1 of the paper book which contains trading, profit and loss and alloca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count. " From the aforesaid extracts, it is to be seen that if the goods did not become property of the agent and is merely a conduit pipe between the sellers and the purchasing principals, then only the gross commission will be taken into account for the purpose of section 44AB which is said to be applicable in the case of the assessee. Further, reference was made by assessee to pages 52 to 54 which contains Board's Circular No. 452, dated 17-3-1986 which has been issued in connection with section 44AB of the Income-tax Act, 1961. Reliance was placed on para 4 of the said circular according to which the Board were advised that so for as kachha arahatias were concerned, the turnover did not include sales effected on behalf of the principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular No. 452, dated 17-3-1986 the case of the assessee fits in with the kachha arahatia vis-a-vis case of pucca arahatia. We have already noticed that the assessee has effected sales at cost to cost basis to the various undisclosed principals for which particulars were filed to the extent of Rs. 1,89,392 at page 3 of the paper compilation. Out of the 12 instances furnished, except in two cases, the purchases and sales were effected on the same date. In remaining 2 cases sales were effected next day or couple of days thereafter, charging sale price at which the sadis were purchased or procured. In fact, no margin of profit has been charged in respect of these transactions which is very peculiar feature of the business carried on by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s viewed by the CIT (Appeals). We agree with the CIT (Appeals) that interest receipt cannot be part of sale. But however the gross receipts including the adat and interest would take the case of the assessee beyond the limit of Rs. 40 lakhs prescribed under section 44AB(a). In the circumstances, therefore, there was reasonable cause for the assessee in not getting its accounts audited as contemplated by section 44AB and therefore, there was no deliberate defiance of law in this regard, as rightly held by the CIT (Appeals). In any case, this is the first year in which mischief of section 44AB has been attracted. Therefore, in all fairness, the alternative plea taken by the assessee ought to have been allowed and the assessee would have been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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