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TMI Blog2014 (1) TMI 1582X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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, AO held that turnover of the assessee exceeded the limit prescribed by the Act for getting the books of accounts audited, that if the turnover of only speculation profit was considered same was more than 40 lacs, that assessee was required to get her accounts audited, that inspite of sufficient opportunity given to her she had not submitted any explanation.Finally, AO levied penalty of Rs. 1 lac u/s. 271B of the Act. 3.Assessee preferred an appeal before the First Appellate Authority (FAA), after considering the submissions of the assessee and the penalty order, he held that even if the assessee's contention that speculation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n -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 get the accounts audited and obtain an audit report before the specified date.Rule 6G along with Forms Nos.3CB, 3CC, 3CD and 3CE of the Income-Tax Rules, 1962, (Rules) are the part of the sections 271B and 44AB of the Act.It was expected that such audit would help in facilitating the administration of tax-laws by a proper presentation of the accounts before the tax authorities.It was also expected that the time of the AOs could be saved and could be utilised for attending to more important investigational aspects of the case.In other words section was introduced in the Act to have a detailed scan of accounts of the assessees in high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivered 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 business. Obviously, it would not include such transfer of immovable or movable property by way of investment.Similarly, where the assessee is not merely selling the movable commodities, but relating to other trading activities, e.g., where the assessee is a land developer and he is engaged in the business of acquiring land developing it and selling houses or purchasing or is indulging in leasing business or is indulging in stock market and so on and so forth, the expression "turnover" is made out to denote receipts from such activities.There may be a third or residuary category which may not be termed properly a trading activity yet it is ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iples 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-frame is inherent in the words 'as required under section 44AB' appearing in the section. Act of getting accounts audited and furnshing a report of such audit subsequent to the 'specified date'; though before the filing of the return, by the assessee;does not automatically absolve him of his liability for penalty under section 271B of the Act. ii).Act does not give any discretion to the AO to extend the time-limit, viz., the 'specified date' for getting the accounts audited under section 44AB. Non-compliance with the provisions of section 44AB renders an assessee liable for penalty under section 271B of the Act. iii).If an assessee, having t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri 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 reasonable cause for delay and penalty is such cases should not to be imposed. xiii).Ignorance of Act is not a ground for not writing up books of account and same cannot be taken as a reasonable cause for not levying penalty for not getting the books audited. xiv).If the fact is proved that furnishing the audit report belatedly was due to illness of auditor, penalty under the section 271B should not be levied. xv).Separate penalty has been provided for non-maintenance of accounts, i.e., under section 271A of the Act and for not getting the accounts audited and not furnishing the audit report, i.e., under section 271B. If a person has not maintaine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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