TMI Blog2004 (12) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... 89. However, the assessee has filed the audit reports dated 14-8-1989 for the assessment year 1987-88 and dated 27-10-1989 for the assessment year 1988-89 along with its returns of income on 3-9-1992 for the assessment years 1987-88 and 1988-89. As the assessee has failed to comply with the provisions of section 44AB of the Act the Assessing Officer issued a show cause notice requiring the assessee to show cause why penalty should not be levied under section 271B of the Act. In response to the show cause notice the assessee submitted its reply which is mentioned in the second para of penalty orders that finalisation of accounts for the year took considerable amount of time due to arrear works and the absence of relevant accounts staff who resigned and that though new staff were appointed it took considerable time for them to got acquitted with the system and to compile the accounts. The assessee also submitted that sufficient time was also taken by the auditors in completing the audit after the compilation of accounts by the staff. The assessee further submitted that the report in the prescribed Form No. 3CD can be submitted only after the completion of the statutory audit. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has raised a legal plea that the Assessing Officer has imposed penalty on the basis of 1 % of the turnover which is not as per provision of law as section 271B provides for levy of penalty @ 1% of the turnover or ₹ 1,00,000 whichever is lower, thereform, the issue is fully covered by the decision of the Hon ble Gauhati High Court in the case of CIT v. Assam Travels Shipping Service [1977] 110 ITR 359 . The learned Departmental Representative further submitted that in the cited case the penalty was imposed for late filing of return whereas in the case under appeal is relating to penalty under section 271B, therefore, the decision relied on by the learned A/R of the assessee is not applicable. The reliance was also placed on the decision reported in CIT v. Basha Vikas Khand Sahakari Vipanan Sanstha [1987] 166 ITR 461 (MP). The learned Departmental Representative further submitted that the CIT(A) has deleted the penalty on the ground that under section 264 the CIT has waived the interest charged under section 139(8) but as a matter of fact the same CIT has authorised to file the appeal before the Tribunal against the order of the CIT(A) therefore, the order passed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by the learned A/R of the assessee that such reasonable cause was also accepted by this Tribunal in the case of Bharat Brick Works v. ITO [IT Appeal Nos. 304, 306 and 307 (Gauhati) of 1975-76 dated 26-8-1977] for the assessment years 1968-69, 1966-67 and 1967-68. The Jaipur Bench of the Tribunal has also accepted such type of reasonable cause in the case of Jailal Om Prakash v. ITO [1988] 30 TTJ (Jp) 514. Reliance was also placed in the case of Singh Furnitures v. ITO [1954] 19 TTJ 551 (Gauhati). As regards learned Departmental Representative s plea that the penalty for late filing of return has been restored by the Tribunal in the assessee s own case for the assessment year 1987-88 vide order in ITA No. 11 (Gau.) of 1997 dated 31-5-2002, the learned A/R of the assessee submitted that the Hon ble jurisdictional High Court has passed an interim order dated 7-1-2003 directing that operation of the order of the Tribunal in ITA No. 11 (Gau.) of 1997 dated 31-5-2002 shall remain suspended. The learned A/R further submitted that since the Assessing Officer has imposed higher penalty than what is statutorily leviable, therefore, the penalty orders passed by the Assessing Officer ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on : - ITO v. Shree Kailash Trading Co. [1984] 20 TJ 342 (All.); (f)Non-availability of experienced accountants who possessed knowledge of accounting system of a daily newspaper publication house; (g)Negligence on the part of accountants to make up accounts. This explanation was rejected by the Assessing Officer and he imposed penalty under section 271B. We find that the Assessing Officer while rejecting the assessee s explanation has not mentioned as to why he has not accepted the assessee s explanation. On the other hand, the Assessing Officer only on the ground that one year s time was available to the assessee, therefore, the assessee s explanation is not acceptable and has imposed the penalty. But we find that the assessee s explanation cannot be rejected in this manner. The Hon ble Madras High Court in the case of V.L. Dutt v. CIT [1976] 103 ITR 634 at page 648 has held that the assessee is not ordinarily bound to presume that the plea that he is putting forward was going to be disbelieved by the Income-tax Officer. It would be open to the Income-tax Officer to accept a plea even on a prima facie reading of the explanation. If the explanation was not found prima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 44AB of the Act to get the accounts audited, however, section 271B which deals with imposition of penalty, is reproduced hereunder :- 271B. If 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 Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred thousand rupees, whichever is less. 10. A reading of the aforesaid provision makes it clear that the imposition of penalty is not mandatory. The word used is may . A discretion is conferred on the authority to impose penalty or not to impose it. That the provision with respect to imposition of penalty is not mandatory, is further fortified by the statutory provision contained in section 273B of the Act, which is reproduced hereunder :-- 278B. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition of penalty. 14. In the present case there was certainly the reasonable cause. The delay in non-completion of audit was not on account of non-compliance by the assessee or in conscious neglect on its part. The delay was explained by the assessee before the Assessing Officer, CIT(A) and CIT, Administration and the same reasonable cause has been accepted as reasonable cause for delay in filing the returns which is of much larger period by the Assessing Officer and the CIT under section 264 and the assessee s explanation showing the reasonable cause was not found to be untrue, therefore, we do not find any reason as to why the same reasonable cause cannot be accepted for the delay in obtaining the audit reports and furnishing the same to the Assessing Officer. Since once the reasonable cause has been accepted by the Revenue and in the absence of any contrary material brought on record by the Revenue and keeping in view the decisions as relied upon by the learned A/R of the assessee as mentioned hereinabove, we hold that the assessee was prevented by reasonable cause for getting the accounts audited and furnishing the audit report to the Assessing Officer beyond the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X
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