TMI Blog2021 (12) TMI 1257X X X X Extracts X X X X X X X X Extracts X X X X ..... e belief that provisions of section 44AB of the Act does not apply and hence, no audit under section 44AB of the Act was got done. We find that this is a reasonable cause which has resulted into failure of the assessee to comply with the law - we find that penalty under section 271B of the Act cannot be levied for the reason that there was a failure on the part of the assessee to obtain tax audit report because of a bonafide belief that there is no turnover, gross receipts, etc. The revenue could not show that the belief of the assessee was malafide. We find that in the present case, the assessee has shown the cost of the project as work-in-progress. Therefore, whenever the assessing officer would like to examine the income earned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work-in-progress. He further disallowed a sum of ₹ 10,20,00,000/- being compensation paid to other party. Thus, the work-in-progress shown by the assessee of ₹ 14.99 crores was reduced to ₹ 3.79 crores. The assessment order was framed under section 143(3) of the Act on 31/03/2015 at the returned income / loss. 3. However, the learned assessing officer noted that the assessee is a developer and has incurred huge expenditure by way of compensation as well as receipt of advance for various projects and, therefore, looking at the total business receipt, the assessee should have got her accounts audited under section 44AB of the Income-tax Act, which is admittedly not done by the assessee; hence, he initiated penalty procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing project completion method and does not have any sales during the year. Therefore, there is no turnover or gross receipts and all the expenditure are shown as work-in-progress; therefore, assessee was under a bonafide belief that tax audit was not required to be carried out. He supported his statement showing the profit loss account for the year ended on 31/03/2012, where there is no gross receipt or turnover is shown as it is Nil. . He further submitted that the co-ordinate bench in assessment year 2016-17 2017-18, where the penalty under section 271C was considered, held that the assessee was not liable for tax audit under section 44AB of the Act and, therefore, was not required to withhold any tax under the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no sales made during the year. Therefore, assessee was under a bona fide belief that if there is no sales turnover or gross receipts in the profit loss account, then it is not required to obtain tax audit report under section 44AB of the Act. During the year assessee has only received the advances against sale of property. Because of this, as there was no gross receipts or turnover in the books of the assessee for the year, she did not got her accounts audited under section 44AB of the Act and, therefore, exposed herself to the provisions of penalty under section 271B of the Act. Undoubtedly, in assessee s own case, on identical facts and circumstances, where assessee contested for deletion of the penalty under section 271C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o obtain tax audit report because of a bonafide belief that there is no turnover, gross receipts, etc. The revenue could not show that the belief of the assessee was malafide. The judicial precedents cited by the learned departmental representative has given a reason that in case of project completion method, the assessing officer will not have any opportunity to verify the expenses incurred by the assessee during the tenure of the project. We find that in the present case, the assessee has shown the cost of the project as work-in-progress. Therefore, whenever the assessing officer would like to examine the income earned by the assessee, naturally, he will have to examine the composition of total work in progress also. He would be entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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