TMI Blog1992 (10) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 271B of the Act imposing a penalty of Rs. 75,545 which he subsequently rectified under section 154 of the Act and reduced the penalty to Rs. 25,182. According to the ITO as the appellant's sales turnover amounted to Rs. 50,36,345 it ought to have got its accounts audited as required by sections 44AB of the Act and that the reasons stated by the appellant in reply to the show-cause notice were untenable and that there was clear contravention of the provisions of section 44AB of the Act which called for a penalty under section 271B. 3. When the matter went before the DC(Appeals), he upheld the levy of penalty under section 271B of the Act agreeing with the decision of the ITO. However, he was of the view that the total sales turnover of the appellant amounted to Rs. 40,74,706 and that, therefore, the penalty leviable could only be Rs. 20,373 and not Rs. 25,182 imposed by the ITO thus resulting a relief of Rs. 4,809 to the appellant. The appellant feels aggrieved by this order of the DC(Appeals) and has come up in further appeal to the Tribunal. 4. Shri N. Subramanian, the learned authorised representative of the appellant, submitted that the computation of the sales turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,981 shown under the head sales to Master Weavers in the Madras branch, the learned authorised representative explained that this amount represented the cost of yam and other raw materials supplied by the appellant-firm to Master Weavers for manufacture of lungies, that it was a misnomer to describe this amount as sales to Master Weavers, that there was no question of any sales to Master Weavers of these materials who took them from the assessee and brought back finished material viz., lungies after weaving them on their handlooms in their houses. The learned authorised representative submitted that if these two amounts are excluded or even if one of these two amounts viz., Rs. 86,016 or Rs. 80,981 were deducted from the sales figure of Rs. 40,74,706 the total sales of the assessee would be less than Rs. 40 lakhs and the assessee would not be hit by the provisions of section 44AB of the Act. 5. Sri Subramanian next submitted that the appellant-firm is a regular assessee whose income-tax affairs were being looked after by a reputed firm of Chartered Accountants at Madras for the past eight years and in fact even in this year the assessee firm had submitted its statements on Tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before me as well as the case law relied on by the assessee's learned counsel in his written submissions. 8. It is seen from the statements of Trading and Profit Loss Account dated 31-3-1988 for the assessee's head office and Madras branch, copies of which are available in the assessee's compilation, that the assessee's accounts were examined and certified by a firm of Chartered Accountants at Bangalore and that the said statements were also filed along with the return of income by the appellant. A perusal of the assessment order dated 24-5-1989 shows that the assessing officer had practically accepted the assessee's books of account as well as the statements prepared therefrom as certified by its auditors, as correct, as the only adjustment made by the assessing officer was the disallowance of a further sum of Rs. 5,000 out of miscellaneous and general expenses over and above the sum of Rs. 4,500 disallowed by the assessee in the computation sheet. The explanation of the appellant-firm that it has acted bona fide on professional advice of its Chartered Accountants in regard to submission of the tax audit report as required under section 44AB for the year under appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's ledger in which discount account is maintained at L.F. 517 to 1526. The entries in this account are supported by discounts allowed from the bills as could be seen from the counterfoils of the bills at rates ranging from 2% to 6%. Such discounts are allowed in certain cases in the sales bills themselves or at the time when payment were made by the parties to the assessee. This discount amounts are properly recorded in the accounts of the assessee and no discrepancy has been found by the Assessing Officer in this account at the time of completing the assessment. As stated already the only adjustment made in the assessment by the AO was only in respect of the mess expenses wherein he disallowed a further amount of Rs. 5,000 and nothing more. Therefore, the observations of the DC(Appeals) regarding this discount amount of Rs. 86,016 as a deliberate attempt made by the assessee to reduce its turnover are totally unjustified and uncalled for. 13. Similar is the position in regard to the sum of Rs. 80,981 representing the cost of yarn and other materials supplied by the assessee-firm to Master Weavers for manufacture of lungies. It is a misnomer to call them as sales to Master ..... 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