ITA No. 692/Kol/2012

Penalty under section 271B–Failure to get accounts audited—Leviability–Assessee being partner in a professional firm

Conclusion: Where assessee was a partner is a  professional firm and his income by way of salary from such firm exceeded the limit specified under section 44AB, then the assessee was liable to get its accounts audited under section 44AB.

AO observed from the return of income filed by the assessee that the assessee|s income included income from salary from Price Water House of which he was a partner. Since income by way of salary or remuneration from a firm was to be assessed under the head “Profits and gains from business or profession” in terms of section 28(v) and the receipts from the profession of the assessee was Rs. 74,16,000 i.e., exceeding Rs. 10 lakhs, the assessee was required to get his accounts audited within the specified time and furnish the audit report before the specified date under the provision of section 44AB. Since the assessee failed to do so the AO imposed penalty by invoking the provision of section 271B.

Held: Since the receipt of the assessee was more than Rs.10 lakhs, in the previous year relevant to the assessment year under consideration, the assessee was required to get his accounts audited as per section 44AB  and to enclose a copy of the said report in the prescribed form before the specified date. The assessee had admittedly not got his accounts audited under section 44AB. Therefore, the action of the AO to impose penalty under section 271B was justified.

Decision: Against the assessee.

IN THE ITAT, KOLKATA ‘C’ BENCH

N.S. SAINI A.M. & MAHAVIR SINGH, J.M.

Sagar Dutta v. DCIT

ITA No. 692/Kol/2012

A.Y. 2006-07

3 May, 2013

Appellant by: Avra Mazumdar

Respondent by: Dilip Kr. Rakshit, Sr.DR

N.S. Saini, A.M.

This is an appeal filed by the assessee against the order of learned Commissioner (Appeals)-XXXVI, Kolkata confirming the levy of penalty under section 271B of the Income Tax Act imposed by the assessing officer.

2. The brief facts of the case are that the assessing officer observed from the return of income filed by the assessee that the assessee’s income included income from salary from Price Water House of which he was a partner. Since income by way of salary or remuneration from a firm was to be assessed under the head profit and gains from business from profession in terms of section 28(v) of the Income Tax Act and the receipts from the profession of the assessee was Rs. 74,16,000 i.e. exceeding Rs. 10 lakhs, the assessee was required to get his accounts audited within the specified time and furnish the audit report before the specified date under the provision of section 44AB of the Act. Since the assessee failed to do so the assessing officer imposed levying of penalty of Rs. 37,080 by invoking the provision of section 271B of the Act.

2.1. Being aggrieved against this order of the assessing officer the assessee filed appeal before the learned Commissioner (Appeals), who confirmed the order of the assessing officer by following the order of the Kolkata ‘A’ Bench of the Tribunal in the case of Amal Ganguli v. DCIT, Kolkata for assessment year 2003-04 passed on 20-2-2009 in ITA No. 2135/Kol/2008.

3. The learned AR of the assessee fairly conceded that the issue was covered against the assessee and in favour of the Revenue by the order of the Tribunal in the case of Amal Ganguli v. DCIT (supra).

4. After considering the submissions of both the parties, we find that in the instant case penalty of Rs. 37,080 was imposed under section 271B of the Act by the assessing officer as the assessee failed to filed audit report under section 44AB of the Act along with the return of income. It is not in dispute that the assessee received salary from M/s. Price Waterhouse which is a partnership firm and that the same was assessed to tax under the head profit an gains from business or profession. The total receipts from profession of the assessee was Rs. 74,16,000 which was exceeding Rs. 10 lakhs and therefore in view of the provision of section 44AB the assessee was required to get his audit report under section 44AB of the Act and file the same along with the return of income within the due date prescribed under section 139(1) of the Act. The assessee failed to do so. Therefore, the assessee was liable to levying of penalty under section 271B of the Act @ 0.5% on total professional receipts of the assessee. We find that in the similar facts and circumstances of the case the Kolkata ‘A’ Bench of the Tribunal in the case of Amal Ganguli v. DCIT (supra) has confirmed the levy of penalty by observing as under :–

“6. We have carefully considered the submissions of the learned Representatives of the parties and the orders of the authorities below. We have also considered the provisions of section 44AB of the Act. There is no dispute to the fact that the assessee is a Chartered Accountant and is engaged in the profession. However, the assessee is a partner in the firm “Price Waterhouse” which is a firm of Chartered Accountants. We are of the considered view that the assessee is carrying on the profession of Chartered Accountant though not individual but as a partner. The assessee has received income by way of salary, allowance, commission and interest on capital from the firm. During the course of hearing, the learned A.R. in reply to a query from the Bench admitted that the assessee is holding a certificate of practice to carry on the profession. Therefore, the assessee has received the above amount from the firm as a partner and he is a partner only because he is engaged in the business of Chartered Accountants and is eligible to carry on the profession of Chartered Accountant. Thus we are of the considered view that the assessee has received the said amount as a professional fee as a partner from the firm. There is no dispute to the fact that the amount received by the assessee by way of salary, allowance, commission, interest from the firm is assessable under section 28(v) of the Act under the head “profits and gains of business or profession”. Since the receipt of the assessee is more than Rs.10 lakhs, in the previous year relevant to the assessment year under consideration, we are of the considered view that the assessee is required to get his accounts audited as per section 44AB of the Act and to enclose a copy of the said report in the prescribed form before the specified date. The assessee has admittedly not got his accounts audited under section 44AB of the Act. Therefore, we hold that the learned Commissioner (Appeals) has rightly confirmed the action of the assessing officer to impose penalty under section 271B of the Act of Rs. 58,719. Hence, we uphold the order of the learned Commissioner (Appeals) and reject the grounds of appeal taken by the assessee.”

4.1. We therefore do not find any good and justifiable reasons to interfere with the order of the learned Commissioner (Appeals). It is confirmed and the grounds of appeal of the assessee are dismissed.

5. In the result the appeal of the assessee is dismissed.