Failure to get accounts audited Penalty under section 271B.

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PATELAMBALAL SOMNATH SARKAR vs. INCOME TAX OFFICER

ITAT, AHMEDABAD ‘SMC’ BENCH R.P. Garg, Vice President

ITA No. 1814/Ahd/2001

29th April, 2005

(2005) 24 CCH 0261 AhdTrib

(2006) 100 TTJ 0735

Legislation Referred to

Section 271B, 273B

Case pertains to

Asst. Year 1997-98

Decision in favour of:

Assessee

Penalty under s. 271B—Failure to get accounts audited—Reasonable cause—Total sales of the assessee was less than Rs. 40 lakhs but total receipts inclusive of interest receipt exceeded Rs. 40 lakhs—Assessee did not get the accounts audited in the belief that the accounts are to be audited only if the turnover of the assessee exceeds Rs. 40 lakhs—Penalty under s. 271B not justified—Interest income shown in P&L a/c is other income and not part of business income of the assessee—In any case, assessee entertained a bona fide belief for not getting its accounts audited—Thus, it was prevented from doing so by sufficient cause—Penalty deleted

(Para 3)

Conclusion:

Assessee whose total sales was less than Rs. 40 lakhs but total receipts inclusive of interest receipt exceeded Rs. 40 lakhs having failed to get the accounts audited entertaining a bona belief that the accounts are to be audited only if the turnover of the assessee exceeds Rs. 40 lakhs, there was sufficient cause for default and, therefore, levy of penalty under s. 271B was not justified.

In favour of:

Assessee

Counsel appeared:

M.K. Patel, for the Appellant : N.M. Darji, for the Respondent

ORDER

R.P. GARG, VICE PRESIDENT:

Order

The appeal by the assessee is against the order of CIT(A) for asst. yr. 1997-98 confirming the levy of penalty under s. 271B of the Act of Rs. 20,155.

2. The total sales of the assessee as per P&L a/c was Rs. 39,98,297. Besides that, interest receipt of Rs. 4,678 was also there. If both are taken together the total receipts exceeded Rs. 40 lakhs. But, the assessee entertained a belief it is only the turnover of the assessee which if exceeds Rs. 40 lakhs the accounts are to be audited. He, therefore, did not get the accounts audited. The AO, however, stated that by including the interest the turnover exceeded Rs. 40 lakhs and the assessee failed to get its accounts audited. He, therefore, levied a penalty of Rs. 20,155 which was upheld by the CIT(A).

3. I have heard the parties and considered their rival submissions. The interest income shown by the assessee is by way of other income in the P&L a/c. Apparently, it is not part of the business income of the assessee. In any case, the assessee entertained a bona fide belief that it is required to get its accounts audited only when its turnover or the receipts of the business exceeded Rs. 40 lakhs. In these circumstances, in my opinion, it is not a fit case for levying the penalty and the assessee was prevented by sufficient cause and the benefit of s. 273B is given to the assessee. The penalty is, accordingly, deleted.

4. In the result, the appeal of the assessee is allowed.

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