Income Tax Appellate Tribunal

Ahilyadevi Mahila Dudh Utpadak Sanstha Limited vs. Income-Tax Officer

MANU/IP/0204/2021

03.11.2021

Direct Taxation

Where the assessee is prevented by sufficient reasonable cause for obtaining a tax audit report, the penalty shall not be levied

The Appellant is a co-operative society registered under the provisions of Maharashtra Co-operative Societies Act, 1960. The Appellant society is engaged in the business of purchase and sale of milk and cattle feeds to its members. The return of income for the assessment year 2014-15 was filed declaring total income as NIL. Against the said return of income, the assessment was completed by the Income Tax Officer. The Assessing Officer initiated penalty proceedings under Section 274 read with Section 271B of the Income Tax Act, 1961 (IT Act) by alleging that, the Appellant had failed to obtain the tax audit report as envisaged under the provisions of Section 44AB of the IT Act. The Assessing Officer imposed penalty of Rs.1,23,800 under Section 271B of the IT Act vide order dated 29.06.2017. Even on appeal before the learned CIT(A), the same was confirmed by the learned CIT(A). Being aggrieved, the Appellant society is in appeal.

The only issue in the present appeal relates to validity of the order passed under Section 271B of the IT Act. The provisions of Section 44AB of the IT Act provides that, where a turnover of the assessee exceeds the prescribed limit, is required to obtain the audit report and file it along with the return of income, failure to do so, attracts levy of penalty under Section 271B of the Act. The provisions of Section 271B of IT Act provides that where the assessee is prevented by sufficient reasonable cause for obtaining a tax audit report, the penalty shall not be levied.

The explanation of the Appellant is that, it was under bona-fide belief that there is no requirement under law to obtain the audit report under Section 44AB as its income was exempt under Section 80P(2) of the IT Act and its books accounts were subject to audit by Government Auditor. This explanation was not found to be false by the lower authorities. The lower authorities merely rejected the explanation and proceed with levy of penalty.

There is nothing on record to doubt the explanation offered by the Appellant society. Therefore, when the assessee entertained bona-fide belief that its account were not subject to audit under Section 44AB, it would certainly constitute reasonable cause for not obtaining the audit report and, therefore, the question of imposing of the penalty under Section 271B of IT Act does not arise. Further, audit report under the provisions of Maharashtra Co-operative Society was obtained only 27th June, 2017 and, therefore, occasion for filing the tax audit report along with the return of income does not arise. The lower authorities was not justified in confirming the levy of penalty and accordingly, the Assessing Officer is directed to delete the penalty levied under Section 271B of the IT Act. Appeal allowed.

Tags : Penalty Levy Legality

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