Delhi ITAT in a case namely Saurabh Kumar Agarwal Vs. Income tax Officer (2011) ISI C-184 Del. (Trib.) has held that where an assessee is under a bonafide belief that his turnover doesnot exceed audit limit and therefore doesn’t get his accounts audited then it will form a reasonable cause for his failure for not obtaining the audit of his accounts u/s 44AB and hence no penalty u/s 271B can be levied.
Facts of the Case: The assessee is having sale turnover of Rs. 39,94,723/- and purchases of Rs 51,12,718/-. According to the department, the assessee deliberately contravened the provisions contained in section 44AB, therefore, liable for penalty u/s 271B. The AO also considered the aspect that the assessee has shown income from commission in the return at Rs 52512/- and also observed that in general, commission is paid @ 2% of the gross turnover and on that basis he worked out the turnover of the assessee of commission at Rs. 26,25,600/- and, thus he calculated the turnover of the assessee at Rs. 66,20,323/- and imposed penalty of ½% i.e Rs. 33,110/-. CIT(A) upheld the penalty on the ground that purchases which were to the tune of Rs. 51,12,718/- also constituted turnover, hence, the AO was right in leving the penalty, On appeal to tribunal by the assessee the appeal was accepted.
Held by Tribunal: Not going into the controversy that whether or not purchases also constitute turnover, but one thing is clear that assessee’s sale turnover was a sum of Rs. 39,94,723/- which is a sum lower that the amount of Rs. 40 lac limit fixed for obtaining tax audit report. It has been the contention of the assessee that according to his bonafide belief, his turnover being lower that Rs. 40 Lac, he was under an obligation to get his accounts audited. It has also been the contention of the assessee that in any case even if it is held that purchases also constitute turnover, then also it was the bonafide belief of the assessee that he was not under an obligation to get his accounts audited.
The sale turnover of the assessee indisputably has been mentioned at a sum of Rs. 39,94,723/- not only in the order of AO but also in the order of CIT(A). If it is a factual aspect, then, it cannot be denied that the assessee working under bonafide belief has not got his accounts audited, therefore, he was having reasonable and sufficient cause for non compliance of the provisions of section 44AB.
Section 273-B provides an exception where such penalties should not be imposed in the case where the assessee proves that there was a reasonable cause for the failure to perform statutory obligation. Resorting to section 273-B, we are of the opinion that the assessee in the present case proves that there was reasonable cause for his failure for not obtaining the audit of his accounts as according to the assessee his turnover did not exceed a sum of Rs. 40 Lac. Therefore it is a case where levy of penalty cannot be held justified. Accordingly we delete the penalty and allow the appeal filed by the assessee.
In result the appeal filed by the assessee is allowed
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