2008 (2) TMI 356 - HC - Income Tax

Tribunal Decision Upheld: Importance of Bona Fide Belief in Tax Penalties

COMMISSIONER OF INCOME-TAX Versus SAJUMA CO-OP. CREDIT AND SERVICE SOCIETY LTD.

The High Court upheld the Tribunal's decision to delete the penalty imposed under section 271B of the Income-tax Act. The judgment emphasized the ... During assessment proceedings it was noticed that gross turnover of assessee exceeded Rs. 40 lakhs, but assessee has not get its accounts audited - Tribunal has recorded a finding of fact that, the assessee under a bona fide belief did not get its accounts audited from the chartered accountant or from the inspector of co-operative societies because the sales turnover of the assessee were less than Rs. 40 lakhs – hence penalty was rightly cancelled by ITAT Issues:1. Penalty imposed under section 271B of the Income-tax Act.2. Benefit of section 273B for not furnishing audit report by a chartered accountant within the specified period.Analysis:1. The High Court dealt with the issue of penalty imposed under section 271B of the Income-tax Act for failure to get accounts audited by a chartered accountant within the specified period. The respondent-assessee, a co-operative credit and service society, filed a return declaring nil income after claiming exemption under section 80P of the Act for the assessment year 2004-05. However, it did not get its accounts audited by the stipulated date of October 31, 2004, as required under section 44AB of the Act. The Assessing Officer imposed a penalty of Rs. 21,756, which was upheld by the Commissioner of Income-tax (Appeals). The Tribunal, on the other hand, accepted the appeal and deleted the penalty, stating that the assessee did not get its accounts audited under a bona fide belief that its sales turnover was less than Rs. 40 lakhs, excluding interest receipts. The High Court upheld the Tribunal's decision, emphasizing that it was a finding of fact and no substantial question of law arose from the order.2. The second issue involved the benefit of section 273B for not furnishing the audit report by a chartered accountant within the specified period. The Tribunal granted this benefit without discussing the reasonable cause for the delay. However, the High Court did not delve into this issue separately as it was subsumed under the first issue regarding the penalty under section 271B. The High Court concurred with the Tribunal's decision based on the factual finding that the assessee had a bona fide belief that its sales turnover was below the threshold, thereby justifying the non-audit of accounts within the specified period.In conclusion, the High Court dismissed the appeal filed by the Revenue, upholding the Tribunal's decision to delete the penalty imposed under section 271B of the Income-tax Act. The judgment emphasized the importance of bona fide belief in determining the applicability of penalties under tax laws and reiterated the significance of factual findings in such cases.