Tribunal reverses penalty for audit failure under section 271B, citing appellant's reasonable cause.

The Tribunal reversed the lower authorities' decisions and directed the assessing officer to delete the penalty of 1,50,000 imposed under section 271B for failure to audit accounts under section 44AB. The appellant's bonafide belief, supported by the absence of turnover or gross receipts due to following the project completion method, was deemed reasonable cause for non-compliance. The Tribunal found no malafide intent and emphasized the assessing officer's ability to verify expenses upon project completion, leading to the successful appeal by the appellant.

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Issues:
Appeal against penalty under section 271B for failure to get accounts audited under section 44AB.

Analysis:
1. The appellant, engaged in construction business, filed an appeal against the penalty levied under section 271B for the assessment year 2012-13. The assessing officer disallowed expenses and imposed the penalty due to the non-audit of accounts under section 44AB.

2. The appellant contended that as per the project completion method, no sales were made during the year, and all expenses were shown as work-in-progress. The appellant argued that since there were no sales turnover or gross receipts, a tax audit was not necessary, leading to a bonafide belief that no penalty should be imposed.

3. The assessing officer rejected the appellant's contentions, emphasizing the advances received and joint venture agreements entered into during the year. The penalty was upheld by the Commissioner of Income-tax (Appeals), prompting the appellant to file the current appeal.

4. During the appeal, the appellant reiterated that the project completion method was followed, resulting in no turnover or gross receipts for the year. The appellant cited previous decisions in their favor, where similar circumstances led to the deletion of penalties under section 271C.

5. The departmental representative supported the penalty, citing the failure to audit accounts without reasonable cause. A decision from the Bangalore Bench was referenced to justify the penalty imposition.

6. The Tribunal analyzed the facts and considered the appellant's bonafide belief in not requiring a tax audit under section 44AB due to the absence of turnover or gross receipts. The Tribunal noted the lack of gross receipts in the profit & loss account and the reasonable cause for non-compliance with the law.

7. The Tribunal found that the appellant's failure to obtain a tax audit report was due to a bonafide belief, and there was no malafide intent. The Tribunal highlighted the assessing officer's ability to verify expenses when the project is complete, supporting the appellant's claim.

8. Consequently, the Tribunal reversed the lower authorities' orders and directed the assessing officer to delete the penalty of &8377; 1,50,000 levied under section 271B, allowing the appeal of the appellant.

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