2001 (3) TMI 231 - AT - Income Tax

Appeal success: Tribunal directs cancellation of penalty for share-broker firm non-audit despite commission

The appeal against the penalty under s. 271B was allowed as the Tribunal directed the AO to cancel the penalty imposed on the share-broker firm for not ... Penalty under section 271B for failure to furnish audit report - applicability of section 44AB for audit requirement - bona fide belief regarding non-applicability of audit provisions - reasonable cause under section 273BPenalty under section 271B for failure to furnish audit report - applicability of section 44AB for audit requirement - bona fide belief regarding non-applicability of audit provisions - reasonable cause under section 273B - Validity of levy of penalty under section 271B where assessee filed return without audit report while asserting bona fide belief that section 44AB did not apply - HELD THAT: - The Tribunal held that the assessee, a share-broker earning commission and also dealing in shares, had a bona fide belief that the turnover for determining applicability of section 44AB did not include the brokerage/commission received for transactions executed as sub-broker. That belief was supported by the manner of accounting followed, the relatively small turnover if brokerage were excluded, and the fact that assessments both in past and subsequent years had not attracted penalty proceedings under section 271B. The Tribunal noted a precedent in ITA No. 509/Ahd/1995 (order dated 30-11-2000) where the same contention was accepted and penalty under section 271B was held not justified. On these facts the Tribunal concluded that the assessee had a reasonable cause within the meaning of section 273B for filing the return without an audit report, and therefore the levy of penalty under section 271B was not sustainable. Following the earlier decision, the Tribunal directed cancellation of the penalty. [Paras 3, 4]Penalty levied under section 271B set aside and the Assessing Officer directed to cancel the penalty; appeal allowed.Final Conclusion: The Tribunal allowed the appeal, holding that the assessee's bona fide belief about non-applicability of audit requirement (section 44AB), supported by past practice and a preceding Tribunal decision, constituted reasonable cause under section 273B and warranted cancellation of the penalty under section 271B. The appeal was filed against the sustenance of penalty under s. 271B. The assessee-firm, a share-broker, received commission and believed its turnover did not require audit. The Tribunal directed the AO to cancel the penalty, following a similar decision in favor of the assessee. The appeal was allowed.