Proviso to Section 44AB: post hoc CA certificate cannot avert Section 271B penalty for failure to furnish statutory audit report.

Proviso to Section 44AB raising the audit threshold to ten crore where cash receipts/payments do not exceed five percent was examined; the Tribunal held that a post cutoff Chartered Accountant certificate asserting low cash transactions and turnover below the threshold could not substitute for the statutory requirement to furnish the audit report under Section 44AB(2). Because the assessee did not file the audit report for the relevant year and the CA certificate was produced after the cut off, the Tribunal sustained the penalty under Section 271B for failure to comply with the audit filing obligation.

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Issues: Whether the penalty of Rs. 1,50,000 imposed under Section 271B of the Income-tax Act, 1961 for non-compliance with Section 44AB(2) is sustainable where the assessee relied on a Chartered Accountant certificate asserting cash receipts and payments below five percent and turnover below ten crore under the proviso to Section 44AB.

Analysis: The Tribunal examined applicability of the proviso to Section 44AB(2) which raises the audit threshold to ten crore where cash receipts and cash payments do not exceed five percent. The assessee produced a CA certificate stating cash receipts were 1.40% and cash payments 1.07% and that turnover was below ten crore. The Tribunal considered timing and nature of the certificate and the statutory requirement that the proviso's effect applies from the specified cut-off date; the assessee did not file an audit report as mandated by Section 44AB(2) for the relevant assessment year. The Tribunal found the proviso could not be applied to relieve the assessee of filing the audit report for the assessment year in question merely by producing a CA certificate after the relevant cut-off, and concluded that the Assessing Officer's imposition of penalty under Section 271B for failure to furnish the audit report was justified.

Conclusion: The penalty under Section 271B of the Income-tax Act, 1961 imposed for failure to comply with Section 44AB(2) is sustained; the appeal is dismissed and the penalty confirmed (decision in favour of Revenue).

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