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INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD

ITA No. 2792/Ahd/2015
Assessment Year: 2009-10
N J Metal Screen Manufacturing Pvt Ltd (Appellant) vs. Income Tax Officer (Respondent)
Date of Judgment: 06-01-2015

ORDER

This appeal has been filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-2, Vadodara, dated 07.07.2015 for Assessment Yeas 2009-10.

2. In this appeal, the sole ground raised by the assessee reads as under:

1. Levy of penalty to the tune of Rs.1 lac u/s 271B of the Act.

On the facts and circumstances of your appellant’s case and in law, the ld. CIT(A) has erred in confirming action of ld. AO of imposing penalty u/s 271B of the Act not appreciating fact that books of accounts of appellant were not maintained in proper form and as a result of which, the books were not audited under Companies Act, 1956 by the Statutory Auditors and as a result of which, the books were not audited u/s 44AB of the Act.

3. The brief facts of the case are that the assessee is a private limited company engaged into the business of manufacturing of perforated metal screens and job work. In the present case, the Assessing Officer levied penalty of Rs.1 lac u/s 271B of the Income-tax Act, since the assessee failed to get its books of account audited as required u/s 44AB of the Act and the penalty imposed by the Assessing Officer was confirmed by the CIT(A) in appeal. According to the assessee, there was a family dispute with regard to the operation, administration, control and management of the company for the last few years. On account of increase in such dispute, a civil suit i.e. Civil Suit No.1173/2009 was filed against the company before the Civil Court at Baroda, which is still pending. The assessee submitted that owing to such dispute, the books of accounts of earlier years were not finalized and not audited. Since balances of earlier years were not carried forward correctly, books of accounts of the year under consideration were also not finalized and were not maintained in a manner that the same could be audited either under the Companies Act, 1956 or under the Income-tax Act, 1961. As a result, the assessee’s books of accounts for the year under consideration could not be audited as prescribed u/s 44AB of the Act. It was pointed out by the ld. Authorized Representative for the assessee that this issue is squarely covered in favour of the assessee by the decision of Hon’ble Gujarat High Court in the case of CIT vs. Tea King, reported in (2002) 123 Taxman 162 (Guj), wherein, the assessee, a registered partnership firm, was carrying on business in tea and it filed returns of income for the assessment years in question after a survey under section 133A. The books of accounts were not audited. So, the Assessing Officer levied penalty u/s 271B for all the years, i.e., 1986-87 to 1989-90. The appellate authority confirmed the penalty for the assessment year 1985-86 on the ground that the assessee failed to get the accounts audited within the stipulated period. But for the subsequent years, the levy of penalty ws set aside on the ground that since the books of account for the preceding assessment years were not ready and were not up-to-date, it was not possible for the assessee to get the account books audited for the subsequent years through the same were written. Under these facts and circumstances, the matter was carried before the Hon’ble High Court and the Hon’ble High Court has held as under:-

“Looking to the facts and circumstances, it could not be said that any question of law arose in the matter. The instant case was a case where the assessee could not comply with the provisions because there was no audit for the preceding year. For subsequent years though the books of account were ready, the same could not be audited. The Tribunal and the Commissioner (Appeals) found that the audit could not be completed because the books of account for the first year were not ready. Thus, the Tribunal was justified.”

4. Nothing contrary was brought to our knowledge on behalf of the Revenue. Facts being similar, so following the same reasoning I am not inclined to concur with the findings of the ld. CIT(A); because no penalty can be levied u/s 271B in a case where an assessee could not comply with the provisions of Section 44AB of the Act since there was no audit of preceding assessment years. Accordingly, the Assessing Officer is directed to delete the penalty in question.

5. In the result, appeal filed by the assessee is allowed.

Order pronounced in the Court on 6th January, 2016 at Ahmedabad.

(SHAILENDRA KUMAR YADAV)
JUDICIAL MEMBER

No penalty imposable u/s 271B where assessee could not comply with provisions of Section 44AB because of non-audit of preceding assessment years-ITAT | 09-01-2016 |

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