The Commissioner Of Income Tax, Karnal v. The Rajound Co-Op.credit & Service Society Ltd. V&Po Rajound,Distt.kaithal

IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No.584 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANTVersus The Rajound Co-op.Credit & Service Society Ltd.V&PO Rajound,Distt.Kaithal ....RESPONDENT ITA No.585 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANTVersus The Rohera Co-op.Credit & Service Society Ltd.V&PO Kaulapur (Kurukshetra) ....RESPONDENT DATE OF DECISION: FEBRUARY 05, 2008 CORAM:HON'BLE MR.JUSTICE SATISH KUMAR MITTALHON'BLE MR.JUSTICE RAKESH KUMAR GARG --- Present:Mr.Yogesh Putney, Advocate,for the appellants. .. SATISH KUMAR MITTAL,J. This order shall dispose of two Income Tax Appeals bearingNos.584 and 585 of 2007 filed under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as `the Act'), which are arising from thecommon order dated 9.3.2007 passed by the Income Tax AppellateTribunal, Delhi Bench `H' Delhi (hereinafter referred to as `the ITAT') forthe Assessment Year 2004-05, whereby two appeals filed by the different ITA Nos.584 & 585 of 2007 -2- assessees, in which the common question of law was involved, weredisposed of. The common issue involved in these appeals is relating to thepenalty imposed under Section 271B of the Act for violation of theprovisions of Section 44AB.For the disposal of these appeals, we are taking the facts fromITA No.584 of 2007. In the present case, the respondent is a Co-operative Credit &Service Society (hereinafter referred to as `the Society') registered underthe Haryana Co-operative Societies Act, 1984 (hereinafter referred to as`the Societies Act') and it is being governed by the provisions of theSocieties Act. The Society derives income from supply offertilizer/pesticides, seeds etc. to its members and also derives incomefrom interest etc. For the year 2004-05, the Society filed return under theAct declaring loss of Rs..2,15,845/- after claiming exemption underSection 80P of the Act. The said return was accompanied by tradingaccount, profit and loss account and balance sheet which were notaudited. As the total sale/gross receipts of the Society were more thanRs.40.00 lacs, the Society was required to get its accounts audited by theChartered Accountant and furnish the same in the prescribed form dulysigned and verified as per the provisions of Section 44AB of the Actbefore the stipulated date i.e. 31.10.2004. Since the Society failed to getits accounts audited by a Chartered Accountant and furnish the reportthereof by the stipulated date, i.e. 31.10.2004, as per the provisions ofSection 44AB of the Act, a show cause notice under Section 271B of theAct was issued for imposition of penalty. ITA Nos.584 & 585 of 2007 -3- In response to the said show cause notice, the assessee filedits reply dated 22.08.2005 by taking a plea that it being a Co-operativeSociety, was required to get its accounts audited by the auditor appointedby the Registrar, Co-operative Societies under the provisions of theSocieties Act, and since the auditor was not appointed by the Registrarwithin the stipulated time, therefore, the audit report could not besubmitted in time. Before the Assessing Officer, the Society raised a contentionthat annual audit fee is being paid by the Society regularly, but since theaccounts of the Society are not being carried out in time due to non-availability of sufficient number of auditors in Co-operative Department,which is not a fault of the Society, the Society can not be penalized for thefault of others. It was further contended that the Society has no controlover the appointment of auditor by the Registrar, Co-operative Societies,therefore, the requirement of submitting the audit report within thestipulated period could not be complied with. Before the Assessing Officer, the Society raised a contentionthat annual audit fee is being paid by the Society regularly, but since theaccounts of the Society are not being carried out in time due to non-availability of sufficient number of auditors in Co-operative Department,which is not a fault of the Society, the Society can not be penalized for thefault of others. It was further contended that the Society has no controlover the appointment of auditor by the Registrar, Co-operative Societies,therefore, the requirement of submitting the audit report within thestipulated period could not be complied with. The Assessing Officer did not accept the explanation givenby the Society and thus imposed a penalty of Rs.21,400/- on the Societyunder Section 271B of the Act @ half per cent of the gross turnover forfailure to get its accounts audited by the Chartered Accountant and furnishthe same along with the audit report by the specified date as per theprovisions of Section 44AB of the Act. On appeal by the Society, the aforesaid order passed by theAssessing Officer was upheld by the Commissioner of Income Tax(Appeals), Karnal. Aggrieved against the said order, the Society filed anappeal before the ITAT. Vide impugned order, the ITAT deleted the ITA Nos.584 & 585 of 2007 -4- penalty imposed on the assessee while observing as under:- “The case of the assessee that it did not earn any income inthe year and a loss return was filed in response to noticeissued by the revenue. This is a matter of fact borne out bythe record. It was also the case of the assessee that theturnover of goods was only about Rs.21.76 lakh, far belowRs.40 lakh and, therefore, it was under the belief that it wasnot required to get the accounts audited. This turnover is alsoa matter of record borne out by the profit & loss account. Itwas also its submission that its income was exempt u/s 80P.Being a cooperative society, the provisions of section 80P areapplicable to the case of the assessee. In the case of NarenderKumar, it was held that if the income was below taxablelimit, that constituted reasonable cause for not gettingaccounts audited. In this case, the assessee suffered loss and,therefore, ration of this decision applied to the facts of thecase. In the case of Patel Ambalal Somnath Sarkar, it washeld that if the turnover of the assessee was below Rs. 40lakh, but the gross turnover and receipts exceeded Rs.40 lakhand the assessee entertained a bona fide belief that because ofthe turnover being less than Rs.40 lakh, he was not requiredto get the accounts audited, such belief constitutedreasonable cause u/s 273B of the Act. The facts of this caseare that the turnover of the goods was lower than theprescribed limit and, therefore, it constituted sufficient reasonfor the assessee to believe that it was not required to get itsaccounts audited. In view of the above circumstances, we areof the view that the instant case was not a fit case for levy ofpenalty. Therefore, the penalty is deleted.” After hearing the learned counsel for the appellants, we do not find any merit in this appeal. In our opinion, the ITAT has rightlydeleted the penalty while recording a pure finding of fact to the effect thatthe assessee was under the bona fide belief that it was not required to get ITA Nos.584 & 585 of 2007 -5- its accounts audited and such belief constituted reasonable cause underSection 273B of the Act. Therefore, we do not find any ground tointerfere in the said finding of fact. No substantial question of law is involved in these appeals.Hence, both the appeals are dismissed. (SATISH KUMAR MITTAL) JUDGE February 05, 2008vkg (RAKESH KUMAR GARG) JUDGE