The Commissioner Of Income Tax, Karnal v. The Umri Co-Op.credit & Service Society Ltd.v&Po Umri, Distt. Kaithal

IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No.476 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANTVersus The Mathana Model Co-op.Credit & Service Society Ltd.V&PO Mathana, Kurukshetra ....RESPONDENT ITA No.477 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANTVersus The Kaulapur Co-op.Credit & Service Society Ltd.V&PO Kaulapur (Kurukshetra) ....RESPONDENT ITA No.478 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANT Versus The Umri Co-op.Credit & Service Society Ltd.V&PO Umri, Distt. Kaithal ....RESPONDENT ITA No.479 of 2007 The Commissioner of Income Tax, Karnal .....APPELLANTVersus The Ratangarh Kakroli Co-op.Credit & Service Society Ltd.V&PO Rattangarh Kakroli, Kurukshetra ....RESPONDENT ITA Nos.476 to 480 of 2007 -2- The Commissioner of Income Tax, Karnal .....APPELLANTVersus The Masana Model Co-op.Credit & Service Society Ltd.V&PO Masana, Kurukshetra ....RESPONDENT DATE OF DECISION: FEBRUARY 01, 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 Income Tax Appeals bearingNos.476, 477, 478, 479 and 480 of 2007 filed under Section 260A of theIncome Tax Act, 1961 (hereinafter referred to as `the Act'), which arearising from the common order passed by the Income Tax AppellateTribunal, Chandigarh (hereinafter referred to as `the ITAT'), whereby thefive appeals filed by different assessees, in which the common questionof law was involved, were disposed 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.476 of 2007. In the present case, the respondent is a Co-operative Credit & ITA Nos.476 to 480 of 2007 -3- 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 its income as nil after claiming exemption under Section80P of the Act. The said return was accompanied by trading account,profit and loss account and balance sheet which were not audited. As thetotal sale/gross receipts of the Society were more than Rs.40.00 lacs, theSociety was required to get its account audited by the CharteredAccountant and furnish the same in the prescribed form duly signed andverified as per the provisions of Section 44AB of the Act before thestipulated date i.e. 31.10.2004. Since the Society failed to get its accountsaudited by a Chartered Accountant and furnish the report thereof by thestipulated date, i.e. 31.10.2004, as per the provisions of Section 44AB ofthe Act, a show cause notice under Section 271B of the Act was issued forimposition of penalty. The assessee replied to the notice stating that itbeing a Co-operative Society, was required to get its accounts audited bythe auditor appointed by the Registrar, Co-operative Societies under theprovisions of the Societies Act, and since the auditor was not appointedby the Registrar within the stipulated time, therefore, the audit reportcould not be submitted in time. It is pertinent to mention here that in the present case, thecopy of the audit report in Form No.3CA & 3CD was submitted by theSociety with its reply dated 15.9.2005. Before the Assessing Officer, the ITA Nos.476 to 480 of 2007 -4- It is pertinent to mention here that in the present case, thecopy of the audit report in Form No.3CA & 3CD was submitted by theSociety with its reply dated 15.9.2005. Before the Assessing Officer, the ITA Nos.476 to 480 of 2007 -4- Society raised a contention that it has no control over the appointment ofauditor by the Registrar, Co-operative Societies, therefore, therequirement of submitting the audit report within the stipulated periodcould not be complied with. The Assessing Officer did not accept the explanation givenby the society and imposed a penalty of Rs.24,362/- on the Society underSection 271B of the Act @ half per cent of the gross turnover for failureto get its accounts audited by the Chartered Accountant and furnish thesame 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 allowed theappeal of the Society and set aside the order of the Income Tax authoritieswhile holding that the explanation given by the Society explaining itscause of delay in filing the audit report in the prescribed Form underSection 44AB of the Act, was sufficient, therefore, in view of theprovisions of Section 273B of the Act, no penalty was imposable on theassessee. Against the said order, the instant appeals have been filed by therevenue. Learned counsel for the appellants argued that the orderpassed by the ITAT canceling the penalty is not justified in the facts andcircumstances of the case and the explanation given by the Society that itwas required to get its accounts audited by the auditor appointed by theRegistrar, Co-operative Societies under the provisions of the Societies ITA Nos.476 to 480 of 2007 -5- Act, and since the auditor was not appointed by the Registrar within thestipulated time, therefore, the audit report could not be submitted in time,can not be accepted as reasonable because if the auditor was notappointed by the Registrar, Co-operative Societies within the stipulatedperiod, the Society could have got its accounts audited by the CharteredAccountant before the specified date and furnish the same along with theaudit report on the prescribed form as per the provisions of Section 44ABof the Act. Learned counsel further submitted that second proviso ofSection 44AB of the Act provides an alternative to a person, who isrequired by or under any other law to get his accounts audited under suchlaw before the specified date and furnishes by that date the report of theaudit as required under such other law along with a further report by aChartered Accountant in the form prescribed. Therefore, the explanationgiven by the Society, which was not rightly accepted by the AssessingOfficer and affirmed as such by the Commissioner of Income Tax(Appeals), could not be said to be sufficient and the orders passed bythese two authorities should not have been set aside by the ITAT. After hearing the learned counsel for the appellants and goingthrough the impugned order, we do not find any substance in thecontentions raised by the learned counsel for the appellants. Section 44ABof the Act provides that every person carrying on business shall, if histotal sales, turnover or gross receipts, as the case may be, in businessexceed or exceeds forty lakh rupees in any previous year, get his accountsof such previous year audited by an accountant before the specified dateand furnish by that date the report of such audit in the prescribed formduly signed and verified by such accountant and setting forth such ITA Nos.476 to 480 of 2007 -6- After hearing the learned counsel for the appellants and goingthrough the impugned order, we do not find any substance in thecontentions raised by the learned counsel for the appellants. Section 44ABof the Act provides that every person carrying on business shall, if histotal sales, turnover or gross receipts, as the case may be, in businessexceed or exceeds forty lakh rupees in any previous year, get his accountsof such previous year audited by an accountant before the specified dateand furnish by that date the report of such audit in the prescribed formduly signed and verified by such accountant and setting forth such ITA Nos.476 to 480 of 2007 -6- particulars as may be prescribed. The explanation added to this Sectionfurther provides that for the purposes of this section, “accountant” shallhave the same meaning as in the explanation given below sub-section (2)of Section 288; and “specified date”, in relation to the accounts of theassessee of the previous year relevant to an assessment year, means the31[st] day of October of the assessment year. In the present case, the specified date is 31.10.2004. Theexplanation added to sub-section (2) of Section 288 of the Act providesthat in this section, “accountant” means a chartered accountant within themeaning of the Chartered Accountants Act, 1949, and includes, in relationto any State, any person who by virtue of the provisions of sub-section (2)of Section 226 of the Companies Act, 1956, is entitled to be appointed toact as an auditor of companies registered in that State. The secondproviso to Section 44AB further provides that in a case where such personis required by or under any other law to get his accounts audited, it shallbe sufficient compliance with the provisions of this section if such persongets the accounts of such business or profession audited under such lawbefore the specified date and furnishes by that date the report of the auditas required under such other law and a further report by an accountant inthe form prescribed under this section. It is undisputed that the Society is registered under theSocieties Act and it acts under the control of Registrar, Co-operativeSocieties. Under Section 77 of the Societies Act, the accounts of the co-operative society shall be audited in such manner as the Registrar mayspecify from time to time. In the instant case, the Society has given theexplanation for not furnishing the required audit report within the ITA Nos.476 to 480 of 2007 -7- It is undisputed that the Society is registered under theSocieties Act and it acts under the control of Registrar, Co-operativeSocieties. Under Section 77 of the Societies Act, the accounts of the co-operative society shall be audited in such manner as the Registrar mayspecify from time to time. In the instant case, the Society has given theexplanation for not furnishing the required audit report within the ITA Nos.476 to 480 of 2007 -7- stipulated time, as the auditor was not appointed by the Registrar by thattime. The delay took place because the Society had no control over theappointment of the auditors by the Registrar, Co-operative Societies.Admittedly, in this case, along with reply dated 15.9.2005 to the showcause notice , a copy of the audit report by the Sub Inspector (Audit)appointed by the Registrar, Co-operative Societies along with tax auditreport in Form No. 3CA & 3CD, was submitted by the Society. Thoughthe said explanation was not accepted by the Assessing Officer andCommissioner of Income Tax (Appeals), but the ITAT found that the saidexplanation was satisfactory. In view of the provisions of Section 271Bof the Act, no penalty should have been imposed on the person or theassessee if he proves that there was a reasonable cause for delay incomplying with the provisions under Section 271B of the Act. We do notfind any illegality in the conclusion arrived at by the ITAT that theexplanation given by the Society is satisfactory. Once the explanationgiven by the assessee was found to be satisfactory, the benefit of Section273B was available to the assessee. The said finding is a pure finding offact based on the material available on the record which does not requireany interference in these appeals. We are also not inclined to accept thecontention of the learned counsel for the appellants that in the presentcase when the Society could not get its accounts audited from the auditorappointed by the Registrar, then it could have got its accounts auditedfrom the Chartered Accountant and submit the report within the specifiedtime. The contention of the appellants that the Society was having analternative which it could have availed of to avoid the penalty forviolation of the provisions of Section 44AB of the Act, can not be ITA Nos.476 to 480 of 2007 -8- accepted because, in our opinion, the Society is required to act under thecontrol of the Registrar, Co-operative Societies under the provisions ofthe Societies Act and it is bound to get its accounts audited only from theauditor appointed by the Registrar, Co-operative Societies. Therefore, itcannot be said that the Society was having an alternative to get itsaccounts audited from the Chartered Accountant. In view of the aforesaid discussion, we do not find anyillegality in the impugned order passed by the ITAT. No substantial question of law is arising in these appeals.Dismissed. (SATISH KUMAR MITTAL) JUDGE February 01, 2008vkg (RAKESH KUMAR GARG) JUDGE Refer to Reporter