Mathura Zila Sahkari Bank Ltd. Vs. Deputy Commissioner of Income Tax - Court Judgment

Excerpt:
1. this appeal of the assessee is directed against the order passed by cit(a) agra on 16th oct., 1996, confirming the penalty of rs. 90,000 levied under section 271-b of the it act. "1. because the courts below were not justified in imposing penalty of rs. 90,000 under section 271b of the it act, 1961 in respect of the asst. yr. 1992-93. 2. because the amounts maintained by maintained by the co-operative society are required to be audited under the co-operative societies act, 1912 or under the state acts. 3. because the accounts of the co-operative societies were audited by the government auditors and their report was duty submitted to the ao. 4. because the provisions of section 44-ab are not applicable in the case of cooperative societies. 5. because the imposition of penalty at rs. 90,000 under section 271b is uncalled for and unwarranted and is against the cannons of equity justice and good conscience. 6. because the co-operative societies function under the strict supervision and directions of the state government and it has no free hand and choice in dealing with the societies' matters, 7. because the imposition of penalty under section 271b is bad in law and against facts of the case." 3. the facts of the issue are that the assessee failed to get its accounts audited and furnish the audit report under section 44ab of the act. the ao, therefore, imposed penalty of rs. 90,000 for the default as the assessee failed to offer any explanation. before the cit(a) it was submitted that the assessee is a co-operative society, thus required to be audited its accounts under the co-operative societies act, 1912 or under the state acts. further, if the accounts are audited under other law as in the instant case of the assessee's co-operative society, it will suffice and no further audit under section 44ab is required to be done. the accounts books of the assessee were duly audited and the audit report was placed before the ao during the course of assessment proceedings, hence there is no default under the provisions of section 44ab. it is also submitted that the provisions to section 44ab also support the views of the assessee, which says in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section. however, the cit(a) did not agree with the explanation of the assessee for the reason that second proviso to section 44ab reads as under : "provided further that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts, of such business or profession audited under such law before the specified date and furnished by that date the report of the audit as required under such other law and a further report in the form prescribed under this section." 5. during the course of hearing, the learned counsel for the assessee pleaded that the return of income was due on 31st oct., 1992, and audit report was obtained on 28th sept., 1992. the said audited copy of account was furnished during the course of assessment proceedings on 8th feb., 1995, and assessment was completed on 28th feb., 1995.therefore, as per the provisions existed before 1st july, 1995, obtaining of the audited copy of account is sufficient compliance to provisions of section 44ab of the it act, 1961. hence, there is no default on the part of the assessee during the year under consideration. we have verified the above position from the paper book furnished by the representative of the assessee. we further noted that the penalty imposed cannot be held justified for another reason also namely that there was reasonable cause in not submitting tax audit report as the appellant bank which is part of u.p. state cooperative bank ltd. was under the bona fide belief that the audit report as given by statutory auditors was sufficient compliance with legal requirement of furnishing audit report and that the u.p. state co-operative bank ltd.' who control the affairs of various banks under it functioning in different districts, was responsible to obtain the tax audit report.hence, on both the accounts we allow the appeal of assessee.

Judgment:
1. This appeal of the assessee is directed against the order passed by CIT(A) Agra on 16th Oct., 1996, confirming the penalty of Rs. 90,000 levied under Section 271-B of the IT Act.

"1. Because the Courts below were not justified in imposing penalty of Rs. 90,000 under Section 271B of the IT Act, 1961 in respect of the asst. yr. 1992-93.

2. Because the amounts maintained by maintained by the co-operative society are required to be audited under the Co-operative Societies Act, 1912 or under the State Acts.

3. Because the accounts of the co-operative societies were audited by the Government auditors and their report was duty submitted to the AO. 4. Because the provisions of Section 44-AB are not applicable in the case of cooperative societies.

5. Because the imposition of penalty at Rs. 90,000 under Section 271B is uncalled for and unwarranted and is against the cannons of equity justice and good conscience.

6. Because the co-operative societies function under the strict supervision and directions of the State Government and it has no free hand and choice in dealing with the societies' matters, 7. Because the imposition of penalty under Section 271B is bad in law and against facts of the case." 3. The facts of the issue are that the assessee failed to get its accounts audited and furnish the audit report under Section 44AB of the Act. The AO, therefore, imposed penalty of Rs. 90,000 for the default as the assessee failed to offer any explanation. Before the CIT(A) it was submitted that the assessee is a co-operative society, thus required to be audited its accounts under the Co-operative Societies Act, 1912 or under the State Acts. Further, if the accounts are audited under other law as in the instant case of the assessee's co-operative society, it will suffice and no further audit under Section 44AB is required to be done. The accounts books of the assessee were duly audited and the audit report was placed before the AO during the course of assessment proceedings, hence there is no default under the provisions of Section 44AB. It is also submitted that the provisions to Section 44AB also support the views of the assessee, which says in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section. However, the CIT(A) did not agree with the explanation of the assessee for the reason that Second Proviso to Section 44AB reads as under : "Provided further that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts, of such business or profession audited under such law before the specified date and furnished by that date the report of the audit as required under such other law and a further report in the form prescribed under this section." 5. During the course of hearing, the learned counsel for the assessee pleaded that the return of income was due on 31st Oct., 1992, and audit report was obtained on 28th Sept., 1992. The said audited copy of account was furnished during the course of assessment proceedings on 8th Feb., 1995, and assessment was completed on 28th Feb., 1995.

Therefore, as per the provisions existed before 1st July, 1995, obtaining of the audited copy of account is sufficient compliance to provisions of Section 44AB of the IT Act, 1961. Hence, there is no default on the part of the assessee during the year under consideration. We have verified the above position from the paper book furnished by the representative of the assessee. We further noted that the penalty imposed cannot be held justified for another reason also namely that there was reasonable cause in not submitting tax audit report as the appellant bank which is part of U.P. State Cooperative Bank Ltd. was under the bona fide belief that the audit report as given by statutory auditors was sufficient compliance with legal requirement of furnishing audit report and that the U.P. State Co-operative Bank Ltd.' who control the affairs of various banks under it functioning in different districts, was responsible to obtain the tax audit report.

Hence, on both the accounts we allow the appeal of assessee.