Decided on March 19,1993



T.V.K. Natarajachandran, Accountant Member - (1.) THIS is an appeal by the revenue which is directed against the order of the CIT (Appeals), Nasik, dated 12-7-1988 wherein he has cancelled the penalty levied by the Assessing Officer under Section 271B of the Income-tax Act, 1961. The Assessing Officer has imposed the penalty for the assessee's failure in not getting the books of accounts audited as required in Section 44AB of the Income-tax Act, 1961. According to the CIT (Appeals), there was a reasonable and bonafide belief for the assessee in not getting the accounts audited as the assessee is a kachha arahatia and sales were made on commission basis, there was no obligation to get the accounts audited.
(2.) Revenue has taken grounds to urge that on the facts and circumstances of the case, the CIT (Appeals) erred in cancelling the penalty levied under Section 271B and therefore, his order should be vacated and that the Assessing Officer should be restored. The assessee has shown a turnover of Rs. 39,69,599 in sadi business said to have been carried on adat basis. The assessee has also shown interest income and adat receipts of Rs. 40,507 and Rs. 75,388 respectively. Including interest and adat receipt to the turnover in sadis, the total receipts came to Rs. 40,85,484 and thus exceeded the limit specified under Section 44AB(a), namely, Rs. 40 lakhs. Therefore, the assessee was required to get its books of accounts audited, but it failed to do so. After issuing show-cause notice to which the assessee filed written explanation on 29-2-1988 in which it was stated that the adat (commission receipts) of Rs. 75,388 cannot be included in sales of adat business in powerloom sadis. It is said that purchases of sadis from local dealers were made as per orders placed by different customers and they were handed over to the said merchants and customers when they visited the assessee's premises for which commission has been charged by the assessee. Therefore, it was urged that the said commission receipts could not be considered as a part of turnover. Alternatively, it was submitted that if the aforesaid explanation was not acceptable, the assessee-firm was ready to get its books of accounts audited and then submit the audit report.
(3.) THE written submission of the assessee was not acceptable to the Assessing Officer. According to the Assessing Officer, the amount received by the firm as consideration of sale price of sadis has to be included in the total sales or turnover. In other words, the Assessing Officer was of the view that adat, dalali, bank commission, insurance etc. received by the assessee formed part of price paid by the buyers and therefore, should be regarded as part of consideration of the sale of goods. THE alternative submission made by the assessee was not acceptable for the reason that Section 44AB specified a time limit and the audit report was to be filed alongwith the return of income. Further the alternative submission also amounted to admission of default under Section 44AB. THErefore, the Assessing Officer was satisfied that the assessee has committed default by not getting the books of accounts audited as required by Section 44AB and consequently, a penalty of Rs. 20,427 was levied.;

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