BANGALORE STEEL DISTRIBUTORS Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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S.BANDYOPADHYAY, A. M. : -
(1.) SINCE a common issue is involved in all these three appeals filed by the assessee for the three successive years, the appeals have been consolidated and a common order is being passed for the sake of convenience.
(2.) All the appeals relate to penalty levied by the ITO under s. 271B for failure on the part of the assessee to comply with the provisions of s. 44AB, strictly. It was found out during the course of a survey conducted by the Department on 10th Nov., 1988 that although the turnover of the assessee for each of the three years under consideration had exceeded the limit of Rs. 40 lakhs, the assessee had not, however, filed the audit report as required under s. 44AB. Returns of income for these years were also filed much belatedly in April, 1988 only. The ITO, after taking into consideration the objections of the assessee, ultimately levied penalties under s. 271B on account of default on the part of the assessee in not complying with the statutory requirements under s. 44AB, at the minimum levels of Rs. 28,510, Rs. 34,235 and Rs. 52,560 respectively.
The appeals filed by the assessee before the CIT(A) against imposition of the above mentioned penalties were disposed of by the CIT(A). The CIT(A) brushed aside the contention of the assessee that its partners were not much educated and that the work of filing the returns of income and complying with the other statutory requirements had been entrusted to the auditors of the assessee M/s Singhvi & Associates, Bangalore, and that there was a failure on the part of the said auditors to actually comply with the said requirements. She emphasised on the survey conducted by the Department under s. 133A of the Act (sic). She also stated that apart from stating that the auditors had delayed the matter, the assessee had not been able to file any convincing evidence or proof to substantiate its contention. In that view, she dismissed the appeals.
(3.) THE assessee has now come up in further appeals before us. THE learned counsel for the assessee has tried to attack the levy of penalty from two different angles. Firstly, he argues that the assessee was prevented by a reasonable cause from getting the audit as required under s. 44AB done in time. In that connection, the same argument as taken up before the lower authorities has been reiterated before us also. It is the contention of the assessee that the assessee-firm had come into existence in 1983 only and that the work of auditing its accounts and looking after its tax matters was entrusted to M/s Singhvi & Associates, chartered accountants. It has furthermore been contended that the partners of the assessee-firm not being much educated, solely depended on the said Chartered Accountants for complying with the various provisions relating to tax matters. It is thus stated that the delay in not only filing of the returns but also in getting the audit work done is entirely attributable to the negligence of the said Chartered Accountants. It is also the contention of the assessee that the assessee became aware of the fact that the audit report as required under s. 44AB had not till then been filed, during the course of the survey conducted by the Department under s. 133A on 18th Nov., 1986. It is stated that on contacting the said auditors, the assessee met with an unco-operative attitude on the part of the auditors who expressed their unwillingness to continue as the tax counsel of the assessee. THEreafter the assessee had to engage the said auditors and appoint another Chartered Accountant viz. Shri Haiderali Jeewabhai as its new auditor and tax consultant. It has furthermore been stated that on being appointed as the auditor and tax counsel, Hyderali Jeewabhai completed the audit of the accounts of the assessee for all the three years under consideration very shortly and submitted the said audit reports which were thereafter presented to the Department some time in December, 1988 alongwith revised returns of income for all the three years prepared in accordance with the said audit reports. It has furthermore been stated that at the time of making an enquiry with its former auditors, the assessee found audit report for asst. yr. 1985-86 in Form 3CB dt. 25th June, 1985 prepared by M/s Singhvi & Associates but not signed by it. It is thus contended that the delay in getting the audit work done and submitting the same with the Department thus entirely rests with the former auditors of the assessee viz., M/s Singhvi & Associates and the assessee should therefore be considered as absolved of any liability towards penalty in that regard. In support of the above contention, the assessee has filed on our record an affidavit stating all the abovementioned facts sworn by one of its partners, viz., Shri Mohammad Mustaq, another affidavit filed by Shri Hyderali Jeewabhai, new auditor, copy of the bill raised by M/s Singhvi & Associates dt. 9th Dec., 1985 relating to sales-tax matters of the assessee for the year 1983 and also a copy of the letter addressed by the said M/s Singhvi & Associates dt. 30th March, 1987 to the ITO in support of the claim that M/s Singhvi & Associates had earlier been employed by the assessee as its auditors and tax consultants and also the xerox copies of the unsigned reports in Form 3CB dt. 25th June, 1986 prepared by M/s Singhvi & Associates. THE learned counsel for the assessee has relied on the decision of the Tribunal, Hyderabad Bench, in the case of Progressive Constructions (P) Ltd. vs. ITO (1987) 20 ITD 182 (Hyd) and also on another decision of the Madhya Pradesh High Court in the case of Addl. CIT vs. B. K. Sethi (1980) 126 ITR 394 (MP) in support of his contention that the delay occurring on account of the negligence on the part of the auditors constitutes a reasonable cause towards the default. THE learned Departmental Representative, on the other hand, has argued that the assessee is a big dealer in iron and steel and that in the revised returns filed by the assessee, much higher incomes were returned and furthermore that this revision in the returns would not have been possible but for the audit conducted in accordance with the provisions of s. 44AB consequent to the survey conducted by the Department. It has furthermore been argued that the responsibility of getting the audit work done and thereafter filing the same with the Departmental authorities rests with the partners and not with its auditors. It has been tried to point out that this very point has been noted by the Tribunal in its combined order for these three years with regard to the imposition of penalties under s. 271(1)(a) for delay in filing the returns and that the Tribunal did not accept these contentions of the assessee and, ultimately, rejected the argument of the assessee that the delay on its part in filing its returns of income in time was caused by the negligence on the part of its auditors.;
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