R.S. Syal, A.M. - (1.)THIS appeal by the assessee is directed against the order passed by the CIT(A) on 23rd March, 2005 confirming the penalty of Rs. 36,585 imposed by the AO under Section 271B of the Act in relation to asst. yr. 1999-2000.
(2.)Briefly stated, the facts of this case are that the assessee, an individual, carried out business of manufacturing and sale of its produce in the shape of Chuna (Lime) and Kilns. In this year, two lime Kilns one at Town Gotan, Dist. Nagaur and another at village Borunda, Dist. Jodhpur were run by the assessee in the name and style of M/s United Chemicals Products and M/s Ajij Lime & Plaster Industries. Books of account of both the concerns were maintained separately. The turnover of the first concern was at Rs. 45,62,002 and of the second concern at Rs. 27,55,023 totalling Rs. 73,17,025. The AO observed that the accounts of the second concern were not audited. On being called upon to explain the reasons it was stated that the assessee being an illiterate person had appointed a chartered accountant to get the books of account audited and for doing all taxation and audit work. It was stated that the assessee relied on the wisdom of the chartered accountant who did not audit the books of account of the second concern where the sales were at Rs. 27.55 lakhs. It was contended that non-auditing of accounts was based on the legal advice and opinion on which the assessee had relied and acted. The assessee was required to produce the chartered accountant for examination. The assessee did not produce him for examination on the ground that Shri R.B. Soni, chartered accountant who audited the books of account was non-co-operative. It was also submitted that the chartered accountant appeared before the ITO, Ward-4, Jodhpur, in response to notices under Sections 142(1) and 143(2) of the Act but when the case was transferred to the Asstt. CIT, Nagaur he did not turn up and refused to appear before the Asstt. CIT. Then a new chartered accountant was engaged for completion of hearing. Not satisfied the AO imposed penalty at 1/2 per cent on the total turnover of Rs. 73.17 lakhs. The first appeal did not change the fortune of the assessee.
We have heard both the sides and perused the relevant material on record. The contention of the assessee is that the books of account of both the concerns were given to Shri R.B. Soni, who audited the accounts of the first concern where the turnover exceeded Rs. 40 lakhs and compiled the balance sheet of the other concern without auditing it and thereafter the return was filed by him. It has been contended that Shri Soni did not point out the need for getting the accounts of the second concern audited, the sales of which was less than Rs. 40 lakhs and assessee being an illiterate, could not be saddled with such a heavy penalty. On the other hand, the stand of the Department is that Shri R.B. Soni had not been produced before the AO for examination and the learned CIT(A) has further mentioned in para 5 of the impugned order that it was incumbent upon the assessee to give evidence in support of his claim and the assessee could not ask the AO to summon the auditor. We, further note the appointment letter of another chartered accountant, namely, Shri Raj Kumar Jain, copy placed at p. 11 of the paper book, in which he sought no objection from Shri R.B. Soni and the later chartered accountant has given his no objection on the same letter. Pages 12 to 15 are affidavits of Shri Shivkaran Vyas, Shri Babu Khan, the accountants of the assessee along with assessee's own affidavit to the effect that the books of account of both the concerns were given to Shri Soni and all the income-tax proceedings were being handled by him for the last couple of years. The assessee has further submitted to the AO during the course of penalty proceedings that Shri Soni appeared before the ITO during the course of assessment proceedings before transferring of case to Asstt. CIT, Nagaur. These facts indicate that Shri Soni was handling not only the auditing work of the assessee but also the taxation matters including compilation of accounts, filing of return and appearance before the assessing authority. When all the books of account were given to him for auditing and he chose to audit the accounts of the concern in which sales exceeded Rs. 40 lakhs and compiled accounts of the other concern, it cannot be stated that the assessee was guilty in any manner. An illiterate assessee, as is the case in question, cannot have an in-depth knowledge of the requirements to be fulfilled before filing of return of income. He can only submit himself to the advice of an expert, a chartered accountant and work as per his directions. When the books of account of both the concerns were given to the chartered accountant who audited only first concern whose turnover exceeded Rs. 40 lakhs, in our considered opinion, there existed a reasonable cause for the violation of the provisions of Section 44AB. Here it is important to mention that Section 271B is subject to the provisions of Section 273B and if the assessee proves reasonable cause for failure to comply with the requirements of Section 44AB, then he can be immuned from penalty under Section 271B. Non-production of Shri Soni before the AO has to be seen in the light that when the matter got complex and the assessee was beleaguered by the tax officials, the said chartered accountant turned around and chose non-co-operative attitude. It is further borne out of the fact that the new chartered accountant was appointed and Shri Soni did not object to the appointment. If the AO was so inclined to record the statement of Shri Soni, he could have done so by summoning Shri Soni and enquiring the matter. Having not done so and considering the strained relations of the assessee with Shri Soni, we are satisfied that the assessee could not have legitimately produced Shri Soni before the AO. By considering the facts in totality we hold that there was a reasonable cause for non-compliance with the provisions of Section 44AB and hence penalty under Section 271B has been wrongly sustained. We, therefore, order for its deletion.

(3.)IN the result the appeal is allowed.