The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT) deleted the penalty for auditing the books of account under section 44AB of the Income Tax Act,1961 due to turnover limitation.
Bangla Readymade Garments Mfg and Traders Welfare Association, the appellant assessee was an association of persons formed for looking after the interests of manufacturers and traders of garments. The assessee appealed against the order passed by the Commission of Income Tax(Appeals) for confirming the penalty imposed under section 271B of the Income Tax Act by the assessing officer for the late filing of the audit report.
Anil Kochar, the counsel for the assessee contended that the gross turnover of the association was only the service charges received for facilitating the members for deposits of sales tax to the Government treasury and other activities of the association. It was also submitted that the alleged cash deposit has been wrongly construed as turnover by the assessing officer ( AO).
The counsel for the assessee further contended that the turnover was below the prescribed limit under section 44AB of the Income Tax Act the assessee was not liable to get the books of accounts audited and, thus, no penalty was leviable under section 271B of the Income Tax Act.
Ranu Biswas, the counsel for the respondent contended that the assessee had failed to explain the purpose of receiving the huge cash from its members and depositing the said sum with the Government treasury towards sales tax. It was also submitted that the assessee was able to explain the source of the alleged cash deposit, it had to be considered as the business turnover of the assessee and, thus, liable for audit under section 44AB of the Income Tax Act.
The bench observed that in the audit of a person carrying on business the limit provided under section 44AB of the Income Tax Act was Rs. 1 Crore. The sales turnover or gross receipts as the case may be in the business exceed/exceeds Rs. 1 Cr, the assessee was liable to get books of accounts audited under section 44AB of the Income Tax Act.
It was also observed that the assessee was carrying the business activities and the turnover of the assessee was Rs. 32,38,340/- which was less than Rs. 1 Cr during the year, it is out of the purview of Section 44AB of the Income Tax Act. Thus the assessee was not liable to get its books of accounts audited under section 44AB of the Income Tax Act and the penalty imposed under section 271B of the Income Tax Act was against the provision of law and is liable to be deleted while allowing the appeal filed by the assessee.
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