The Kolkata bench of Income Tax Appellate Tribunal (ITAT) has held that no penalty should be levied under section 271B of Income Tax Act, 1961, if the assessee proved the reasonable cause for failure to furnish audit report on loss suffered from share trading.
The assesseeKartick Das Bairagya is in the business of retail dealings in building material on commission basis. During the course of assessment, the Assessing Officer (AO)observed that the assessee has done share transactions through brokers which suffered a loss of Rs.4,38,446.
The AO also noted that the assessee was entered into an intra-day share trading and suffered this loss. Since the income from share trading is below 8% of the total turnover, the assessee should have got his accounts audited under Section 44AB of the Income Tax Act and furnished a report of such an audit. The assessee did not comply, thus the AO started the penalty proceedings in accordance with section 271B of the Income Tax Act.
Soumitra Choudhury, the counsel for the assessee submitted that the assessee was completely unaware of the share dealings done by the broker. The AO did not allow sufficient time to get the audit done in respect of the share dealings and furnish a report thereon.
Further, the counsel argued that the delay in preparing the audit report occurred since impugned year is the first year where the turnover of the assessee exceeded Rs. 1 crore on share dealings for which the assessee was not aware ofto get the accounts audited under Section 44AB of the Income Tax Act.
Thus, the assesses is eligible to the protection provided in the Section 273B of the Income Tax Act since he was under a bona fide belief that provisions of Section44AB Income Tax Act was not applicable to him.
G. HukughaSema, the counsel for the revenue, supported the decision of the lower authorities.
The tribunal observed that the impugned year is the first year wherein his gross receipts/turnover exceeded the threshold prescribed under Section 44AB of the Income Tax Act and was under a bonafide belief that there was no requirement of any audit in this respect, which was the reasonable cause for not auditing the account.
Therefore, the Two-member bench of Rajpal Yadav (Vice President) and Girish Agrawal(Accountant Member) held that no penalty shall be imposed on the person if he proved that there was a reasonable cause for the failureas provided under Section 273B of the Income Tax Act.
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