Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income-Tax vs Rediffusion Advertising Ltd. on 9 June, 1997
Equivalent citations: [1998]65ITD29(MUM)
ORDER
I.S. Verma, JM
1. This is an appeal by the Revenue against the order of the CIT (Appeals) dated 6-12-1990 by which the penalty imposed under section 271B had been cancelled.
2. We have heard the learned D.R. as well as the assessee's counsel. The learned D.R. has submitted that as per provision of section 44AB, the assessee was under obligation to get its accounts audited and to obtain the report of tax audit before the specified date which in this case was 30-6-1986 because the previous year for the assessment year 1986-87 had ended on 30-6-1985. Disputing the findings of the CIT (Appeals), the learned D.R. submitted that the assessee was to procure the tax audit report before the specified date even if its accounts were required to be audited under the Companies Act and as the assessee had failed to obtain the tax audit report, the CIT (Appeals) was not justified in cancelling the penalty. In support of these submissions, the learned D.R. heavily relied on the observations of the Special Bench of the Tribunal in the case of Asstt. CIT. v. Gayatri Traders [1996] 222 ITR 1 at pages 10 to 13 (Hyd.). The learned D.R. further submitted that the CIT (Appeals) was not justified in considering the assessee's choice of getting two different types of audits from different CAs as a reasonable cause for not obtaining the tax audit report in time as prescribed under section 44AB. The learned D.R. further relied on the decision in the case of Abhay Kumar & Co. v. Union of India [1987] 164 ITR 148 (Raj.). The learned counsel for the assessee, on the other hand submitted that the due date for furnishing the report for the assessment year 1986-87 in this case was 31-7-1986 and as the assessee was required to got its accounts audited under the Companies Act so, it had got its accounts audited under the Companies Act on 24-2-1986 and had also obtained the audit report under that law on 24-2-1986 itself. In view of these facts, the assessee's counsel submitted that the assessee was under a bona fide belief that by virtue of second proviso to section 44AB, the assessee was under obligation only to get its accounts audited and to obtain the report of audit under Companies Act before the specified date and not to get the tax audit report also before the specified date. Elaborating this line of argument, the learned counsel for the assessee drew our attention to second proviso as it stood at that time and further submitted that as there was no time limit as far as the assessee's case is concerned; to obtain the tax audit report, so, the assessee had not contravened the requirement of section 44AB.
3. The other plea taken by the assessee's counsel was that after getting its accounts audited under the Companies Act, the assessee had to obtain the tax audit report from a different Chartered Accountant and as the accounts of the assessee's Branch Offices were required to be brought to Bombay from various places throughout India so, the delay in obtaining the audit report was on account of reasonable cause beyond the control of the assessee.
4. The last line of argument taken by the assessee's counsel was that the default in not obtaining the tax audit report before the specified date was of technical and venial nature for which imposition of penalty is not justified. In support of his submissions, the assessee's counsel relied on the decisions in Prabhulal Sahu v. ITO [1995] 83 Taxman 177 (Jp.) (Tax-Mag.), Sibonarayan Patro & Bros. v. ITO [1996] 87 Taxman 111 (Ctk.) (Tax-Mag.), National Agro Service v. ITO [1990] 34 ITD 506 (Pune) and ITO v. Vinedale Distilleries (P.) Ltd. [1992] 43 ITD 703 (Hyd.).
5. After considering the rival submissions and having gone through the facts and circumstances, as well as the case laws relied upon by the parties, we are of the opinion that the issue raised by the assessee's counsel regarding the non-prescription of time limit for obtaining that tax audit report in cases where the accounts are required to be audited under any other law itself is quite important one and therefore, we proceed to decide the issue first. To decide the issue relating to the time limit for obtaining the tax audit report in cases where the accounts are required to be audited under any other law, as provided under the second proviso to section 44AB, it is necessary to consider the provisions in this respect which as stood at that time were in the following terms :-
"44AB. Every person, -
(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds forty lakh rupees in any previous year, or
(b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :
Provided ** ** ** Provided further that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report in the form prescribed under this section."
From the second proviso, it is clear that in case of an assessee whose accounts were required to be audited under any other law, fulfilment of the following conditions was to be a satisfactory compliance of the provisions of section 44AB.
(i) If the assessee had got the accounts audited under such other law (under Companies Act in the assessee's case) before the 'specified date' and
(ii) Had obtained the report of audit as required under that other law (in assessee's case under the Companies Act) before such date i.e., the specified date and
(iii) Had obtained a further report in the "form" prescribed under section 44AB - which as per Rule 6G was to be in Form Numbers 3CA and 3CD.
6. (i) In depth analysis of the language and the words used while prescribing three different requirements to be specified in second proviso, which we have extracted above; it is patently evident that requirement of getting the accounts audited and to obtain the report of audit under that other law were to be fulfilled before the specified date - as prescribed in the main section, but as far as the third requirement, i.e. requirement of obtaining the further report in the form prescribed under section 44AB - in Form 3CA, 3CD, was concerned, there was no mention of the date or period by which such further report was to be obtained. The use of the words "before the specified date" for first requirement, use of words "before the date" for second requirement, and omission of these words for third requirement leads to one and the only conclusion that the legislature has consciously avoided the limitation for obtaining the report of audit in the form prescribed under section 44AB. Had it not been the case, then the legislature should have, instead of using the three different sentences; should have used only one sentence in the form "if such person gets the accounts audited under such law and obtains the report of audit both as required under such other law as well as under this section; before the specified date". We are, therefore, of the opinion that in case of those assessees who were covered by second proviso to section 44AB, there was no time limit for obtaining the tax audit report.
(ii) One more aspect of the language used in the second proviso, supports our aforesaid conclusion relating to time limit and that aspect is the use of words "in the form prescribed under this section". These words only require the assessee to obtain the audit report in the prescribed forms and not "as required by section 44AB". Because had it not been the case then the legislature should have used the words "as required under this section" instead of the words "in the form prescribed under this section". This difference clearly conforms that the legislature had required the assessee only to obtain the tax audit report in Forms 3CA and 3CD, which were prescribed under Rule 6G and not to obtain the report "before the specified date."
7. In view of above discussions, we are of the opinion that if a person, who was required to get his accounts audited under any other law; had got the accounts audited and had obtained the report of audit required under that other law before the specified date and further had obtained a report of audit in Forms 3CA and 3CD "as prescribed under Rule 6G, read with section 44AB" then, he was considered to have complied with the requirement of section 44AB meaning thereby that by virtue of second proviso, there is time limit for getting the accounts audited under other law and to obtain the report of audit under that law but there is no time limit for obtaining the report of audit in Forms 3CA and 3CD.
8. As far as assessee's case is concerned, it is an admitted fact that it had got its accounts audited under the Companies Act and had obtained the report of audit under that Act on 24-2-1986 which was well before the specified date and had obtained the report of audit in Forms 3CA and 3CD though after the specified date we are of the opinion that all the requirements of section 44AB, read with second proviso had been satisfied and the assessee was not liable to penalty under section 271B.
9. Even otherwise, the default, as claimed by the assessee; was of technical and venial nature for which we are of the opinion; penalty is not justified and in support of this conclusion, we rely on the decision of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 wherein it has been held that where there is a technical and venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. The authority competent to impose the penalty is justified in refusing to impose penalty - even if a minimum penalty is prescribed.
10. As we have confirmed the order of the CIT (Appeals) on legal grounds, we do not consider it necessary to consider the assessee's submissions on merits. However, before parting with the matter, we would like to observe that the observations of the ITAT (Special Bench) in the case of Asstt. CIT v. Gayatri Traders [1996] 222 ITR 1 (Hyd.) on which the learned D.R. has strongly relied, were in different context. In that case, the applicability of second proviso was not under consideration. In view of this, we are of the opinion that the observations relied upon by the learned D.R. in this case as well as the decision in the case of Abhay Kumar & Co. v. Union of India [1987] 164 ITR 148 (Raj.) are not applicable to the facts of the present case.
11. In the result, the appeal of the revenue is dismissed.