Gireesh Bhalla : Tax audit U/S 44AB, penalty U/S 271-B of IT Act

As per section 44AB, every person,- a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceeds or exceeds sixty lakh rupees in any previous year (substituted for “Forty Lacs Rupees” by the Finance Act, 2010, w.e.f. 01.04.2011) or 
b) carrying on profession shall, if his gross receipts in profession exceeds Fifteen Lacs Rupees in any previous year (substituted for “Ten Lacs Rupees” by the Finance Act, 2010, w.e.f. 01.04.2011) 
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 verififed by such accountant and setting forth such particulars as may be prescribed. 
As per section 271-B, if any persons fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required u/s 44AB, the assessing officer may direct that such person shall pay, by way of penalty, a sum equal to one half percent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less. (substituted for “One Hundred Thousand Rupees” by the Finance Act, 2010 w.e.f. 01.04.2011) 
Important case Laws :- 
a) Section 271-B does not imply that the default must be continuous one and that if the audit is made before the completion of the assessment, then the penalty is not imposable. C.I.T. vs. Capital Electronics 261 ITR 4 (Cal.) 
b) There was delay in filing the Audit Report, since statutory auditors suddenly discontinued the work for increase fees, no penalty was leviable [Kirpa Industries (I) Ltd. vs. Jt. C.I.T. 76 TTJ-502 (Pune)] 
c) Seizing of accounts by custom department and later on by income tax department was reasonable and sufficient causes (Asstt. CIT vs. Tribhovandas Tejpal & Sons 126 Taxmann 28 (Raj) 
d) Additional Sales found as as result of search :-

 

In Brij Lal Goyal vs. Asstt. C.I.T. (2004) 88 ITD 413 (Delhi), the Tribunal held that the word “accounts” have not been defined in the Act. 

 

Therefore, in view of section 34 of the Indian Evidence Act, 1872, term “accounts” should be understood as “accounts which are maintained in the regular course of business”.  Therefore, turnover recorded in “accounts which are maintained in the regular course of business” alone should be considered for computing the limit of Rs. 60,00,000/- under section 44AB. 

 

The additional sales found as a result of search, which was not recorded in the books of account regularly kept in the course of business by the appellant, are not to be considered as “turnover” or “gross receipts” for computing the limit of Rs. 60,00,000/- under section 44AB. 

 

Merely because the assessee accepted the additional sales for the purpose of assessment of the relevant year on the basis of entries in the seized documents, the same would not constitute accounts of the appellant maintained in the regular course of business and on that basis alone liability cannot be fastened on the assessee by holding him to have