ORDER
K. C. SNVGHAL, J.M.:
The only issue arising out of this appeal relates to the levy of penalty of Rs, 1,00,000 under s. 271B pertaining to asst. yr. 1986-87.
2. The brief facts giving rise to this appeal are these. The assessee is a co- operative society engaged in running a processing unit and resale of the processed yarn. It is registered under the Maharashtra Co-operative Societies Act, 1960 (hereinafter called as MCSA). Its co-operative year is 1984-85 ending on 30th June, 1985, relevant to asst. yr. 1986-87. Its sales during the year was above Rs. 5,00,000,00 and, therefore, it was under obligation to get its accounts audited as required under s. 44AB before the specified date. The assessee failed to get its accounts audited in terms of s. 44AB but filed its return declaring loss of Rs. 6,46,500 on 10th of September, 1986, without such audit report. Proceedings under s. 271B were initiated by the AO because of the aforesaid default by the assessee. In response to the show cause notice, it was explained by the assessee vide its letter dt. 1st May, 1989, that assessee was required to get its accounts audited by a statutory auditor as per s. 81 of the MCSA. Since the statutory audit was still pending, it was unable to file tax audit report as prescribed under s. 44AB. The AO rejected the plea of the assessee and imposed a penalty of Rs. 1,00,000. It was observed by him that the assessee got its internal audit done by a Chartered Accountant which was completed on 14th Dec., 1985, and, therefore, there was no reason for not obtaining the tax audit report from such Chartered Accountant. The order of the AO was confirmed by the CIT(A) for the reasons given by the AO. Aggrieved by the same, the present appeal has been filed before the Tribunal by the assessee.
3. The learned counsel for the assessee contended before us that assessee being a co-operative society was under obligation to get its accounts audited under s. 81 of the Maharashtra Co-operative Societies Act, 1960. According to him, the statutory audit fees of Rs. 3000 was paid by the assessee on 28th Sept., 1985 and had cooperated with the auditors for getting its accounts audited. Despite this, the auditors for the reasons best known to them, could not complete the audit in time as the final audit was completed only on 30th Nov., 1989. According to him, the assessee could not be penalised for the delay on the part of the auditors. It was also submitted by him that internal audit was completed by the firm of the Chartered Accountants Mls Birafflar & Co. in the month of December, 1985. However, they were of the view that the tax audit under s. 44AB could not be taken up by them unless statutory audit under the MCSA was completed. Accordingly, they advised the assessee to get its accounts first audited under the MCSA. He also drew our attention to the letter dt. 6th July, 1984, issued by the Commissioner for Co-operation and Registrar, Co-operative Societies, Maharashtra State, Pune to the CIT, Pune to show that even such Commissioner was of the view that Co-operative Societies were not required to get the account books audited by an auditor other than the statutory auditor appointed under MCSA. He further drew our attention to the letter dt. 12th Feb., 1985, issued by the Commissioner for Co-operation and Registrar Cooperative Societies, Maharashtra State to the special auditor, Co operative Societies, stating that the presumption made by his office in its letter dt. 6th July, 1984, was confirmed by the CIT, Pune vide its letter dt. 12th Oct., 1984. In view of these submissions, it was prayed by the learned counsel for the assessee that there was sufficient cause and, therefore, the impugned penalty should be cancelled.
4. On the other hand, the learned senior Departmental Representative vehemently opposed the legal contention taken up by the assessee’s counsel. He read out the provisions of the second proviso to s. 44AB to contend that there was no bar from getting its accounts audited by any other chartered Accountant. According to him, the statutory audit is only an alternative which if completed within the time would be considered as sufficient compliance. He proceeded further to contend that assessee was not bound to obtain the tax audit report only from statutory auditor appointed under MCSA. Therefore, delay on the part of statutory auditor could not be considered as sufficient cause. In this connection, he drew our attention to the decision of Patna Bench Tribunal in the case of Dy. CIT vs. Bihar State Leather Development Corpn. (P) ITD. (1996) 58 ITD 276 (Pat) (Para 12). It was also his contention that if internal audit could be done by a Chartered Accountant, there was no reason for not getting its accounts audited by it by such Chartered Accountant. Accordingly, it was prayed by him that penalty levied by the AO be confirmed.
5. Rival submissions as well as the material placed before us have been considered carefully. In order to levy the penalty under s. 271B, there must be a failure on the part of the assessee to get its accounts audited by a Chartered Accountant before the specified date as required by s. 44AB. Sec. 273B provides that if such failure is because of sufficient cause, then penalty shall not be imposed. However, the legislature has reduced the rigour of such requirements in the second proviso to s. 44AB which provides that if the ass6ssee is required under any other law to get his accounts audited, then it shall be a sufficient compliance of s. 44AB, if assessee gets its accounts audited under such law before the specified date and obtains before the date the report of such date and further report in the form prescribed under s. 44AB.
6. In the present case, the assessee is governed by the provisions of Maharashtra Co-operative Societies Act, 1960. According to s. 81 of this Act, the assessee is required to get his accovnts audited by the auditors appointed by the Registrar of the Co-operative Societies. There is no dispute about the fact that assessee failed to get its accounts audited before the specified date. The stand of the assessee is that the delay was beyond its control and, therefore, there was sufficient cause for such failure while the case of the Revenue is that assessee was not bound to get its accounts audited under s. 44AB by the auditors under the MCSA, According to the learned senior Departmental Representative, tax audit under s. 44AB could have been got done by the assessee by any Chartered Accountant. Therefore, the dispute before us centres round the interpretation of provisions of second proviso to s. 44AB. The relevant portion of s. 44AB is set out as under:
“Every person :
(a) carry 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
(c) ………………….
get his accounts of such previous year audited by an accountant before the specified date and 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 obtains before that date the report of the audit as required under such other law and a further report in the form prescribed under this section.
Explanation ……….. 7. On careful study of the above provisions, we are of the view that the second proviso provides an alternative in those cases where audit of books of account is governed by some other law in order to avoid the audit of such books twice., one under the special law and the other under s. 44AB as no useful purpose would have been served by the second audit. The purpose of the legislature in enacting s. 44AB is to have an detailed scan of accounts of the assessees in higher brackets with a view to detect evasion, if any, and to ensure expeditious assessment. It is to ensure that financial statements are presented in accordance with generally accepted accounting principles and the information disclosed in the financial statements are reasonable and adequate to give a true and fair view of the financial affairs of an assessee. The similar object is achieved by the audits done under other special enactments such as Companies Act and Co-operative Societies Act. It is because of this reason, that legislature reduced the rigour of the main provision of introducing the second proviso. 8. In order to strengthen the above view, the reference may be made to the decision of the Gujarat High Court in the case of Rajkot Engineering Associations & Ors. vs. Union of India (1986) 54 CTR (Guj) 272 : (1987) 162 ITR 28 (Guj) wherein the Hon’ble High Court had to consider the validity of the provisions of s. 44AB. Their Lordships considered the provisions of second proviso to s. 44AB. At p. 86 of the report, the following observations were made.
it is merely an enabling provision so as to save the category of the assessee like co-operative societies, from being subject to audit under the statute by which it is governed and also to get its accounts again audited by the Chartered Accountant for the purposes of specific provisions of compulsory s. 44AB by tax audit. The purpose appears to be, as has been rightly contended by Mr. G.N. Desai, the learned counsel appearing on behalf of the Chartered Accountants, that the provision is an enabling provision which saves the special categories of the assessees like co-operatives societies from the burden of audit twice over.” 9. It is pertinent to note that the CIT for Co-operation and Registrar, Co-operative Societies, Maharashtra State was also of the similar view when the provisions of s. 271B were enacted by the legislature, This is apparent from his letter dt. 6th July, 1984, issued by him to the CIT, Pune, wherein the following observations were made by him that :
“I am of the opinion that if the accounts of other institutions are audited by the Government auditors under s. 81 of the Maharashtra Co-operative Societies Act, 1960, it is not necessary to get the accounts again audited by the Chartered Accountants to enable them to file the prescribed returns as there cannot be two audits of the same institution by two different auditors for two different purposes.”
In connection with this letter, it appears that CIT, Pune vide its letter No. PNT/PRO/1984/85, dt. 12th Oat., 1984, confirmed the above view of the Registrar, Co-operative Societies, Maharashtra. This is apparent from the copy of the letter, dt. 12th Feb., 1985, issued by the Registrar, Co-operative Societies to the Special Auditor, Co-operative Societies.
10. In view of the above discussion, we are of the opinion that view canvassed by the learned counsel for the assessee is a plausible view and, therefore, it is not necessary or obligatory for the assessees who are required to get their accounts audited under some other law to get their accounts further audited again by another Chartered Accountant for the purposes of s. 44AB. It will be sufficient compliance if tax audit report is obtained from the statutory auditors.
11. However, we find that a different view has been taken by the Patna Bench of the Tribunal in the case of Bihar State Leather Development ITD. (supra) by making the following observations:
“The Act is a self-contained code and it is not necessary to go into the provisions of the Companies Act in order to implement it. The second proviso below s. 44AB only provides an alternative and reduces the rigours of audit where audit has already been conducted under any other law. There is nothing to indicate that the assessee is bound to adopt the alternative course and is helpless if audit under the other law has not been done or is being delayed.”
12. It is well-settled proposition that where the language of the trading provision is capable of more meanings than one, then Court has to adopt that interpretation which favours the assessee, more particularly so, where the provision relates to the imposition of penalty. Such view has been taken by the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products ITD. 1973 CTR (SC) 177: (1973) 88 ITR 192 (SQ). Respectfully following the same, it is held that assessee being a co-operative society was not required to get its accounts audited separately by a chartered accountant since it was statutorily required to get its accounts audited under s. 81 of the Maharashtra Co-operative Societies Act.
13. The next question which arises is whether there was sufficient cause for the delay in getting the accounts audited. There is no dispute about the fact that assessee paid audit fees of Rs. 3,000 on 28th Sept., 1985, in pursuance of the letter of auditors dt. 9th Jan., 1985. The correspondence between the assessee and auditors show that assessee cooperated with the auditors in this regard. But, the auditors could not complete the audit in time and made inordinate delay. The auditors had issued a letter, dt. 21st Sept., 1991, to the Chairman of the assessee admitting delay on their part. The relevant extracts of that letter is given below :
“The statutory audit of your society was to be completed from the year 1983-84. We were compelled to complete the audit of other institutions like banks, etc. in our charge on priority basis and hence for want of time the statutory audit of your society could not be taken up after closure of the year 1984-85. So also the audit could not be taken up from time to time for the 3/4 years thereafter and hence the audit for the years 1983 to 1989 i.e., total six years, the audit was taken up at one time and thereafter the statutory audit for the year 1989-90 was taken up regularly in time. ”
In view of the above facts and circumstances, we are of the view that the delay in audit was beyond the control of the assessee which constituted a reasonable cause. Therefore, the CIT(A) was not justified in sustaining the penalty of Rs. 1,00,000 imposed by the AO. Consequently, we set aside the order of the CIT(A) and cancel the penalty sustained by him.
14. In the result, the appeal is allowed.