ORDER
R.P. Garg, Member
1. This is an appeal by the assessee against the order of the CIT (A), for the assessment year 1988-89, confirming the levy of penalty under Section 271B of the Income-tax Act, 1961, for the failure of the assessee to obtain an audit report, under Section 44AB of the Act.
2. The Legislature realised that the accounts maintained by companies are audited under the Companies Act, 1956; those maintained by Co-operative Societies are audited under the Co-operative Societies Act, 1912; but there is no obligation on other categories of assessees to get their accounts audited. It also felt that a proper audit for tax purposes would ensure that the books of account and other records are properly maintained and that they faithfully reflect the income of the tax-payer and claims for deductions are correctly made by him. Such audit, it was felt, would also help in checking fraudulent practices and facilitate the administration of tax laws by a proper presentation of the accounts before the tax authorities and considerably saving the time of Assessing Officers in carrying out routine verifications, like checking the correctness of totals and verifying whether purchases and sales are properly vouched or not and further the time of the Assessing Officers thus saved could be utilised for attending to more important investigational aspects of a case. With these considerations in view, the Legislature introduced by Finance Act, 1984, the requirement of audit of accounts of other assessees as well, if the business turnover exceeded Rs. 40 lac or the professional receipts Rs. 10 lac in any year or years relevant to assessment year 1985-86 and subsequent years, before a specific date, by inserting the provisions of Section 44AB of the Act. The Section as it stood in assessment year 1988-89 was as under:
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 years relevant to the assessment year commencing on the first day of April, 1985 or any subsequent assessment year; or
(b) carrying on profession, shall, if his gross receipts in profession exceed ten lakh rupees in any previous year or years relevant to the assessment year commencing on the first day of April, 1985, or any subsequent assessment year,
get his accounts of such previous year or years audited by an accountant before the specified date and obtain before 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.
Section 271B of the Act provided a penalty of 1 1/2 per cent of the turnover or receipts, subject to a maximum of Rs. 1 lac, if one fails to obtain the report as required under Section 44AB of the Act. Section 271B of the Act reads as under :
271B. If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or obtain a report of such audit as required under Section 44AB, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent 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 thousand rupees, whichever is less.
An assessee is exonerated from the levy of penalty, if the failure was with a reasonable cause by virtue of the provisions contained in Section 273B of the Act, which reads as under:
273B. Notwithstanding anything contained in the provisions of Sub-section (1) of Section 271, Section 271A, Section 271B, Section 271BB, Section 271C, Section 271D, Section 271E, Clause (c) or Clause(d) of Sub-section (1) or Sub-section (2) of Section 272A, Sub-section (1) of Section 272AA or Sub-section (1) of Section 272BB or Clause (b) of Sub-section (1) or Clause (b) or Clause (c) of Sub-section (2) of Section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.
Specified date in the present case within which the report was to be obtained under Section 44AB of the Act was 30th June, 1988. The report was, however, obtained on 25-3-1989 and filed with the Income-tax Department on 1-6-1989, even though the return was filed on 5-5-1989. Before the Assessing Officer, the assessee stated the following reasons for the delay :
The assessee is engaged in the business of trading in grey cloth and sarees. The total quantity handled by the assessee runs into lacs of meters. The books of accounts of the concern are written in Gujarathi script by the person known as ‘Mehtaji’. The accountant, namely, Mehtajis are not conversant and familiar with the complicated provisions of the income-tax laws and the tax audit proceedings. Due to a large volume of work, a lot of clerical labour is involved. Due to the immense volume of transactions lot of time is required to finalise the accounts. Moreover, the requirements of the tax audit are to be made and various provisions of the Income-tax Act to be complied with. A thorough scrutiny of details is required to be made to comply the tax audit requirements. While preparing the details the routine work is to be attended and hence, time is also devoted to the maintenance of books of accounts for the period subsequent to the period of audit. All the above reasons have a combined effect of the delay in completion and submission of tax audit report. Thus, there is a reasonable cause in the delay in obtaining tax audit report under Section 44AB. We, therefore, request you to condone the delay of 8 (eight) months and drop the intended penalty proceedings under Section 271B.
The ITO did not accept the explanation as satisfactory. He held that the assessee appeared to have been giving lame excuses by shifting the obligation on the accountant and by stating that a lot of time and work is involved in finalising the accounts and getting the same audited. The accounting year of the assessee had ended on 30-4-1987 and as the total sales were to the tune of Rs. 86,90,118, the accounts ought to have been audited as required under Section 44AB of the Act on or before 30-6-1988. The ITO further observed that the assessee already had about 14 months to do the needful. However, the accounts had been audited only on 25-3-1989 and thus, there was a delay of 8 complete months. He, therefore, held that the assessee had no reasonable explanation to offer in respect of the default committed. He, accordingly, levied a penalty of Rs. 42,075 under Section 271B of the Act.
3. In appeal, the CIT (A) upheld the levy by following his order for the assessment year 1985-86. The reliance placed by the assessee on the Calcutta High Court decision in Calcutta Chromotype (P.) Ltd. v. ITO [1971] 80 ITR 627 and that of the Allahabad High Court in CIT v. Anchor Pressing (P.) Ltd. [1982] 136 ITR 505, according to him, were not applicable to the facts of the present case. Aggrieved by the order of the CIT (A), the assessee is in second appeal.
4. Relying upon the aforesaid decisions of the Calcutta and Allahabad High Courts, the learned counsel for the assessee, Sri V.H. Patil, submitted that the penalty is provided for failure to obtain the audit report and not for the delay in obtaining the same. In any case, he submitted that the delay was on account of the auditors who took eight months in auditing the accounts. Insofar as the assessee was concerned, it made available the accounts to the auditors in June 1988 itself. A certificate dated as late as 24-2-1993 from M/s. M.P. Chitale & Co., Chartered Accountants, certifying that the audit work was commenced by them sometime in June 1988 and was completed after 25-3-1989 was filed. He, therefore, submitted that by virtue of the provisions of Section 273B of the Act, no penalty can be levied as the failure was with reasonable cause. He also submitted that no penalty proceedings were initiated for the delayed filing of the return, under Section 271(1)(a) of the Act, for the same default.
5. The learned Departmental Representative, Sri R.N. Bhadgaonkar, on the other hand, submitted that the two cases relied upon by the learned counsel for the assessee, were rendered under the provisions of Companies (Profits) Surtax Act and Super-Profits Tax Act, which are not in pari materia to the provisions of the Income-tax Act, 1961. The provisions of Section 271B of the Act, according to him, are clearly applicable. He further submitted that the certificate in question is a new evidence and the assessee is trying to make out a new case to attribute the delay to the auditors. In any case, the auditors say that the audit was commenced in June 1988 and completed in March 1989, but no reasons are stated for the delay. They have not accepted the delay to be on their account. Non-initiation of the proceedings under the provisions of Section 271(1)(a) of the Act, he submitted, might be by a mistake on the part of the ITO, or the delay in obtaining the audit report itself could be a reasonable cause for the delayed filing of the return and, therefore, the assessee cannot take any advantage of non-initiation of proceedings under Section 271(1)(a) of the Act to advance its case.
6. I have heard the counsel for either side. Section271B of the Act provides for penalty for failure to obtain a report as required under Section 44AB of the Act. Such a report, as per the provisions of Section 44AB of the Act is to be obtained within the specified time. That time, ended on 30th June, 1988. The report was, however, obtained on 25-3-1989. The assessee, therefore, failed to obtain the audit report before the specified date and subjected itself to penal provisions of Section 271B of the Act. The assessee’s submission that it, not a case of failure but a case of delay, which is not subject to penal provisions as penalty is provided only for failure, has no force. The assessee might be right in stating that it is a case of delay and not a case of failure to get the report as such, but, the obligation under Section 44AB is not only to obtain the report, but to obtain it before a specified date. If the assessee does not obtain the report before the specified date, it would be a case of failure to obtain the report within the specified date. On a combined reading of the provisions of Sections 271B and 44AB of the Act, it is clear that it is the failure to obtain the report before the specified date which is punishable, even though it might also be a case of delay. The two cases under Companies (Profits) Surtax Act and the Super Profits Tax Act, relied upon by the assessee based on the comparison of the provisions of Section 271(1)(a) of the Income-tax Act, are of no help. I do not find any merit in the contention of the assessee that the provisions of Super Profits Tax Act and the Companies (Profits) Surtax Act are in part materia. In Calcutta High Court decision, the provisions of Section 10 of the Super Profits Tax Act, 1963, were involved. Section 10 of the said Act reads as under:
If the Income-tax Officer, in the course of any proceedings under this Act, is satisfied that any person has, without reasonable cause, failed to furnish the return required under Section 6…he may direct that such person shall pay, by way of penalty, in addition to the amount of super profits tax payable, a sum not exceeding-
(a) where the person has failed to furnish the return required under Section 6, the amount of super profits tax payable….
Provided that the Income-tax Officer shall not impose any penalty under this Section without the previous authority of the Inspecting Assistant Commissioner.
This Section, on the first impression, appears to be in pari materia to Section 271B of the Income-tax Act, but on a careful consideration, one finds that the provisions referred to in Section 10 of the Super Profits tax Act talks about the requirement of filing of a return under Section 6 of the said Act and the provisions of Section 271B of the Income-tax Act requiring to obtain an audit report under Section 44AB are quite different. Section 6 of the said Act provides under Sub-section (1) to file the return voluntarily before a specified date, but Sub-section (3) thereof also authorises the assessee to file the return at any time before the assessment is made. On the contrary, in Section 44AB of the Income-tax Act, the requirement for obtaining the audit report within the specified period alone is there and there is no provision authorising an assessee to obtain the report thereafter. It is with reference to this provision, the Court held as under:
If it was the intention of the Legislature to penalise an assessee for filing a return not within the time allowed under the Section while permitting the assessee to file such a return at any time before the assessment was actually completed, then unless there were specific words in the Section imposing such penalty as there are in the corresponding Sections of the Income-tax Act, no penalty could be imposed for failure to file a return on the ground that the return was not filed within the period prescribed by Section 6. In my opinion, under the relevant provisions of the Super Profits Tax Act. 1963, the Income-tax Officer is not entitled to impose a penalty on the petitioner on the ground of failure to file a return within the time prescribed under that Section when the time prescribed under that Section when the return is filed before the assessment is made and the Income-lax Officer completes the assessment on the basis of such a return.
In this case, therefore, there was no such failure if one looks at Sub-section (3) thereof. Section 10 provides for punishment for failure to file the return under Section 6 and not under Sub-section (1) thereof. The return filed under Sub-section (3) would also be a return under Section 6 and, therefore, it would not be a case of failure of the assessee to file the return under Section 6 of the Act.
7. The aforesaid decision of the Calcutta High Court was followed by the Allahabad High Court in the case of Anchor Pressing (P.) Ltd. (supra), a case under the Companies (Profits) Surtax Act, wherein also the provisions of Section 9, providing for penalty and Section 5 providing for filing of the return are in pari materia to Section 10 and Section 6 of the Companies (Profits) Surtax Act. The Court in this case held as under:
The approach made by us to the construction of the relevant provisions could be considered from two other aspects. One is that ‘in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used’. This rule of construction of a taxing statute has been pithily stated by Rowlatt, J. in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71 and quoted with approval by the Supreme Court in CIT v. Ajax Products Ltd. [1965] 55 ITR 741 (SC). Thus, an important rule of construction is that if lhe words of a statute are precise and unambiguous, they must be accepted as declaring the express intention of the Legislatures. The second important aspect is that if the interpretation of a fiscal enactment is open to doubt, the construction most beneficial to the subject should be adopted. See CIT v. Vegetable Products Ltd. (1973] 88 ITR 192 (SC). Their Lordships have observed at p. 195:
If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee. more particularly so because the provision relates to imposition of penalty.
Therefore, looking to the scheme of the C.(P) S.T. Act, the purpose which it was intended to serve and the clear language used in the relevant provisions, we are inclined to agree with the view taken in the Calcutta Chromotype (P.) Ltd. [11971] 80 ITR 627 (Cal.) and hold that the ITO is not entitled to impose a penalty on the ground of the failure to file a return within the time prescribed under Sub-section (1) or Sub-section (2). of Section 5 when the return is filed before the assessment is made and the ITO accepts it and completes the assessment on the basis of such a return. In other words, Section 9 envisages the levy of a penalty for the failure to file a return under Section 5 without reasonable cause and not for the failure to file a return within the time prescribed under Sub-section (1) or Sub-section (2) thereof.
8. On the aforesaid discussion, I am of the opinion that the provisions of the Companies (Profits) Surtax Act and the Super Profits Tax Act are not in pari materiel to the provisions of Section 271B/44AB of the Income-tax Act. Here, the requirement is to obtain the audit report before a specified date and no relaxatipn is given to obtain it subsequently. Once it is found that the assessee has riot obtained the said report within the specified date, the default is committed and the assessee can be said to have failed to obtain the report within the meaning of Section 271B of the Act, subject, however, to an exception of reasonableness as provided in Section 273B of the Act.
9. The next question to be considered is whether the failure was for reasonable cause. The assessee stated before the Assessing Officer that the accounts were in Gujarathi script written by Mehtaji, who was not conversant with Tax Laws and due to immense volume of transactions, a lot of time was required besides attending to the routine work of day-today. This explanation offered by the assessee by way of a letter is extracted in extenso aforesaid. In the statement of facts filed before the CIT (A), however, it was stated by the assessee as under:
2.1 The appellant was required to obtain the tax audit report for income-tax assessment year 1988-89 on or before 30th June, 1988. The appellant obtained the tax audit report on 25-3-1989 thereby causing a delay of 8 completed months. The delay in obtaining the tax audit report is due to the following reasons:
There were some teething problems regarding the accounting. The concern is engaged in the business of trading in grey cloth and sarees. The total quantity handled by the concern is in lakhs of metres. Moreover, the books of accounts are written in Gujarathi script by persons known as ‘Mehtajis’. These ‘Mehtajis’ are not familiar with the complicated income-tax laws and tax audit procedure. Due to the large volume of transactions lot of clerical work is involved. Similarly, the finalisation of accounts is also time-consuming. The requirements of tax audit are to be complied with. Therefore, a thorough scrutiny of details is required to comply with the tax audit requirements. While preparing these details the routine work is to be attended and hence, time is also devoted to the maintenance of books of accounts of the period subsequent to the period of audit.
All the above reasons have a combined effect of the delay in completion and submission of the tax audit report.
10. A similar plea was raised by the assessee in the case of Jagdamha Textiles v. Asstt. CIT and the Division Bench vide order in [IT Appeal Nos. 4361 to 4364 (Bom.) of 1992, dated 12-4-1993], rejected same by observing as under:
Having gone through the cause for delay reproduced hereinbefore, we are of the opinion that there exists no reasonable cause in not getting accounts audited within the specified date. No circumstance aliunde to which delay could be justified was stated before us. The explanation offered by the assessee concerns with the circumstances which normally prevails in every trade or business. Just because, Melhaji was not familiar with the income-tax law or large volume of work it cannot be said that reasonable cause did exist in the facts and circumstances of the case.
Respectfully following the Division Bench decision aforesaid, I reject the contention of the assessee.
11. Before this Bench, the assessee attempted to attribute the delay to the auditors by way of production of their certificate, which is dated 24th February, 1993. This has been objected to by the learned Departmental Representative. He submitted that it is a fresh evidence and makes out a new case which, I am afraid, I can accept at this second appellate stage. In any case, there is nothing in this certificate to suggest that the auditors were responsible for the failure. The assessee was expected to be in the knowledge of the problems of Mehtajis. The accounts were closed on 30-4-1987. However, they were given to the auditors after 13 months, in June 1988, the month by the end of which it was supposed to have obtained the report. If the difficulties were so great, what prevented the assessee to take action in time. The auditors had not acknowledged the failure to themselves. They only give the dates tin which the audit commenced and completed. It is for the assessee to have come out with reasonable cause which, in my opinion, it failed to advance.
12. I also do not find any merit in assessee’s submission that no penalty for the delay in filing the return was initiated under Section 271(1)(a) of the Act and, therefore, the penalty under Section 271B should not be levied. The failure to obtain the report, which is required to be attached with the return, itself was a reasonable cause for the delay in furnishing the return and the question for determination in this case is for reasons for failure to obtain the report itself. Therefore, nothing turns on this. In my opinion, the assessee has not shown any cause for the failure to obtain the report within the specified time and, therefore, no benefit under Section 273B of the Act can be given. Upon the whole, I uphold the order of the first appellate authority sustaining the impugned penalty.
13. The appeal fails. It is dismissed.