ORDER
G.D. Agarwal, A.M.
1. This appeal by the assessee is directed against the order of the CIT(A)-II, Surat, for the asst. yr. 2001-02.’
2. The only ground raised in this appeal by the assessee is against the levy of penalty of Rs. 52,505 under Section 271B of the IT Act, 1961.
3. At the time of hearing before us, it is submitted by the learned Counsel that the assessee is a contractor who is disclosing its income as per Section 44AD of the IT Act, 1961. For the year under consideration the assessee got its accounts audited on 8th June, 2001. The income as per the audited accounts was Rs. 8,11,036. However, the assessee by applying Section 44AD, disclosed the income at 8 per cent of the total receipt, i.e., Rs. 8,40,090. Since the income was disclosed as per Section 44AD and not as per the audited accounts, the counsel of the assessee omitted to furnish the audited balance sheet and P&L a/c though the account of the assessee was duly audited by that time. That the AO accepted the income disclosed by the assessee on the basis of Section 44AD. When the AO initiated penalty proceedings under Section 271B, the assessee furnished the audited statement before him. He submitted that there was reasonable cause for the assessee’s failure to furnish the audited accounts before the AO because the counsel of the assessee omitted to furnish the audited accounts because the income was returned on the basis of Section 44AD. He, therefore, stated that since there was reasonable cause for assessee’s failure to furnish the audited statements, the penalty levied under Section 271B may be deleted.
4. The learned Departmental Representative, on the other hand, relied upon the orders of the authorities below. He stated that as per Section 44AD the assessee was required not only to get its accounts audited but was also duty-bound to furnish the same before the due date. Since the assessee failed to furnish the audited statements before the due date, the penalty was rightly levied and the same should be sustained.
5. We have considered the rival submissions and perused the material placed before us. It is not in dispute that the assessee got its accounts audited within time, however failed to furnish the same before the due date. Therefore, the only default by the assessee is with regard to furnishing of the audit report before the due date. It is not in dispute that the assessee has disclosed the income as per Section 44AD, which is more than the income as shown in the audited P&L a/c. The AO has also accepted the income on the basis of Section 44AD and has not worked out the same on the basis of audited accounts. In the above circumstances, the assessee’s counsel remained under the bona fide impression that since the income is being disclosed under Section 44AD, the audited account is not required to be furnished. In our opinion, the assessee cannot be penalized under Section 271B. The above bona fide impression of the assessee’s counsel would constitute reasonable cause. The bona fides of the assessee are also proved from the fact that the income disclosed by the assessee as per Section 44AD was more than the income as determined in the audited P&L a/c. Apart from there being reasonable cause for assessee’s failure, default committed by the assessee is only a technical/venial breach because the audited statement has not been relied upon either by the assessee or by the Revenue for determining the income of the assessee. In the above circumstances, in our opinion, for such technical or venial default, it would not be justified to levy the penalty under Section 271B, We, therefore, cancel the penalty sustained by the CIT(A).
6. In the result, the assessee’s appeal is allowed.