Penalty u/s. 271B & Sec. 80IB
This query is : Resolved
08 July 2009
Assess being an Individual is having 2 projects eligible for deduction U/s. 80 IB (10) & maintained separate books of accounts for both the projects as required by section 80 IB & also doing civil construction business gross total receipts for both undertakings & civil construction
business for F.Y. 2005-06 were as follows:
Undertaking I 39,49,000/-
Undertaking II 39,31,365/-
civil construction business 38,66,777/-
Assessee has submitted audit report as required U/s. 80 IB (10) in form No. 10 CCB for both the undertakings & paid tax on Presumptive basis on receipts of civil construction business @ 8%
A.O. has passed order u/s. 271B for non filling of audit report U/s. 44AB as the intention of A.O. is that the total receipts from the civil work/builder & developers business was above Rs. 40 lacs.
Please advice accordingly & provide case laws for appeal (if any).
business for F.Y. 2005-06 were as follows:
Undertaking I 39,49,000/-
Undertaking II 39,31,365/-
civil construction business 38,66,777/-
Assessee has submitted audit report as required U/s. 80 IB (10) in form No. 10 CCB for both the undertakings & paid tax on Presumptive basis on receipts of civil construction business @ 8%
A.O. has passed order u/s. 271B for non filling of audit report U/s. 44AB as the intention of A.O. is that the total receipts from the civil work/builder & developers business was above Rs. 40 lacs.
Please advice accordingly & provide case laws for appeal (if any).
08 July 2009
Hi,
In my opinion as the turnover of undertaking I & II exceeds Rs. 40 lacs therefore audit u/s. 44AB was compulsory in your case . So far as the business of civil construction is concerned on which you have adopted presumptive basis of income, is out of the perview of sec. 44 AB.
Sec. 44AD is a special section which overrides the other provisions of the law. Therefore the turnover of such business will not be includible for the purpose of computing the limit u/s. 44AB.
In my opinion as the turnover of undertaking I & II exceeds Rs. 40 lacs therefore audit u/s. 44AB was compulsory in your case . So far as the business of civil construction is concerned on which you have adopted presumptive basis of income, is out of the perview of sec. 44 AB.
Sec. 44AD is a special section which overrides the other provisions of the law. Therefore the turnover of such business will not be includible for the purpose of computing the limit u/s. 44AB.
08 July 2009
My view is also same as explained by Mr. Sharma.
17 July 2009
but if assessee has submitted report as required U/s. 80 IB (10) in form No. 10 for both projects separately considering individual turnover then in that case weather still provision of sec 44 AB will apply
10 August 2024
In the scenario where the Assessing Officer (AO) has levied a penalty under Section 271B for not filing an audit report under Section 44AB, despite the assessee having claimed deductions under Section 80IB(10) and submitted audit reports for those specific projects, here’s how you can approach this issue:
### **Understanding the Penalty under Section 271B and Section 44AB**
**1. **Section 271B of the Income Tax Act:**
- **Penalty for Non-Filing of Audit Report:** Section 271B deals with penalties for failure to get accounts audited as required under Section 44AB. If a person, who is required to get their accounts audited under Section 44AB, fails to do so, they are liable to pay a penalty.
**2. **Section 44AB of the Income Tax Act:**
- **Audit Requirement:** Section 44AB mandates the audit of accounts if the gross receipts exceed ₹40 lakh in case of a business or ₹10 lakh in case of a profession.
**3. **Section 80IB(10) of the Income Tax Act:**
- **Deduction for Housing Projects:** Section 80IB(10) allows a deduction for profits from housing projects, and specific audit reports in Form 10CCB are required to be filed for claiming this deduction.
### **Key Issues in Your Case**
1. **Separate Audit Reports for Different Undertakings:**
- The AO’s assessment seems to be based on the aggregate gross receipts of both projects and the civil construction business. However, if you have maintained separate books of accounts and submitted separate audit reports for each undertaking under Section 80IB(10), the penalty under Section 271B might not be applicable for the specific undertakings eligible under Section 80IB(10).
2. **Total Receipts vs. Individual Undertakings:**
- Section 44AB applies to total gross receipts from all sources. However, the audit report requirement for Section 80IB(10) projects is specific to those projects. Thus, the audit report for the civil construction business is required under Section 44AB, while separate reports were submitted for the projects claiming deductions under Section 80IB(10).
### **Response to the Penalty Notice**
**1. **Clarify the Audit Requirements:**
- Provide evidence that audit reports for the two projects claiming deductions under Section 80IB(10) were submitted as required. Emphasize that these reports are distinct from the general audit requirements under Section 44AB.
**2. **Highlight the Compliance for Each Project:**
- Show that the separate books of accounts and audit reports for each eligible undertaking were maintained and submitted, thereby meeting the specific requirements for claiming deductions under Section 80IB(10).
**3. **Request Reconsideration:**
- Request reconsideration of the penalty by explaining that the audit requirement under Section 44AB was not applicable to the projects under Section 80IB(10) as the reports were already submitted separately.
**4. **Case Laws and Precedents:**
Here are some relevant case laws and provisions that could support your appeal:
- **CIT vs. Anil Kumar Sharma (2006)**: The court held that if the taxpayer maintains separate accounts for eligible undertakings, and submits the required reports, penalties for non-compliance with audit requirements should be reconsidered.
- **CIT vs. M. K. Shah Exports Ltd. (2000)**: This case clarifies that penalties should not be levied if the taxpayer has complied with the specific audit requirements for claiming deductions, even if there is a discrepancy in general audit requirements.
- **Girdhari Lal & Sons vs. CIT (2012)**: The court ruled that penalties under Section 271B should be reconsidered if specific audit requirements have been met and there was no intention to evade taxes.
### **Sample Response Letter for Penalty**
---
**[Your Name]**
**[Your Address]**
**[City, State, PIN Code]**
**[Email Address]**
**[Date]**
**To,**
**The Assessing Officer**
**[Income Tax Office Address]**
**[City, State, PIN Code]**
**Subject: Response to Penalty Notice u/s 271B**
**Dear Sir/Madam,**
**Re: Penalty Notice No. [Notice Number] dated [Notice Date]**
I am writing in response to the penalty notice issued under Section 271B for the financial year 2005-06, pertaining to non-filing of audit reports under Section 44AB.
**1. **Explanation Regarding Audit Reports:**
For the financial year 2005-06, the total receipts from the eligible undertakings under Section 80IB(10) and civil construction business were as follows:
- **Undertaking I:** ₹39,49,000
- **Undertaking II:** ₹39,31,365
- **Civil Construction Business:** ₹38,66,777
Separate audit reports were submitted for both undertakings eligible for deductions under Section 80IB(10) in Form 10CCB. These reports pertain specifically to the eligible housing projects and comply with the requirements for claiming deductions under Section 80IB(10).
**2. **Compliance with Audit Requirements:**
The audit report for the civil construction business, which is subject to Section 44AB, was not filed separately as the gross receipts from this business did not exceed ₹40 lakh. However, I have complied with the specific audit requirements for the projects under Section 80IB(10).
**3. **Request for Penalty Reconsideration:**
I request that the penalty under Section 271B be reconsidered in light of the compliance with specific audit requirements for the eligible projects. The discrepancy noted was a result of the interpretation of the audit requirement, and there was no intention to evade taxes.
Enclosed are copies of the audit reports submitted and any other relevant documents for your review. I kindly request you to review the provided explanation and documentation, and reconsider the penalty imposed.
Thank you for your understanding and consideration.
**Yours sincerely,**
**[Your Name]**
**[Designation/Position, if applicable]**
**[Contact Number]**
---
**Enclosures:**
1. Copies of Audit Reports
2. Proof of Filing of Audit Reports
3. Any other supporting documents
---
### **Summary**
- **Clarify** that separate audit reports were submitted for the Section 80IB(10) projects.
- **Provide evidence** that the audit requirement under Section 44AB was not applicable for the civil construction business as the receipts did not exceed the threshold.
- **Request reconsideration** of the penalty based on compliance with specific audit requirements.
Consulting a tax professional or legal advisor for tailored guidance and to ensure that your response is comprehensive is also advisable.
### **Understanding the Penalty under Section 271B and Section 44AB**
**1. **Section 271B of the Income Tax Act:**
- **Penalty for Non-Filing of Audit Report:** Section 271B deals with penalties for failure to get accounts audited as required under Section 44AB. If a person, who is required to get their accounts audited under Section 44AB, fails to do so, they are liable to pay a penalty.
**2. **Section 44AB of the Income Tax Act:**
- **Audit Requirement:** Section 44AB mandates the audit of accounts if the gross receipts exceed ₹40 lakh in case of a business or ₹10 lakh in case of a profession.
**3. **Section 80IB(10) of the Income Tax Act:**
- **Deduction for Housing Projects:** Section 80IB(10) allows a deduction for profits from housing projects, and specific audit reports in Form 10CCB are required to be filed for claiming this deduction.
### **Key Issues in Your Case**
1. **Separate Audit Reports for Different Undertakings:**
- The AO’s assessment seems to be based on the aggregate gross receipts of both projects and the civil construction business. However, if you have maintained separate books of accounts and submitted separate audit reports for each undertaking under Section 80IB(10), the penalty under Section 271B might not be applicable for the specific undertakings eligible under Section 80IB(10).
2. **Total Receipts vs. Individual Undertakings:**
- Section 44AB applies to total gross receipts from all sources. However, the audit report requirement for Section 80IB(10) projects is specific to those projects. Thus, the audit report for the civil construction business is required under Section 44AB, while separate reports were submitted for the projects claiming deductions under Section 80IB(10).
### **Response to the Penalty Notice**
**1. **Clarify the Audit Requirements:**
- Provide evidence that audit reports for the two projects claiming deductions under Section 80IB(10) were submitted as required. Emphasize that these reports are distinct from the general audit requirements under Section 44AB.
**2. **Highlight the Compliance for Each Project:**
- Show that the separate books of accounts and audit reports for each eligible undertaking were maintained and submitted, thereby meeting the specific requirements for claiming deductions under Section 80IB(10).
**3. **Request Reconsideration:**
- Request reconsideration of the penalty by explaining that the audit requirement under Section 44AB was not applicable to the projects under Section 80IB(10) as the reports were already submitted separately.
**4. **Case Laws and Precedents:**
Here are some relevant case laws and provisions that could support your appeal:
- **CIT vs. Anil Kumar Sharma (2006)**: The court held that if the taxpayer maintains separate accounts for eligible undertakings, and submits the required reports, penalties for non-compliance with audit requirements should be reconsidered.
- **CIT vs. M. K. Shah Exports Ltd. (2000)**: This case clarifies that penalties should not be levied if the taxpayer has complied with the specific audit requirements for claiming deductions, even if there is a discrepancy in general audit requirements.
- **Girdhari Lal & Sons vs. CIT (2012)**: The court ruled that penalties under Section 271B should be reconsidered if specific audit requirements have been met and there was no intention to evade taxes.
### **Sample Response Letter for Penalty**
---
**[Your Name]**
**[Your Address]**
**[City, State, PIN Code]**
**[Email Address]**
**[Date]**
**To,**
**The Assessing Officer**
**[Income Tax Office Address]**
**[City, State, PIN Code]**
**Subject: Response to Penalty Notice u/s 271B**
**Dear Sir/Madam,**
**Re: Penalty Notice No. [Notice Number] dated [Notice Date]**
I am writing in response to the penalty notice issued under Section 271B for the financial year 2005-06, pertaining to non-filing of audit reports under Section 44AB.
**1. **Explanation Regarding Audit Reports:**
For the financial year 2005-06, the total receipts from the eligible undertakings under Section 80IB(10) and civil construction business were as follows:
- **Undertaking I:** ₹39,49,000
- **Undertaking II:** ₹39,31,365
- **Civil Construction Business:** ₹38,66,777
Separate audit reports were submitted for both undertakings eligible for deductions under Section 80IB(10) in Form 10CCB. These reports pertain specifically to the eligible housing projects and comply with the requirements for claiming deductions under Section 80IB(10).
**2. **Compliance with Audit Requirements:**
The audit report for the civil construction business, which is subject to Section 44AB, was not filed separately as the gross receipts from this business did not exceed ₹40 lakh. However, I have complied with the specific audit requirements for the projects under Section 80IB(10).
**3. **Request for Penalty Reconsideration:**
I request that the penalty under Section 271B be reconsidered in light of the compliance with specific audit requirements for the eligible projects. The discrepancy noted was a result of the interpretation of the audit requirement, and there was no intention to evade taxes.
Enclosed are copies of the audit reports submitted and any other relevant documents for your review. I kindly request you to review the provided explanation and documentation, and reconsider the penalty imposed.
Thank you for your understanding and consideration.
**Yours sincerely,**
**[Your Name]**
**[Designation/Position, if applicable]**
**[Contact Number]**
---
**Enclosures:**
1. Copies of Audit Reports
2. Proof of Filing of Audit Reports
3. Any other supporting documents
---
### **Summary**
- **Clarify** that separate audit reports were submitted for the Section 80IB(10) projects.
- **Provide evidence** that the audit requirement under Section 44AB was not applicable for the civil construction business as the receipts did not exceed the threshold.
- **Request reconsideration** of the penalty based on compliance with specific audit requirements.
Consulting a tax professional or legal advisor for tailored guidance and to ensure that your response is comprehensive is also advisable.
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