Sec.44AB tax audit proposal and Sec.271 penalty

This query is : Resolved

Dhaval Desai (Querist)
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27 May 2009 My elder brother is dealer of Amul Milk product at Gujrat in small town, amul allow us to earn commission Appx Rs.3.50 per 20 bag milk of one carate cost of product is very high per day sale may above be Rs.50000, Turnover crossing Rs.40 lacks and actual net profit is very low may be less than precribe taxable limit.So much of labour is there no more assets is there vehicle for delivery all are on instalment of bank and T.O is official because of Amul 100% through cheque.i already warn him you may come introuble he neglected me and my talk now dept send notice for FY.2007-08.
Suppose we submit income tax return as per notice and audit report of old date, how chance of penalty U/s.271B , please advice me i expect reply from member's opinion
You can see suppose on carat of milk Qty.20 bag cost each bag is Rs.22 cost Rs.440 my profit only Rs.3/50 paisa perday sale 100 carat cost of product Rs.44000/- my margin is Rs.350
Yours faithfully
Ajit Desai

taxindiaconnect

taxindiaconnect (Expert)
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27 May 2009 The penalty u/s 271B may be levied by the assessing officer in a case the assessee who is liable to get his accounts audited u/s 44AB has failed to do so or fails to furnish the audited accounts along with the return of Income. The provision of section 271B are reproduced as under –

If any person fails 84[***] to get his accounts audited in respect of any previous year or years relevant to an assessment year or 85[furnish a report of such audit as required under section 44AB], the 86[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.]

Thus from the careful perusal of the above provisions it can be observed that the penalty is leivable not only on the default of non getting the accounts audited, but also for not furnishing the same if this is not furnished along with the return of Income. This provision was amended with effect from 1.4.89. The intension seems to curb the practice of getting the accounts tax audited in back date.

It is to be noted that the levy of penalty is not mandatory as the word used is that “AO may direct” In your case it seems that no tax audit has taken place and since the report has not been furnished with ITR, the penalty may be levied by the AO