Tax audit provisions

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: of filing of the auditor’s report along with the return so as to complete the defective return, or to impose a penalty under section 271-B.

In the case of where the assessing officer overrules the assessee’s objection and holds that the assessee is liable to get his accounts audited in terms of section 44-AB, the question to consider is whether such objection raised by the assessee as to his obligation under section 44-AB was frivolous or a plausible stand, before arriving at a conclusion whether in such a case penalty could be levied. This view has been taken by the Rajasthan High Court in Bajrang Oil Mills versus Income-tax Officer (163 TAXMAN 154).

The Supreme Court in Hindustan Steel Ltd versus State of Orissa (83 I.T.R. 26), has laid down that even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.

To conclude, it cannot be held that in all cases where the assessee’s objections as to his obligation to get his accounts audited under section 44-AB are overruled, his defense or reasons for non-compliance are not bona fide. The fact that on an analysis of the provisions, the authorities or the court come to the conclusion that the objections raised by the assessee about the requirement to comply with the provisions of the Act are not sustainable, that would not mean that the objection raised by the assessee is not bona fide.