Case Law Details
The short issue in this appeal is whether or not penalty under section 44AB will also be attracted in the case in which the professional income of the assessee received from partnership firm of Chartered Accountants is taxable under the head “income from business or profession”.
In the relevant previous year, the assessee, a Chartered Accountant, received Rs. 32,76,000/- from M/s. Lovelock & Lewes of which she was a partner. In terms of section 28(v), the said income was taxable under the head “Profits & Gains from Business or Profession”. The Assessing Officer was of the view that the assessee ought to have obtained the audit report under section 44AB of the Income Tax Act and her failure to do so, invited penalty under section 271B of the Act. The assessee’s contention, on the other hand, was that since the assessee was not carrying out any independent profession and the taxability of the said income received under the head “profits and gains from business or profession” was only due to technical requirement of section 28(v) of the Act the provisions of section 44AB are not attracted. The Assessing Officer rejected this plea of the assessee on the basis of a decision of this Tribunal in the case of Amal Ganguly (ITA No. 2135/Kol./2008, Assessment Year 2003-04) vide order dated 20.02.2009. The Assessing Officer was of the view that since the plea raised by the assessee is not acceptable to the jurisdictional Tribunal, the same cannot be accepted by him. Respectfully following the view of the Tribunal and thus holding that the assessee ought to have got her accounts audited under section 44AB of the Act, the Assessing Officer imposed penalty of Rs.16,380/- under section 271B of the Act. Aggrieved, the assessee carried the matter in appeal before ld. CIT(Appeals) but without any success. Ld. CIT(Appeals) also took note of the decision of the Coordinate Bench of this Tribunal, which covered the issue against the assessee. The assessee is not satisfied and is in further appeal before us.
INCOME TAX APPELLATE TRIBUNAL, KOLKATA
Before Shri Pramod Kumar (Accountant Member),
and Shri George Mathan (Judicial Member)
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I have differing with others view. The CA might have claimed expenditureagainst the income of his share from the professional firm and hence the ITAT hasagreed that 44AB audit is necessary. If no expenses claimed, no audit required.
As the remuneration recd and ca partner is not carrying independent profession it shall not be applicable
I do agree with the opinion of Mr. J.K.Paul, Advocate dated 23/01/2014.
A single partner of a partnership firm is not liable at all for tax audit U/S.44AB of the I.T.Act,1961.Hence question of penalty U/S. 271B does not
arise.
The Govt.employee simply asked me to pay a particular amount as risvat or he will show some tax and penality in assessment . His wordings where
” He openly confirmed even I know you are not defaulter but once I pass a order you will be bound to prove the same .The cost and time of defending yourselves will be much higher than the payment you make to me .Decide yourselves ”
Now a CA will run pillar to pillar to defend a wrong penality of Rs.10000-20000 or will he manage the officer by paying 5000-10000/- and avoid the proceeding.
I don’t agree with the decision, as the appellant is not carried the business or profession , which is being carried by the firm, where the appellant is a partner .Applicability of Tax Audit under Section 44 AB lies on the firm , not for the appellant .
CA. Subhash Chandra Podder
kolkata
24/01/2014
A good decision no doubt but of Kolkata Bench of ITAT and to set it at rest a direction from CBDT may be sought for.
Similar situation continues in respect of West Bengal Shops & Establishment Act. Cases are pending in different High Courts as to the applicability of SE Act on CA Firms. The issue is whether students/ audit assistants engaged in CA firms are “employees” for the purpose of this Act.
The matter should further be preferred in appeal u/s 260A of I.T.Act,1961 by the assessee before the Hon’ble High Court at Kolkata as both the Ld. C.I.T (Appeals) and the Hon’ble ITAT/Kolkata made cardinal mistake by treating the income of the assessee, a Chartered Accountant, from the Chartered Accountants Firm wherein the assessee was a partner, by way of salary, remuneration or commission, interest etc. according to Deed of Partnership, as income from “Profits & gains of Business or Profession” as has been impugned and defined in section 44AB of I.T.Act,1961 . Section 44AB is applicable to persons carrying out business or profession in individual capacity by way of holding the necessary trade licence. Here, in the instant case, the assessee was not earning the income in individual capacity by way of holding any trade or professional licence. What the assessee was earning as chartered accountant from the Chartered Accountant Firm was only as a partner thereof and that too under the terms of the Partnership Deed and as such deemed as income from profession under section 28(v) of the I.T.Act,1961,which was not a normal professional income in individual caopacity. The Partnership Firm was liable for Tax Audit u/s 44AB as “persons” carrying on professional activities under its banner consisting of several individuals as ‘partners’ who represent the Partnership Firm.
Hence, no single partner is liable for Tax Audit u/s 44AB of I.T Act.1961 and initiation of penalty proceedings u/s 271B does not arise at all and bad in law.
Your are Correct Rajes Sir, I agree.
The remuneration received by a working partner from a Partnership Firm although taxed as part of Income from Business / Profession is certainly not identical to any professional income received from a client and hence should not be reckoned to compute tax audit turnover. With due respect to the decisions of the Hon’ble ITAT the decision needs to reviewed by the judiciary. Perhaps, it is better a clarificatory circular from CBDT will put an end to such litigations.
I agree with Shri Rajesh Thakkar Ji
The decision of the Hon’ble ITAT is not surprising as we do not know that in which coloum of the ITR the income was reflected.If it is put in “Share income from firm” then the ITAT order is surprising.If the income is reflected in “Business and Profession” the ITAT order is not surprising.
The decision of the Hon’ble ITAT is surprising. The section 44AB is covered a person carrying on profession. The appellant had not carrying on the profession. The profession is carried on by the firm in which the appellant is partner. The firm, in which the appellant is partner had submitted the audit report u/s 44AB is sufficient compliance because partner is not separate from the firm. The firm has not different entity. The firm is collective name of the partners.
Merely, the income from the firm is taxable u/s 28(v)not lead to applicability of section 44AB. The appellant should carried out himself the profession in his individual capacity.
Therefore, I am not agree with the decision of the Hon’ble ITAT.