RASIK NEMCHAND PETHAD,THANE vs. DCIT, CC-1, THANE

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI

BEFORE SHRI PRASHANT MAHARISHI, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No.66/Mum/2023 (Assessment Year: 2017-18) Rasik Nemchand Pethad DCIT, CC-1 Gala No.3, Nausibai Compound, Thane Vs. Near Sarkari Bunglow, Chitalsar Manpada, Thane-400 610 PAN/GIR No. AANPP 1791 J (Appellant) : (Respondent) Assessee by : Shri Shashank Mehta Revenue by : Smt. Mahita Nair Date of Hearing : 02.03.2023 : 24.05.2023 Date of Pronouncement

O R D E R Per Kavitha Rajagopal, J M:

This appeal has been filed by the assessee, challenging the order of the learned

Commissioner of Income Tax (Appeals)-11 Pune (‘ld.CIT(A) for short), passed u/s.250

of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for

short) 2017-18.

271B of the Act without considering the fact that the tax audit report was belatedly

furnished by the assessee.

of retail and wholesale trading of food grains, grocery items, dry fruits and masala items

under the name and style of M/s. R. N. Trading. The assessee filed his return of income

2 ITA No. 66/Mum/2023 (A.Y.2017-18) Rasik Nemchand Pethad vs. DCIT dated 19.02.2018, declaring total income at Rs.18,97,960/-. The assessee’s case was

selected for scrutiny and the assessment order dated 19.12.2019 was passed u/s. 143(3) of

the Act where the Assessing Officer (A.O. for short) accepted the returned income and

determined the total income at Rs.18,97,960/-. The A.O. observed that the assessee had

filed tax audit report on 19.02.2018 and, therefore, levied penalty u/s. 271B of the Act,

amounting to Rs.1,50,000/- for failure to comply with the provision of section 44AB of

the Act which mandates that tax audit report to be filed within the specified time as per

section 139(1) of the Act vide order dated 06.07.2021.

assessee has failed to substantiate any reasonable cause for non filing of tax audit report

within the due date specified under the Act.

contended that the assessee has always been prudent in filing the tax audit report for the

previous years and even during the subsequent years. The ld. AR for the assessee further

stated that since the assessee has changed his accounting software during October, 2016

and had also sifted his place of operation during the month of December, 2016, some of

the files were misplaced and the assessee had called for the duplicate copy of those files

which had taken considerable time. The ld. AR for the assessee further stated that the

assessee’s Accountant had left service without intimation and that because of these

reasons, there was delay in filing the tax audit report. The ld. AR for the assessee

3 ITA No. 66/Mum/2023 (A.Y.2017-18) Rasik Nemchand Pethad vs. DCIT submitted that there was reasonable cause for the delay and prayed that the impugned

penalty be deleted.

the other hand, controverted the said facts and contended that the assessee has not

specified as to why the change in the accounting software has caused the delay. The ld.

DR also contended that the assessee has not furnished any documentary evidence to

prove that the delay was caused due to the shift in the place of operation of the assessee.

The ld.DR brought our attention to the fact that the assessee had not filed his return of

income for the impugned year till a survey u/s. 133A of the Act was conducted on the

business premises of the assessee dated 25.01.2018. The ld. DR further contended that

the reason stated by the assessee was not sufficient to consider it to be a reasonable cause

and relied on the orders of the lower authorities.

record. It is observed that the assessee had not filed his return of income for the

impugned year and only subsequent to the survey action u/s. 133A of the Act conducted

on the business premises of the assessee, the assessee is said to have filed the returns for

the impugned year dated 05.02.2018. It is also observed that the assessee had paid the

taxes and filed ITR along with the tax audit report subsequent to the survey action. The

assessee has submitted its tax audit report in Form 3CD along with the audited copy of P

& L account and balance sheet on 19.02.2018 and, hence, the A.O. levied penalty u/s.

271B of the Act after issuing show cause notice dated 10.06.2021. The assessee in its

reply to the said show cause notice had stated that the delay was due to change in

4 ITA No. 66/Mum/2023 (A.Y.2017-18) Rasik Nemchand Pethad vs. DCIT accounting software, shifting of his place of operation and due to the reason that his

Accountant left service without prior intimation. As the assessee’s case falls under the

provision of section 44AB of the Act which mandates that the accounts has to be audited

by the Accountant before the specified date and the audited report has to be furnished

within the specified date and the failure of the same will attract penalty of a sum equal to

one half percent of the total sales, turnover or gross receipts as the case may be or sum of

Rs.1,50,000/-, whichever is less. The A.O. calculated 0.5% of the total sales, turnover or

gross receipts of Rs.4,65,47,200/- and worked out at Rs.2,32,756/-, thereby levied a

maximum penalty of Rs.1,50,000/- u/s. 271B of the Act. The ld. AR for the assessee has

relied upon the decision of the Tribunal in the case of Lata Keshao Thaokar vs. ITO (in

ITA No. 2256/Mum/2022 vide order dated 30.01.2023), wherein it was held that the

penalty levied u/s. 271B was to be deleted, if there was a reasonable cause for the delay

in filing the audited report. The ld. AR had also furnished the copy of the leave and

license agreement dated 03.12.2016 executed by the licensor and the assessee to

substantiate the fact that the assessee had shifted his place of operation and, hence, in the

process had misplaced some of the document required for the purpose of auditing his

accounts. It is pertinent to point out that section 273B of the Act mandates that penalty

shall not to be imposed in certain cases where the assessee proves that there was a

reasonable cause for the failure which cost the A.O. to levy penalty. It is also pertinent to

point out that section 271B is very much covered by section 273B where if the assessee is

able to substantiate that there was a reasonable cause for the failure to comply with the

provision, then the penalty shall not be imposed in such cases. Upon consideration of the

reasons stated by the assessee for the delay in filing the audit report, we deem it fit to

5 ITA No. 66/Mum/2023 (A.Y.2017-18) Rasik Nemchand Pethad vs. DCIT delete the impugned penalty for the reason that the assessee has substantiated the delay

by having a reasonable cause. We find merit in the submission of the assessee and, hence,

the A.O. is directed to delete the penalty levied u/s. 271B of the Act.

Order pronounced in the open court on 24.05.2023

Sd/- Sd/-

(Prashant Maharishi) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 24.05.2023 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai