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

The solitary issue involved in this appeal is challenging the penalty levied u/s. 271B of the Act without considering the fact that the tax audit report was belatedly furnished by the assessee.

The brief facts are that the assessee is an individual and is engaged in the business 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

Aggrieved by the said order, the assessee was in appeal before the ld. CIT(A).

The ld. CIT(A) confirmed the penalty levied by the A.O. for the reason that the assessee has failed to substantiate any reasonable cause for non filing of tax audit report within the due date specified under the Act.

The assessee is in appeal before us, challenging the order of the ld. CIT(A).

The learned Authorised Representative (ld. AR for short) for the assessee 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

The learned Departmental Representative (ld. DR for short) for the Revenue, on 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.

We have heard the rival submissions and perused the materials available on 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 (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 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 (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.

In the result, the appeal filed by the assessee is allowed.