PUMPKIN PICTURES PRIVATE LIMITED ,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, MUMBAI

The only grievance of the assessee is against the levy of penalty under section 271B of the Act.

The brief facts of the case as emanating from the record are: The assessee is engaged in the production of cinematographic films, educational programs, advertisement, production training institutes in India and abroad, setting up educational documentaries, motion pictures etc. On perusal of information available on the ITD system and analysing the Individual Transaction Statement from Non-Filers Monitoring System (‘NMS’) pertaining to the assessment year 2011-12, it was noted that despite receiving substantial contract receipts and professional and technical fees, the assessee has not filed its original return of income under section 139(1) of the Act. Accordingly, on the basis of the above information, proceedings under section 147 of the Act were initiated in the case of the assessee, and notice under section 148 of the Act was issued. The AO vide order dated 26/12/2018 passed under section 143(3) r/w section 147 of the Act assessed the total income of the assessee at Rs. 59,57,450.

Meanwhile, the penalty proceedings vide notice issued under section 271B r/w section 274 of the Act was initiated for the failure to get accounts audited as per the provisions of section 44AB of the Act. In reply, the assessee submitted that its auditor though had signed the statutory audited report, balance sheet, and profit and loss account as per the Companies Act,1956, and uploaded the same on the ROC Portal, however, due to certain unknown reasons, failed to prepare and file audit report as per the provisions of section 44AB of the Act. The AO vide penalty order dated 28/06/2019 passed under section 271B of the Act levied a penalty of Rs. 70,001 i.e. 0.5% of the gross receipts on the basis that the assessee has failed to get its books of accounts

The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee against the penalty order on the basis that no documentary evidence has been filed by the assessee which could suggest that the auditor was authorised to prepare the tax audit report and to upload the same. Further, the learned CIT(A) held that no confirmation or affidavit has been filed in this regard from the auditor. The learned CIT(A) also held that the directors of the assessee company cannot take the plea that they were not aware about the requirement or process of filing the tax audit report. Being aggrieved, the assessee is in appeal before us.

During the hearing, the learned Authorised Representative (‘learned AR’) submitted that in the previous year, the assessee filed its return of income and audit report as required under section 44AB of the Act. However, in the year under consideration, the assessee though filed the audit report as required under the Companies Act, 1956 but failed to file the same as per the provisions of the Act. In this regard, the learned AR referred to the audit report prepared under the provisions of the Companies Act, 1956, which forms part of the paper book for the year ending 31/03/2011. The learned AR also submitted that because of the non-filing of the return of income and audited accounts, the assessee cannot set off the loss incurred during the year.

On the contrary, the learned Departmental Representative vehemently relied upon the orders passed by the lower authorities and submitted that Pumpkin Pictures Private Limited ITA No.2093/Mum./2022 there is nothing on record from the auditor that the audit report under section 44AB of the Act could not be filed due to a mistake on its part.

In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 25/01/2023