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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI MANJUNATHA. G, HON’BLE
आदेश /O R D E R
PER MANJUNATHA. G, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 22.03.2023 and pertains to assessment year 2017-18.
:-2-: ITA. No: 628/Chny/2023 2. The brief facts of the case are that, the appellant filed its return of income for assessment year 2017-18 on 08.01.2018, declaring a loss of Rs. 2,10,250/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that gross receipts from the business exceeds the threshold limit for getting accounts audited u/s. 44AB of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) from an Accountant and submitted audit report in Form no. 3CA and 3CD. But, in spite of assessee is liable to get its accounts audited and file audit report, the assessee has not filed tax audit report within due date prescribed under the Act and thus, issued notice u/s. 271B of the Act and called upon the assessee to explain as to why penalty shall not be levied for non-filing/belated filing of tax audit report. In response, the assessee submitted that the appellant had obtained tax audit report on 31.10.2017 and the same was not uploaded along with income-tax returns filed on 08.01.2018. However, it has been uploaded in the web portal on 23.08.2018, before completion of the assessment on 27.12.2019. Therefore, when the audit report was made available to the Assessing Officer before completion of assessment, for belated filing of said report penalty cannot be :-3-: ITA. No: 628/Chny/2023 levied u/s. 271B of the Act. The Assessing Officer, however was not convinced with the explanation furnished by the assessee and according to the Assessing Officer, the assessee has failed to file tax audit report as required u/s. 44AB of the Act on or before due date prescribed under the Act and thus, levied penalty of Rs. 1,50,000/- u/s. 271B of the Act.
Being aggrieved by the penalty order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee submitted that although tax audit report as required u/s. 44AB of the Act, was not filed along with return of income on or before due date prescribed under the act, but said tax audit report was uploaded in the e-portal on 23.08.2018 before the Assessing Officer completes assessment on 27.12.2019. Therefore, no penalty can be levied u/s. 271B of the Act. The ld. CIT(A), after considering relevant submissions of the assessee and also taken note of provisions of section 271B of the Act, observed that the appellant violated the provisions of section 44AB of the Act, for non-filing of tax audit report on or before due date prescribed under the Act and the Assessing Officer was justified in imposing penalty u/s. 271B of the Act. Therefore, rejected arguments of the assessee and :-4-: ITA. No: 628/Chny/2023 sustained penalty levied by the Assessing Officer u/s. 271B of the Act. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
The ld. Counsel for the assessee, referring to Form 3CB and Form 3CD submitted by the assessee on 31.10.2017 in web portal of the Department submitted that, the assessee has obtained tax audit report as required u/s. 44AB of the Act on or before due date prescribed under the Act. However, such audit report has not been uploaded along with return of income filed for the relevant assessment year, but the audit report was uploaded on 23.08.2018 before completion of assessment on 27.12.2019. Therefore, when the audit report was made available to the Assessing Officer before completion of assessment, then no penalty can be levied u/s. 271B of the Act. In this regard, he relied upon the decision of ITAT, Chennai Benches in the case of Shri. Ramunaicker Raja vs ACIT in dated 15.02.2023.
The ld. DR, Shri. AR V Sreenivasan, Addl. CIT, supporting the order of the CIT(A) submits that when the law mandates filing of any report including audit report within certain time :-5-: ITA. No: 628/Chny/2023 limit, then the assessee needs to comply with the mandatory provisions of the Act and submit said reports on or before due date prescribed under the Act. In this case, there is no dispute with regard to the fact that the appellant could not file tax audit report on or before due date prescribed under the Act. The Assessing Officer, after considering relevant facts has rightly levied penalty u/s. 271B of the Act and their order should be upheld.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The facts borne out from record indicate that the assessee has obtained tax audit report in Form no. 3CB & 3CD for the impugned assessment year on 31.10.2017. The appellant had filed his return of income on 08.01.2018 without submitting tax audit report as required u/s. 44AB of the Act. Therefore, from the above, it is very clear that the tax audit report as required u/s. 44AB of the Act was not filed on or before due date prescribed under the Act. It is an admitted fact that tax audit report has been uploaded in the web portal on 23.08.2018 before the Assessing Officer completed the assessment on 27.12.2019. In fact, the Assessing Officer and :-6-: ITA. No: 628/Chny/2023 CIT(A) never disputed the fact that the appellant has uploaded tax audit report on 23.08.2018, which is much before the assessment proceedings was completed on 27.12.2019. However, the CIT(A) has rejected the explanation of the assessee on the ground that the tax audit report has been uploaded without the signature of the auditor. It was the contention of the assessee before the lower authorities that unless the appellant approves the tax audit report, the tax auditor cannot submit/upload the report in the web portal of the Department. Since, the tax audit report has been uploaded, it is obvious that the appellant had approved such tax audit report before the same was uploaded in the e-portal. Since, the tax audit report was made available to the Assessing Officer before he completes the assessment, the question of levying of penalty u/s. 271B of the Act does not arise.
Having heard both the sides, we find merit in arguments of the Ld. Counsel for the assessee for simple reason that no doubt, when the law mandates to file certain reports including tax audit report, if any, on or before prescribed date, then the assessee needs to comply with the mandatory provisions and :-7-: ITA. No: 628/Chny/2023 submit those reports within due date prescribed under the Act. But, when the assessee explains reasons for not submitting such reports on or before the due date prescribed under the Act and further such report is made available to the Assessing Officer before he completes the assessment proceedings, in our considered view, the Assessing Officer ought not to have levied penalty u/s. 271B of the Act. This principal is supported by the decision of ITAT, Chennai Benches in the case of Shri. Ramunaicker Raja vs ACIT in where the tribunal under identical set of facts held that when tax audit report was made available to the Assessing Officer before he completes assessment, the question of levying penalty for non-submission of audit report u/s. 271B of the Act does not arise. The relevant findings of the tribunal are as under: 6. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In the penalty order, the Assessing Officer had noted that the assessee’s gross receipt in the year under consideration were to the tune of ₹.1,67,35,870/-. Therefore, the assessee was required to get his accounts audited under section 44AB of the Act and filed within the due date. Since the assessee has not filed the tax audit report under section 44AB of the Act before the due date, the Assessing Officer levied penalty of ₹.83,680/- under section 271B of the Act, which was confirmed by the ld. CIT(A)(NFAC). Before us by assigning reasons for the delay, it was submitted that the audit report under section 44AB of the Act were furnished along with return of income before the completion of assessment.
:-8-: ITA. No: 628/Chny/2023 6.1 Similar issue on an identical fact was subject matter in appeal before this Tribunal in the case of Balaji Logistics v. ACIT in dated 07.09.2022 for the assessment year 2015-16, wherein, the Tribunal has observed as under: “6. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. It is an admitted fact that although the assessee has filed Tax Audit Report in Form 3CB as required u/s.44AB of the Act, beyond due date specified u/s.139(1) of the Act, but such Tax Audit Report was made available to the AO before completion of assessment proceedings u/s.143(3) of the Act, on 22.11.2017. It is evident from the fact that the assessee has obtained Tax Audit Report from an Accountant on 28.03.2016 and furnished before the AO during the course of assessment proceedings. Therefore, we are of the considered view that when the Tax Audit Report was made available to the AO before completion of assessment proceedings, then for venial technical breach without any mala fide intention, penalty cannot be levied u/s.271B of the Act. Further, a similar issue has been considered by the co-ordinate Bench of the Tribunal in the case of M/s. T P D 101 Uthangarai Milk Producers Co-operative Society Ltd.(supra), where on identical set of facts, penalty levied u/s.271B of the Act, has been deleted. The relevant findings of the Tribunal are as under: “…7. We have heard both the parties and perused the materials available on record and gone through the orders of the authorities below. The assessee supposed to have been filed audit report as required u/s.44AB of the Act, on or before 31.10.2015. However, such audit report has been filed on 05.03.2016, which is before the date of completion of assessment proceedings u/s.143(3) of the Act. In other words, although the assessee has filed tax audit report beyond the stipulated period, but such tax audit report was made available to the AO before he completes assessment proceedings. The assessee has given reasons for delay in filing tax audit report. As per which, the audit of accounts of society done by :-9-: ITA. No: 628/Chny/2023 the Dept. of Cooperative Audit, could not be completed on or before 31.10.2015 and said delay was not in the hands of the assessee. Therefore, there is a reasonable cause for not filing the tax audit report within prescribed time limit ad thus, penalty cannot be levied. We find merits in the submission of the assessee for the simple reason that non-filing of audit report within the due date is a venial technical breach without any mala fide intention on the part of the assessee. Because, completion of audit of books of accounts of the society is under the control of Dept. of Cooperative Audit and thus, unless the Dept. of Cooperative Audit completes audit, the assessee cannot file return of income along with tax audit report. Therefore, we are of the considered view that reasons given by the assessee for not filing tax audit report prescribed u/s.44AB of the Act, is neither intention nor any mala fide intention, but it is venial technical breach and for this reason, penalty u/s.271B of the Act, cannot be levied. This principle is supported by the decision of the Hon’ble jurisdictional High Court in the case of P.Senthil Kumar v. PCIT reported in 416 ITR 336, where an identical issue had been considered by the Court and held that for venial technical breach without any mala fide intention, penalty cannot be levied. The ITAT Cochin Bench in vide order dated 05.02.2019 had held that once audit report has been made available before the AO, when the assessment proceedings were completed, then, there is no reason for levy of penalty.
8. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that reasons given by the assessee for not filing tax audit report within due date comes under reasonable cause as provided u/s.271B of the Act, and thus, the AO is erred in levying penalty u/s.271B of the Act. Hence, we direct the AO to delete penalty levied u/s.271B of Act.”….
:-10-: ITA. No: 628/Chny/2023 7. In this view of the matter and by following the decision of the co-ordinate Bench of the Tribunal in the case of M/s.T P D 101 Uthangarai Milk Producers Co- operative Society Ltd.(supra), we direct the AO to delete penalty levied u/s.271B of the Act.
In the result, the appeal filed by the assessee is allowed. 6.2 Respectfully following the above decision of the Coordinate Benches of the Tribunal in the case of Balaji Logistics v. ACIT (supra) for the assessment year 2015-16, we are of the considered opinion that it is not a fit case for the levy of penalty under section 271B of the Act and accordingly, the penalty levied stands deleted.
8. In this view of this matter and by following the decision of ITAT in the case of Shri. Ramunaicker Raja vs ACIT in we direct the Assessing Officer to delete penalty levied u/s. 271B of the Act.
In the result, appeal filed by the assessee is allowed. Order pronounced in the court on 12th July, 2023 at Chennai.