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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI MAHAVIR SINGH, HON’BLE & SHRI ARUN KHODPIA, HON’BLE
आदेश / O R D E R
PER ARUN KHODPIA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Income Tax Department, National Faceless Appeal Centre (NFAC), Delhi, dated 10.11.2022, and pertains to assessment year 2017-18.
The assessee has raised the following grounds of appeal:
The appellant objects to the order of the Commissioner of Income tax (Appeals) [CIT(A)] not deciding the various issues regarding the validity issue of notice and levy of penalty of Rs.150000 u/s 271B for 2017-18 A/Y and 'dismissing' the appeal after accepting that there was a 'reasonable cause' for the delay in submission of audit report on the following grounds: 1. CIT(A) erred in dismissing the appeal after holding in para 4.5 of his order accepting that"... there existed a reasonable cause due to which the appellant failed to submit the audit report u/s 44AB within due time."
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2. The CIT(A) failed to uphold that:
2.1 The Show Cause Notice (SCN) proposing to levy penalty u/s 271B dated 25.11.2019, issued AFTER the completion of assessment u/s 143(3) on 24.11.2029, not being in the course of assessment proceedings, is bad in law and therefore deserves to be annulled.
2.2 The Assessing Officer (AO) erred in levying the penalty of Rs. 150000 u/s 271B on the facts and circumstances of the case.
2.3 The AO omitted to consider that the appellant had reasonable causes for the delay of about 4.75 months in filing the audit report and return for 2017-18 A/Y.
2.4 There was no willful default or contumacious conduct by the appellant in total disregard of law - Hindustan Steel ltd. vs State of Orissa - 83 ITR 26 (SC).
2.5 The AO failed to consider any of the factual reasons stated in paras (ii) to (vi) of Appellant's reply reproduced in page 2 of his order, in para 4 & 4.1 of the of the penalty order which have merely reproduced sec.44AB & 271 B, respectively.
2.6 The AO ought to have appreciated that the delay in completion of audit for the earlier year ending 31.3.2016 only on 30.9.2017 was a reasonable cause for the delay in the audit for the year ending 31.3.2017 - Roopali Dyeing and Printing Works vs AO - February 96 BCAJ 784; CIT vs Tea King 123 Taxman 162 (Guj); 212 ITR536(AII).
2.7 The AO misdirected himself by mechanically levying the penalty of Rs.150000 after accepting the income returned, for the venial default of delay in filing the audit report (OMEC engineers vs CIT 294ITR 599 (Jharkand) -
"penalty can NOT be imposed on merely a technical mistake committed by the assessee, which had not resulted in loss of revenue - is harsh and could not be sustained in law";
Sibonarayan Patro Bros vs AO 54 TTJ 644 (Cuttack);
AO vs Saphire traders pvt ltd. 66 TTJ 180 (And).
2.8 The AO ought to have understood the purpose of the audit report u/s 44AB stated in para 17.2 of CBDT circular No.387 dt.6.7.1984 [152 ITR 11 (ST)] which has been achieved when income returned was accepted and therefore ought to have desisted from levying the penalty.
ITO vs Vinedale Distillaries (P) Ltd. 43 ITD 703 (Hyd); Indian handloom textiles vs ITO 68 ITD 560 (Cal) 2.9 The AO ought to have followed the following cases -
Staywell Hotels p ltd. vs CIT 283 ITR 92 (MP) (delay of 2 months); Saraswathi electronics vs ITO 292 ITR 411 (KAR) (delay of 1 year) -ACIT vs Kamadhenu food products 70 TTJ 720 (Pune) (delay of 41/2 months) holding that marginal delays in filing the audit report (appellant's delay 4.75 months), should not be visited with a penalty u/s 271B.
2.10 The AO misdirected himself by ignoring the decisions that Sec.44AB was only 'directory1 and NOT mandatory - CIT vs Sivananda electronics 209 ITR 63 (Bom); AO vs Rameshchandra & co 47 TTJ 887 (Indore); CBDT circular No.387 dt.6.7.84 -152 ITR 11 (ST) - Purpose of Sec.44AB; Bangalore Steel Distributors vs AO 49 ITD 668 (Bangalore); AO vs Saphire traders (p) ltd 66 TTJ 180 (Ahd) - RELYING ON THE OBJECTIVES OF 44AB AUDIT STATED IN CBDT CIRCULAR NO.387 dt.6.7.84.
2.11 The levy of penalty of Rs.150000 without reference to the period of delay is illegal and therefore liable to be cancelled - A.M.Sali Maricar Vs ITO 90 ITR 116 (MAD).
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2.12 The levy of penalty is not warranted as there was no detriment to the revenue by the delay in filing the audit report, as the loss returned has been accepted - ACIT vs Mandavilli Venkateswara rao 44 TTJ 400 (Hyd); AO Vinedale industries pvt ltd. 43 ITD 703 (Hyd); Indian handloom textiles vs AO 68 ITD 560 (Cal); Auto square vs AO 43 ITD 259 (Pat).
2.13ln any view of the matter, the AO ought to have followed the binding decision of the Jurisdiction Madras High Court in P.Sehthilkumar vs PCIT, 416 ITR 336 (MAD) that non filing of audit report u/s 44AB before the 'due date' is only a technical breach and that if the audit report is available at the time of assessment, then Penalty u/s 271B is NOT LEVIABLE (cited in para 8 of my reply - reproduced in page 4 of order), but AO without application of mind says in para 4.2 of order that there are no decisions of the Jurisdictional Court.
2.14 The demand of Rs.150000 pursuant to the order u/s 271B is unenforceable as no notice of Demand u/s 156 has been issued in Form 7.
On these grounds and on such other grounds as may be put forth at the time of hearing, the appellant prays that the penalty proceedings u/s 271B and the consequent levy of penalty of Rs.150000 thereunder be cancelled and justice rendered.
The brief facts of the case are that the assessee has filed his return of income electronically on 30.03.2018 declaring an income of Rs.65,80,500/-. The return was processed u/s.143(1) of the Income Tax Act, 1961, (in short “the Act"). Subsequently, the case was selected for scrutiny under CASS. A detailed questionnaire was issued on the assessee for information which was responded by the assessee on the basis of submissions of the assessee, the AO has concluded as under:
The assessee is the dealer in tractor and agro implements and has admitted the business income from the same. Besides, the assessee has also admitted Income from House Property. The assessee has filed the copy of the Auditor's report in Form 3CB and 3CD for the audited books as per the provisions of Sec 44 AB of the I.T.Act, 1961. The assessee has declared a total turnover of Rs.17,48,30,092/-, gross profit of Rs.2,03,81,252/- @ 11.66 % and net profit of Rs.69,63,133/-. For failure to comply with the provisions of section 44AB of the Income Tax Act, 1961, penalty proceedings u/s.271B of the Income Tax Act, 1961 separately.
After verification of the issues under scrutiny, the assessment is concluded accepting the income as per the return of income filed.
4. According to the assessment framed by the AO, a penalty order u/s.271B of the Act, was issued on 17.02.2022 imposing a penalty of Rs.1,50,000/- on account of defaults committed by the assessee by not furnishing a report of Auditor as required u/s.44AB of the Act. Against the :: 4 ::
order u/s.271B of the Act, the assessee filed an appeal before the Ld.CIT(A), National Faceless Appeal Centre (NFAC), but the Ld.CIT(A), NFAC, also confirmed the order of the AO by dismissing the appeal of the assessee. The Ld.CIT(A) observed as under:
4. Appellate findings:
I have carefully considered the facts of the case, penalty order dated 17.02.2022 u/s 271B by the National Faceless Assessment Centre, Delhi, submission on the merit of the case by the appellant and various case laws and judicial pronouncement in his reply filed during the appellate proceedings.
4.1 Grounds of appeal
No. 1 to 14:- Vide these grounds of appeal the appellant has challenged the imposition the penalty order u/s 271B of the IT Act, of Rs. 1,50,000/- for failure to get books of account audited u/s 44AB within specified time despite the fact (as claimed by the appellant) reasonable cause for such delay was already communicated during the penalty proceedings before the AO. The appellant has stated that he had reasonable cause for delay of about 4.75 months in filing audit report and return of income A.Y. 2017-
18. Further, the appellant has stated that it AO has mechanically levied the penalty of Rs.1,50,000/-. Further, penalty u/s 44AB was only directory and not mandatory. In sum and substance, the appellant has stated that AO has ignored the legal provisions and judicial pronouncement with respect to levying penalty u/s 271B.
4.2 I have also examined the reply, case laws and various judicial pronouncements cited by the appellant during the appellate proceedings to supports its argument to cancel the penalty u/s 271B of the IT Act. In view of the facts of the case and arguments put forward by the appellant, I am not inclined to accept the explanation in support of cancelation of penalty u/s 271 B. From the facts of case it is seen that the AO has imposed penalty u/s 271B for failure of not filing audit report within specified time.
4.3 Brief facts as noted from the penalty order u/s.271B is that the appellant is the dealer in tractor and agro implements and has admitted the business income from the same. The appellant had filed the copy of the auditor's report in Form 3CB and 3CD for the audited books as per the provisions of Sec 44AB of the IT Act 1961. The appellant has declared a total turnover of Rs.17,48,30,092/-, gross profit of Rs.2,03,81,252/-@ 11.66% and net profit of Rs.69,63,133/-. The appellant was required/supposed to file/up load 'Audit Reports' for A.Y. 2017-18 on 07.11.2017 (extended by CBDT F.NO. 225/270/2017/ITA II at. 31.10.2017) as per the provisions of section u/s 44AB, the appellant had it on 30.03.2018, after a delay of about 4.75 months. As per the provisions of section 44AB of the IT Act, the appellant was liable to get his accounts audited before 07.11.2017 and obtain before the said date the audit report but the appellant failed to do so, which was held to be in violation of section 44AB of the IT Act. Hence, penalty proceedings u/s 271B was initiated by issuing notice.
4.4 Further, it would be prudent to go through the provisions of section 271 B, which read as under:-
"2778. If any person fails, without reasonable cause, to get his accounts audited in respect of any previous year or years relevant to an assessment year or obtain a report of such audit as required under section 44AB, the Income-tax Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred thousand rupees, whichever is less".
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A bare perusal of above makes it amply clear that if the appellant who is required to get its account audited u/s 44AB fails to get it done, then penalty u/s 271B is liable to be imposed on it. 4.5 In view of the above discussion I am inclined to buy the arguments of the appellant that there existed a reasonable cause due to which appellant failed to submit audit report u/s.44AB within due time. Hence, penalty imposed u/s.271B by the AO is confirmed. Therefore, these grounds of appeal the appellant are dismissed.
5. In result, the appeal of the appellant is hereby dismissed.
5. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us challenging the confirmation of penalty u/s.271B of the Act.
During the hearing on 14.03.2023.
None appeared on behalf of the assessee even at the time of second round of hearing thus it was decided to adjudicate the matter as per material available on records.
On behalf of the Revenue, the Ld. DR has submitted that since the assessee was failed without any reasonable cause to furnish the auditor’s report in time in Form 3CB & 3CD, whereas, the assessee is having gross receipts more than as prescribed u/s.44AB of the Act, where audited accounts were compulsory. Thus, penalty u/s.271B of the Act, is correctly levied by the AO and confirmed by the Ld.CIT(A). Therefore, the order of the Ld.CIT(A) deserves to be sustained.
We have considered the submissions of the Revenue and perused the materials available on record. As per provisions of Sec.44AB of the Act, the audit report in Form 3CB & 3CD are to be furnished by the assessee along with its return of income, but was failed to do so. The reasons given by the assessee i.e. auditor pre-occupied with time barring assessments cannot be considered as reasonable cause which has stopped the assessee to comply with provisions of Sec.44AB of the Act. The Ld.CIT(A) has examined the issue in detailed and disregarded the explanation given by the assessee. As per provisions of Sec.271B of the Act, were also discussed by the Ld.CIT(A) and has observed that the assessee failed to get accounts audited u/s.44AB of the Act. Therefore, penalty u/s.271B of the Act, is liable to be imposed on him. Since, no representation from the assessee in last two hearings was made and the decision of the Ld.CIT(A) was also on merits, have no infirmity. Thus, we do not see any reason to deviate or interfere with the same. Therefore, the order of the Ld.CIT(A) stand sustained and appeal filed by the assessee is dismissed.
In the result, appeal filed by the assessee is dismissed.
Order pronounced on the 14th day of March, 2023, in Chennai.