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Income Tax Appellate Tribunal, Hyderabad ‘ SMC ‘ Bench, Hyderabad
Before: SHRI LALIET KUMAR
O R D E R PER LALIET KUMAR, J.M.
The appeal of the assessee for A.Y. 2017-18 arises from the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dt.11.01.2023 invoking proceedings under section 271B of the Income Tax Act, 1961 (in short, “the Act”).
The grounds raised
by the assessee read as under : “1. The order of Ld. Commissioner of Income tax appeals NFAC dismissing the appeal of the appellant is erroneous in law, contrary to facts, and unjustified.
2. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income tax (Appeals) NFAC has erred in levy of penalty u/s. 271B of the I.T.Act for the default in furnishing of Tax Audit Report. It ought to have been considered the fact that the Tax Audit Report is physically filed before the Assessing Officer during the course of assessment proceedings.
3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income tax (Appeals) NFAC has erred in passing the penalty order under section 271B for default in furnishing the Tax Audit Report, ignoring the fact that, the Income tax Website has not admitted the filing due to technical problems and the applicant is not well versed technically to tackle the issues and furnished the Tax Audit Report before the Assessing Officer. The Ld. Assessing Officer ought to have considered the fact, that the Tax Audit Report is available for his consideration during the assessment proceedings and he has not been deprived of the Tax Audit Report.”
Facts of the case, in brief, are that assessee is an individual, who made cash deposits of Rs.12,47,000/- during the period of demonetization. In this case, as the assessee has not filed his return of income for the A.Y. 2017-18, the case has been selected under non-Filers category in ITBA for issue of notice u/s 142(1) of the Act and subsequently, proceedings u/s 144 of the Act were initiated for complete scrutiny. As there was no response from the assessee, show cause notice was issued on 16.09.2019 and still, there was no response from the assessee. Hence, assessment was completed ex-parte u/s. 144 of the Income Tax Act, 1961 (the Act) on 28.12.2019, assessing the total income at Rs. 5,90,220/-. Subsequently, penalty proceedings u/s 271B of the I.T. Act, 1961 were initiated for failure to furnish the Audit Report in Form No.3CD before the specified date as required u/s 44AB of the I.T. Act, 1961. However, the assessee had failed to comply with the statutory provisions prescribed in sec. 44AB of the I.T. Act. The penalty proceedings u/s. 271B of the Act, were initiated by issuing notice u/s. 271B dt. 07.01.2020. Accordingly, penalty show cause notices u/s. 274 r.w.s. 271B were issued to the assessee on 07.01 .2020 and 19.05.2021. In response to said notice, assessee had made submission through 'e-Proceeding Response' on 31.05.2021. Though, the explanation furnished by the assessee was considered, however the same was not found to be tenable and acceptable by the Assessing Officer and hence, Assessing Officer had levied penalty u/s. 271 B of the Act for failure to comply with the provisions of section 44AB of the I.T. Act and directed the assessee to pay by way of penalty a sum of Rs. 84,316/- vide order under section 271B of the Income Tax Act, 1961, dated 11.01.2022.
Feeling aggrieved with the order of Assessing Officer, assessee filed an appeal before the ld.CIT(A) who dismissed the appeal of assessee.
Feeling aggrieved with the order of ld.CIT(A), assessee is now in appeal before me.
Before me, ld.AR submitted that assessee had not filed the return of income as the income of the assessee was below the taxable limit. However, on account of cash deposit of Rs. 4 lakhs in a specified bank notes during the demonetization period, the Assessing Officer had issued notice to the Assessing Officer. After receipt of notice from the Assessing Officer, assessee had submitted that due to technical reasons and glitches, the return of income was not filed, however, the assessee had filed and furnished the copy of audit report, VAT turnover and ledger extracts etc for perusal of the Assessing Officer. Based on the documents furnished by the assessee before the Assessing Officer, Assessing Officer had passed assessment order by estimating the income of assessee at Rs.5,90,220/-. The Assessing Officer in the assessment order had mentioned that penalty proceedings u/s 270A and 271F will be initiated separately. The contentions of the ld. AR are that :
1) No satisfaction has been recorded by the Assessing Officer in the assessment order and therefore, penalty order cannot be passed u/s 271B of the Act. 2) Assessee had filed Audit Report during the assessment proceedings and the Assessing Officer had satisfied and hence, there was no occasion to impose the penalty u/s 271B of the Act. 3) Ld. AR had relied on the decision of Allahabad High Court mentioned at page 9 in para 4.1 of the assessment order, which is to the following effect :
“4.1 In addition to the above arguments on facts the appellant relying on the decision of Hon'ble High Court of Allahabad in the case of CIT Vs. E.C.0 Project (P.) Ltd. in lTA No. 62 of 2000 dated July 25, 2014 that the notice issued by the AO for levy of penalty is invalid. The relevant portion relied upon finding in this case is extracted as under:- "11. In view of above, well settled legal position, we are of the view that in the instant case, no penalty is leviable under section 271B of the Act when AO failed to record its satisfaction in the assessment or der pertaining to it. There is no whisper in the assessment order regarding the levy of the penalty. When it so then we find no reason to interfere with the impugned order. The same is hereby sustained alongwith the reasons mentioned therein.”
On the basis of the above, it was submitted that once the assessment has been completed and the assessee had paid due taxes and immunity has been granted u/s 271AA(2) of the Act, then penalty u/s 271B should not be imposed.
Per contra, the ld. DR for the Revenue has submitted that the penalty u/s 271B can be imposed once it is found that the assessee had failed to maintain the books of accounts. Ld. DR further submitted that assessee had failed to furnish the audit report before the specified date as required u/s 44AB of the Act since the turnover of the assessee exceeded. It is also the contention of the ld. DR that as per provisions of section 44AB, the Tax Audit Report has to be filed along with the return of income. But the assessee has not filed the return of income and there was no occasion for the assessee to file the tax audit report as mandatorily required to be filed by the assessee along with the return of income. It is also the contention of the ld. DR that there is no requirement of recording satisfaction in the assessment order and my attention was also drawn to section 271B of the Act. It was further submitted that the penalty has been rightly imposed by the Assessing Officer and confirmed by the ld.CIT(A).
In rebuttal, the ld. AR had relied upon the submission made by the assessee in the appellate proceedings and our attention was drawn to Para 4.1 to 4.7 of the submissions recorded in the order of the ld.CIT(A).
I have heard the rival submissions and perused the material on record. Undoubtedly, in the order passed by the Assessing Officer, there is no reference of the provision u/s 271B of the Act and penalty proceedings were initiated without recording the satisfaction by issuing show cause notice dt.07.01.2010. Moreover, the Assessing Officer, at the time of passing the assessment order, was in possession of the Audit Report which was duly mentioned by him in Para 4 of his order to the following effect :
“…..…. It has been explained by the assessee that the belated return of income could not be filed due to technical issue while uploading the same. He has furnished a copy of Audit Report, copy of VAT turnover ledger and books of account for perusal.”
In my opinion, once, the assessee has provided the Audit Report to the Assessing Officer at the time of assessment which was though required to be filled by the assessee along with return of income, however the same was subsequently provided to the Assessing Officer during the assessment proceedings. The availability of the audit report or the contents of audit report were not disputed by the authorities below. However, what has been disputed is that there is a delay in filing the audit report as mandatorily required u/s 44AB of the Act. The reason given for not filing the audit report within the time was the ill-health of assessee and technical glitches caused in uploading. Undoubtedly, the assessee has not filed the return of income though the assessee had furnished audit report. In my view, it is undoubtedly required for the assessee to get his accounts audited in respect to the previous year and failure thereof shall attract the penalty under section 271B of the Act.
The ld. AR has submitted that the audit report was prepared on 15.09.2017 and was uploaded on the website and that there is clear watermark of the Department. It is true that the penalty provisions are required to be strictly implemented by the tax authorities and Tribunal. In section 271B of the Act, the only requirement is to get the accounts of assessee audited or furnish the report of audit as required under section 44AB of the Act. There is no requirement either to file or supply at the time of filing of return of income. The only requirement is to get accounts audited. In the present case, the assessee had filed the proof of furnishing the audit report before Assessing Officer, which had not been disputed by the Assessing Officer in his order.
In the light of the above, the order of imposing the penalty / ld.CIT(A)’s order are without any basis as assessee had satisfactorily proved audit of accounts and report thereof. The above said is also supported by the reasoning given by the Hon'ble Supreme Court in the case of M/s. US Technologies International Pvt. Ltd. Vs. CIT wherein at Para 8.1 and 8.2, it was held as under :
“8.1. Even otherwise, the words “fails to deduct” occurring in Section 271C(1)(a) cannot be read into “failure to deposit/pay the tax deducted.” 8.2 Therefore, on true interpretation of Section 271C, there shall not be any penalty leviable under Section 271C on mere delay in remittance of the TDS after deducting the same by the concerned assessee. As observed hereinabove, the consequences on nonpayment/belated remittance of the TDS would be under Section 201(1A) and Section 276B of the Act, 1961.
Respectfully, following the reasoning given by the Hon'ble Supreme Court in the identical facts of the case cited supra though in the context of section 271C, I delete the penalty. Thus, the appeal of the assessee is allowed.
In the result, the appeal of the assessee allowed.
Order pronounced in the Open Court on 11th April, 2023.