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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Chandra Poojari, AM & Shri George George K, JM
Per George George K, JM
This appeal at the instance of the assessee is directed against the Commissioner of Income-tax (Appeals)’s order dated 11.06.2018. The relevant assessment year is 2008- 2009.
The grounds raised read as follows:-
“1. The order of the AO is against facts and natural justice of the case.
The delay in submitting the audit report was only 2 months and 10 days. We rely on the decision in the case of Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC) wherein the Hon'ble Apex Court has held as under :-
ITA No.393/Coch/2018 2 Sri.Anil Kumar L. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act.
The appellant was under a treatment for inter- vertebral disc prolapse for which a medical certificate was produced dated 14.04.2008 during the assessment proceedings. The appellant was advised bed rest for 6 months and was undertaking internal medicine after the said treatment. During the period he was not able to attend the matters of business diligently. Only after the bed rest he could finalize the accounts and get them audited. The AO erred in considering this post treatment bed rest and his genuine inability to complete the audit in time.
We also rely on the decision of the Hon. ITAT (Hyd) in the case of Assistant Commissioner of Income tax vs Gayatri Traders wherein it had ruled that "A cause which a reasonable man accepts as a reasonable one can be taken as a reasonable cause. The expression "reasonable cause" requires to be interpreted liberally in a fair and reasonable manner so as to advance the cause of justice, since a harsh legalistic approach should be mitigated by a soft practical approach in applying penal provisions".”
The assessee has also raised additional ground to the effect that penalty proceedings u/s 271B initiated on 17.02.20012 after the lapse of 23 months and 26 days in passing the assessment order u/s 143(3) r.w.s. 147 was not valid since it was not initiated before the completion of the assessment and is thus barred by limitation prescribed u/s 275 of the I.T.Act.
ITA No.393/Coch/2018 3 Sri.Anil Kumar L.
The brief facts of the case are as follows: The assessee is an individual who derives income from business of retail trade in provisions, stationeries etc. through margin free market. For the assessment year 2008-2009 return of income was filed on 10.12.2008 declaring total income of Rs.2,18,940. As per the profit and loss account furnished along with the return, the assessee had turnover of Rs.2,96,18,079 during the relevant assessment year. As the turnover of the assessee’s business exceeded Rs.40 lakh and since the assessee did not get his books of account audited u/s 44AB of the I.T.Act before the specified due date, the Assessing Officer, after considering the explanation of the assessee imposed penalty u/s 271B of the I.T.Act amounting to Rs.1,00,000, vide order dated 28.06.2013.
Aggrieved by the levy of penalty u/s 271B of the I.T.Act, the assessee preferred appeal to the first appellate authority. The CIT(A) dismissed the appeal of the assessee. The CIT(A) was of the view that there was no reasonable cause as mandated u/s 273B of the I.T.Act, and therefore, the penalty u/s 271B of the I.T.Act was correctly imposed.
Aggrieved by the order of the CIT(A), the assessee has filed this present appeal before the Tribunal. The learned AR reiterated the submissions made before the Income-tax authorities. As regards the additional ground raised, detailed written submission was filed stating that the penalty proceeding is barred by limitation in view of the provisions of
ITA No.393/Coch/2018 4 Sri.Anil Kumar L. section 275 of the I.T.Act. On the other hand, the learned Departmental Representative supported that the orders passed by the Assessing Officer and the CIT(A).
We have heard the rival submissions and perused the material on record. For the relevant assessment year, viz., 2008-2009, the due date of filing of the return and audit report u/s 44AB of the I.T.Act was 30.09.2008. Admittedly, in the instant case, the assessee had filed the return of income and the audit report u/s 44AB of the I.T.Act only on 10.12.2008. The assessment order was completed u/s 143(3) r.w.s. 147 of the I.T.Act vide order dated 21.12.2010. The penalty proceedings were initiated after 23 months and 26 days from the date of assessment order and order u/s 271B of the I.T.Act was passed on 28.06.2013. There is a delay of filing of return of income and audit report by two months and 11 days. The return of income and audit report u/s 44AB of the I.T.Act was filed much before the assessment order u/s 143(3) r.w.s. 147 of the I.T.Act was completed. According to us, the assessee had only committed a technical venial breach, which does not create any loss to the exchequer as the audit report was available to the Assessing Officer well before the completion of the assessment proceedings. On identical facts, the Cochin Bench of the Tribunal in the case of Johns Biwheelers v. ACIT [(2019) 70 ITR (Trib.) 325 (Cochin)] had deleted the penalty imposed u/s 271B of the I.T.Act. The relevant finding of the Tribunal reads as follows:-
ITA No.393/Coch/2018 5 Sri.Anil Kumar L. “7. We have heard the rival submissions and perused the record. In this case, the assessee was required to get his books of account audited and filed along with the return of income u/s. 44AB within the due date of 30/09/2013 for the assessment year 2013-14. However, the audit report was furnished only on 28/03/2014. The contention of the Ld. AR was that the delay in filing the return of income was due to damage to computer system due to virus infection which is a reasonable cause as prescribed u/s. 273B of the I.T. Act. The Ld. AR relied on the following judgments in support of his contentions:
i) CIT vs. Malayalam Plantations Ltd. (1976) (103 ITR 835) (Ker.) ii) ACIT vs. Amar Chand Raj Kumar (2004) (89 ITD 96)(ITAT, Chandigarh) iii) Prem Prakash Senapati vs. ITO (ITA No.459&185/CTK/2017 dated 17/04/2018) )(ITAT, Cuttack).
7.1 From the material available on record, we are of the view that the assessee got his books of accounts audited on 28/03/2014 which was made available to the Assessing Officer and no prejudice has been caused to the Revenue. Now the short question that arises is whether in this scenario, penalty u/s. 271B of the Act can be levied or not. In our considered opinion, the assessee had only committed technical venial breach which does not create any loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings. The Madras High Court in the case of CIT vs. A.N. Arunachalam (208 ITR 481) in the context of filing of audit report for claiming deduction u/s. 80J of the Act, observed that once audit report has been made available before the Ld. Assessing Officer before the completion of assessment proceedings, the assessee should be granted deduction u/s. 80J of the Act. We observe that this judgment was rendered in the context of adjudication of quantum of deduction claimed by the assessee. Hence, the said analogy can very well be drawn and used in the penalty proceedings like that of the assessee. To sum up, we hold that the assessee had committed only technical venial breach for which he cannot be penalized. In view of the above, we are inclined to delete the penalty made by the assessee u/s. 271B of the Act.”
ITA No.393/Coch/2018 6 Sri.Anil Kumar L.
In view of the above co-ordinate Bench order, we delete the penalty of Rs.1,00,000 imposed u/s 271B of the I.T.Act. Since we have already deleted the penalty imposed u/s 271B of the I.T.Act, the additional ground raised as regards the issue that order imposing penalty was barred by limitation, is not adjudicated. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 30th day of April, 2019.
Sd/- Sd/- (Chandra Poojari) (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER
Cochin ; Dated : 30th April, 2019. Devdas*
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The Pr.CIT, Kottayam. 4. The CIT(Appeals) Kottayam. 5. DR, ITAT, Cochin 6. Guard file.
BY ORDER,
(Asstt. Registrar) ITAT, Cochin