SRI.T.T.KURUVILLA,ALAPPUZHA vs. DCIT, ALAPPUZHA

Per CHANDRA POOJARI, AM:

This appeal filed by the assessee is directed against the order of the CIT(A),

Kottayam dated 27/08/2018 and pertain to the assessment year 2012-13.

for delayed filing of return and audit report before the AO.

assessment year 2012-13 on 25/01/2014. The assessment u/s. 143(3) of the Act was completed on 29/03/2015. During the assessment proceedings, the

Assessing Officer noticed that the assessee got his accounts audited under

section 44AB of the Act belatedly on 25/01/2014. Therefore, the Assessing

Officer issued notice u/s. 271B of the Act on 29/03/2015 to the assessee to

explain why the penalty proceedings u/s. 271B of the Act should not be imposed.

After considering the reply of the assessee, the Assessing Officer levied penalty

of Rs.1,50,000/- u/s. 271B of the Act.

CIT(A), the assessee pleaded that the assessment proceedings u/s. 143(3) dated

29/03/2015 is ab-initio-void and refused to give any reply as to the reason why

the accounts were not audited. It was submitted that the penalty proceedings

u/s. 271B of the IT Act is independent of assessment procedure and even if

assessment proceedings is declared void the penalty proceedings u/s. 271B is

not void.

4.1 The CIT(A) observed that the assessee got his accounts audited only on

25/01/2014 as against the stipulated due date of 30/09/2012. There was a

delay of 17 months for which no explanation has been given. Therefore, the

CIT(A) was satisfied that this was a fit case for imposing penalty u/s. 271B of the

I.T. Act. The penalty leviable u/s. 271B is a sum equal to one-half percent of the

total turnover or a sum of Rs.1,50,000 which ever is less. One-half percent of the assessee’s total turnover (Rs.28,16,33,772 x .5%) is Rs.14,08,168/-

Accordingly, he confirmed the levy of penalty of Rs.1,50,000/-.

4.2. During the appeal proceedings, the learned AR argued that audit report is

only directory and not mandatory. Further, in the submissions filed, it was stated

as under:

"2. In the penalty reply, your appellant had submitted that though the assessment itself is ab-initio-void, an appeal is pending in this regard. That apart, it is also now stated that there was a delay in filing the return of income for the earlier assessment year 2010-11 and 2011-12 without which the return for the assessment year 2011-13 could not be filed. In the mean time, there was a survey operation on the business premises of the appellant during the course of survey, return of income were filed. The officer, without appreciating all these basic facts had proceeded to levy penalty and that too without a speaking order.”

4.3 The CIT(A) observed that the assessee had got his accounts audited on

25/01/2014 much beyond the due date applicable for A.Y. 2012-13. The CIT(A)

observed that during the penalty proceedings, the assessee had not adduced any

reasons for the delay in getting the accounts audited except stating that the

assessment proceedings u/s. 143(3) of the Act completed on 29.03.2015 are void ab initio. According to the CIT(A) Assessing Officer had rightly held that

the penalty proceedings are independent of assessment proceedings.

4.4 The CIT(A) observed that the explanation of the Ld. AR that the delay was

on account of delay in filing of return of income for A.Ys. 2010-11 and 2011-12

was not satisfactory and the penalty leviable u/s. 271B of the Act is subject to

the reasonable cause shown by the assessee u/s. 273B of the Act. It was also

observed that the assessee got his accounts audited for A.Y. 2010-11 on

19.09.2010 and for A.Y. 2011-12 on 15/09/2011. Therefore, according to the

CIT(A), it was evident that the assessee got his accounts for A.Ys 2010-11 and

2011-12 audited within the due date, irrespective of the date of filing of return of

income for those years. Considering these facts, it was evident that the Ld. AR

could not show reasonable cause for failure of the assessee to get his accounts

audited within due date as per section 44AB of the Act. Hence, the CIT(A)

upheld the penalty of Rs.1,50,000/- levied by the Assessing Officer u/s. 2721B of

the Act.

submissions made before the CIT(A).

the assessee was required to get his books of account audited and filed along

with the return of income u/s. 44AB with the due date of 30/09/2012 for the

assessment year 2012-13. However, the audit report was furnished only on

25/01/2014. The contention of the Ld. AR was that there was a delay in filing

the return of income for the earlier assessment years 2010-11 and 2011-12

without which the return for the assessment year 2012-13 could not be filed.

Since the assessee had to carry forward the balance from earlier years to the

subsequent years, it was not possible to get the books of account audited for the

assessment year 2012-13 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 25/01/2014 which was made available o

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 created 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.

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 22nd January, 2019 GJ Copy to: 1. Shri T.T. Kuruvilla, Prop. Alleppey Parcel Service, Culten road, Vazhicherry Jn., Alappuzha.

(ASSISTANT REGISTRAR) I.T.A.T., Cochin

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