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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
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.
The assessee has raised the ground with regard to levy of penalty u/s. 271B
for delayed filing of return and audit report before the AO.
The facts of the case are that the assessee filed return of income for
assessment year 2012-13 on 25/01/2014. The assessment u/s. 143(3) of the Act
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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.
Against this, the assessee went in appeal before the CIT(A). Before the
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
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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.”
There was a reasonable cause within the meaning of section 273B to drop the penalty proceedings, since earlier years returns were pending, when alone present year’s return could be filed.
When the predecessors in the office has dropped the proceedings on this score for the earlier years, it was only appropriate for the assessing officer to have dropped the penalty proceedings for the year also.”
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
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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.
Against this, the assessee is in appeal before us. The assessee reiterated the
submissions made before the CIT(A).
On the other hand, the Ld. DR relied on the order of the lower authorities.
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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 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
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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.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on this 22nd January, 2019
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.
I.T.A. No.542/Coch/2018
The Assistant Commissioner of Income-tax, Circle-1, Alappuzha. 3. The Commissioner of Income-tax(Appeals), Kottayam. 4. The Pr. Commissioner of Income-tax, Kottayam. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin
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