PEROORKKADA SERVICE CO-OPERATIVE BANK LIMITED, vs. THE INCOME TAX OFFICER,

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ITA/320/2019HC KeralaKLHC01089185201907 January 2020Author: HONOURABLE MR.JUSTICE C.K.ABDUL REHIM,HONOURABLE MR.JUSTICE T.V.ANILKUMAR16 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises for consideration and dismissed the appeal. The Court reasoned that Section 44AB mandates the furnishing of an audit report in the prescribed form, duly signed by an Accountant, along with a further report by an Accountant in the prescribed form (Form 3CD). The second proviso to Section 44AB provides an exception if accounts are audited under another law, but this requires strict adherence to its stipulations. Even assuming that the audit report under the Co-operative Societies Act sufficed for the first limb, the further report in Form 3CD was not furnished. The Tribunal's factual finding that only the Annual Report and a certificate from the Joint Director were submitted, not the prescribed Form 3CA and Form 3CD, was upheld. The Court found the assessee had failed to show any 'reasonable cause' under Section 273B for the non-compliance. The contention based on CBDT Circular No. 03/2009 was rejected, as specific statutory provisions regarding furnishing the report in the prescribed form before the due date are unambiguous and cannot be overridden by a circular. Therefore, the penalty under Section 271B was sustained.

What were the facts?

The appellant, Peroorkkada Service Co-operative Bank Limited, is challenging an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated June 26, 2019. The ITAT had confirmed a penalty of Rs. 1,50,000 imposed under Section 271B of the Income Tax Act, 1961, for the assessment year 2014-15. The penalty was levied for failure to furnish the report of audited accounts as required under Section 44AB. The assessee contended that audit was conducted under the Co-operative Societies Act, 1969, and a certificate was issued by the Joint Director (Audit). However, the Assessing Officer and the Commissioner (Appeals) found that the prescribed Form 3CA and a further report by an Accountant (Form 3CD) were not furnished, which is a mandatory requirement under the second proviso to Section 44AB.

What were the issues?

1. Whether the Assessing Officer was right in imposing penalty when an audit report was filed as per the second proviso to Section 44AB of the Income Tax Act, 1961? 2. Whether the Assessing Officer was right in insisting for a 'Further Report in Form No. 3CA' when the proviso clearly states that if accounts are audited under any other law, it shall be sufficient compliance? 3. Whether the Appellate Authorities were justified in confirming the penalty without applying their mind, given that an audit report was submitted as per the proviso to Section 44AB? Assessee's Contentions: - The audit was completed under the Co-operative Societies Act, 1969, and the delay in submission was reasonable due to the Society's inability to appoint an auditor within the IT Act's stipulated time. - There was proper compliance with the first limb of the second proviso to Section 44AB. - The penalty under Section 271B should not be imposed for non-compliance with furnishing the further report by an Accountant, as the scope of Section 271B is limited to failure to get accounts audited or furnish the audit report. - Reliance was placed on CBDT Circular No. 03/2009, dated May 21, 2009, which allegedly states that the audit report need not be attached with returns but only retained and produced if called for, thus no penalty under Section 271B should be levied for non-furnishing before the due date. Revenue's Contentions: - The penalty proceedings were initiated based on the allegation that the appellant failed to obtain a proper audit report within the stipulated date. - The judgment does not explicitly record separate contentions for the revenue beyond what was considered by the authorities below.

Which sections of the Income-tax Act were involved?

Section 271B,Section 44AB,Section 273B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, COCHIN BENCH, KAKKANAD, COCHIN - 682 030.

DATED 19/07/2018. ANNEXURE E AOF THE APPEAL DATED 21/08/2018 BEFORE THE 5TH RESPONDENT. ANNEXURE F THE ORIGINAL COPY OF THE APPELLATE ORDER BY THE 5TH RESPONDENT DATED 26/06/2019. ANNEXURE G AOF THE LETTER OF DEMAND DATED 08/11/2019 ISSUED BY THE 1ST RESPONDENT. ANNEXURE H AOF THE STAY ORDER IN WP(C) NO.1828/2018 DATED 18/01/2018.

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