M/S PERFECT STONE LIMITED,CHENNAI vs. ITO NFAC, DELHI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi, dated 30.08.2022 relevant to the assessment year 2016-17.

Brief facts of the case are that the assessment order for the assessment year 2016-17 was passed under section 143(43) of the Income Tax Act, 1961 [“Act” in short] on 23.12.2018. Since the audit report was filed beyond the due date, the Assessing Officer has initiated penalty proceedings under section 274 r.w.s. 271B of the Act. In the penalty proceedings, the Assessing Officer has noted that during the relevant assessment year, the total turnover of the assessee company was at ₹.57,72,24,686/-, which is more than ₹. 1 crore and therefore, the assessee is liable to file the tax audit report in Form 3CA as required under section 44AB of the Act before the due date, but the assessee company filed the tax audit report beyond the due date. Thus, it is evident that the assessee has failed to file tax audit report in Form 3CA within the stipulated due date. Accordingly, in view of the provisions of section 271B of the Act, the Assessing Officer levied penalty of ₹.1,50,000/-. On appeal, the ld. CIT(A) confirmed the penalty levied under section 271B of the Act.

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that there was delay of 51 days in filing the tax audit report and the assessee has filed a petition for condonation of delay, which was rejected and prayed for condoning the delay and delete the penalty levied under section 271B of the Act.

On the other hand, the ld. DR relied on the orders of authorities below.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. During the course of penalty proceedings, the Assessing Officer asked the assessee as to why the tax audit report was not filed in time. The detailed reply submitted by the assessee is reproduced as under: “We received above notice for the delay in filing audit report. In this respect it is to bring to your kind notice that there was a delay of 51 days only in filing the audit report. The main reason was that our main employee Mr. R.K. Kamalakannan who was looking financial transactions of our company and our group companies M/s. G-Tech Stone Ltd. and others, resigned all of sudden and the remaining staff took little extra time to finalize the accounts. Our auditor was also attending to the search assessment hearings related to our company and our group companies. All the staff were also involve in collecting information for the search hearings. Thus our auditor, staff and managing director took little time in finalizing the accounts. The managing director Mr. L.R. Sivaprasad is about 70 years and at that time was about 66 years and was Diabetic patient and also facing health problems like gallbladder stones, etc. Therefore, he was not attending to office regularly. The company is a limited company but shareholders are mainly L.R. Sivaprasad and family members and no public are interested. This delay in filing report was not at all intentional and happened due to all the above reasons. We humbly request the Assessing Officer to kindly condone the delay in filing the audit report and request you to not to levy penalty. We are herewith enclosing copy of resignation letter of said employee for your reference.”

However, the Assessing Officer has not accepted the above explanation given by the assessee and levied penalty of ₹.1,50,000/- under section 271B of the Act, which was confirmed by the ld. CIT(A). On perusal of the above explanation given by the assessee, we find that the explanation offered by the assessee is reasonable and not a fit case to levy penalty. Accordingly, the penalty levied by the Assessing Officer under section 271B of the Act is deleted.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 28th October, 2022 at Chennai.