NASEER AHMATH RISWANA FATHIMA,COIMBATORE vs. ITO, NON CORP WARD 1(4), CHEENAI, CHENNAI

The assessee is an individual and engaged in the business of trading in gold ornaments. The assessee filed the return of income for A.Y 2017-18 on 30.03.2018 declaring total income of Rs. 8,56,420/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The Naseer Ahmath Riswana Fathima :- 2 -:

1. A.O completed the assessment u/s. 143(3) of the Act after making additions towards bogus cash sales and deposits of SBN during demonetization period. Subsequently, the A.O initiated penalty proceedings u/s. 271B of the Act for the reason that the assessee has not furnished the audit report in time. The A.O passed the order u/s. 271B of the Act levying penalty of Rs.79,377/-. Aggrieved, the assessee filed further appeal before the CIT(A).

There is a delay of 122 days in filing the appeal before us and the assessee filed a petition for condonation stating the reasons for delay in filing the appeal. Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST.Katiji & Ors., (167 ITR 471) (SC), we condone the delay in filing the appeal and admit the appeal for adjudication.

We have heard the parties, and perused the material available on record. The Ld. Authorized Representative (AR) of the assessee submitted that the assessee has filed the audit report before the completion of assessment and the same has been considered by the A.O while completing the assessment u/s. 143(3) of the Act. The Ld. AR further submitted that when the audit report is submitted before the completion of assessment then the levy of penalty u/s. 271B of the Act is not warranted. We notice that in assessee's case the audit report in Form No.3CA was filed on 30.03.2018 and the A.O passed the order u/s. 143(3) of the Act on 20.12.2019. Accordingly, we see merit in the submissions that the audit report was available with the A.O while completing the assessment us. 143(3) of the Act. We further notice that the Coordinate Bench in the case of Balaji Logistics vs. ACIT [2023] 147 Naseer Ahmath Riswana Fathima :- 3 -: taxmann.com 607 (Chennai-Trib.) was considered an identical issue where it has been held that: “6. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. It is an admitted fact that although the assessee has filed Tax Audit Report in Form 3CB as required u/s.44AB of the Act, beyond due date specified u/s.139(1) of the Act, but such Tax Audit Report was made available to the AO before completion of assessment proceedings u/s.143(3) of the Act, on 22.11.2017. It is evident from the fact that the assessee has obtained Tax Audit Report from an Accountant on 28.03.2016 and furnished before the AO during the course of assessment proceedings. Therefore, we are of the considered view that when the Tax Audit Report was made available to the AO before completion of assessment proceedings, then for venial technical breach without any mala fide intention, penalty cannot be levied u/s.271B of the Act. Further, a similar issue has been considered by the co-ordinate Bench of the Tribunal in the case of M/s.T P D 101 Uthangarai Milk Producers Co-operative Society Ltd.(supra), where on identical set of facts, penalty levied u/s.271B of the Act, has been deleted. The relevant findings of the Tribunal are as under:

“…7. We have heard both the parties and perused the materials available on record and gone through the orders of the authorities below. The assessee supposed to have been filed audit report as required u/s.44AB of the Act, on or before 31.10.2015. However, such audit report has been filed on 05.03.2016, which is before the date of completion of assessment proceedings u/s.143(3) of the Act. In other words, although the assessee has filed tax audit report beyond the stipulated period, but such tax audit report was made available to the AO before he completes assessment proceedings. The assessee has given reasons for delay in filing tax audit report. As per which, the audit of accounts of society done by the Dept. of Cooperative Audit, could not be completed on or before 31.10.2015 and said delay was not in the hands of the assessee. Therefore, there is a reasonable cause for not filing the tax audit report within prescribed time limit ad thus, penalty cannot be levied. We find merits in the submission of the assessee for the simple reason that non-filing of audit report within the due date is a venial technical breach without any mala fide intention on the part of the assessee. Because, completion of audit of books of accounts of the society is under the control of Dept. of Cooperative Audit and thus, unless the Dept. of Cooperative Audit completes audit, the assessee cannot file return of income along with tax audit report. Therefore, we are of the considered view that reasons given by the assessee for not filing tax audit report prescribed u/s.44AB of the Act, is neither intention nor any mala fide intention, but it is venial technical breach and for this reason, penalty u/s.271B of the Act, cannot be levied. This principle is supported by the decision of the Hon’ble jurisdictional High Court in the case of P.Senthil Kumar v. PCIT reported in 416 ITR 336, where an identical issue had been considered by the Court and held that for venial technical breach without any mala fide intention, penalty cannot be levied. The ITAT Cochin Bench in vide order dated 05.02.2019 had held that once audit

In this view of the matter and by following the decision of the coordinate Bench of the Tribunal in the case of M/s.T P D 101 Uthangarai Milk Producers Co-operative Society Ltd.(supra), we direct the AO to delete penalty levied u/s.271B of the Act.

In the result, the appeal filed by the assessee is allowed.”

The ratio laid down by Coordinate Bench in the above case when the audit report made available to the A.O before the completion of assessment proceedings then for the venial technical breach without any malafide intention penalty cannot be levied u/s. 271B of the Act. Considering that the facts in assessee's case are identical, we are of the view that the said ratio laid down by the Coordinate Bench is applicable in assessee's case also. Accordingly, we hold that a levy of penalty u/s. 271B of the Act in the present case is not warranted and we direct the A.O to delete the same.

In the result, the appeal of the assessee is allowed.