PERUCHETTIPALAYAM PACCS,COIMBATORE vs. ITO, NCW-4(1), COIMBATORE

PDF · subscribers
ITA 3256/CHNY/2024Status: DisposedITAT Chennai29 April 2025AY 2018-195 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the delay in filing the Tax Audit Report (TAR) was due to the belated completion of the statutory audit by the State/Co-operative Department, which was beyond the assessee's control. The government auditor completed the statutory audit on 08.01.2019, and thereafter, the assessee's TAR was prepared on 06.02.2019 and filed on 13.02.2019. The Tribunal found that the assessee would not gain anything by delaying the audit and that the assessee could only obtain the TAR after the finalization of financial accounts and completion of the government audit. Therefore, the explanation of the assessee was accepted as a reasonable cause for the belated filing. The Tribunal followed the decisions of its coordinate benches in M/s.Balaji Logistics and M/s T.P.D. 101, Uthangarai Milk Producer Co-operative Society Ltd., which held that if the TAR is made available to the AO before the completion of assessment proceedings, a mere venial technical breach without any mala fide intention would not warrant a penalty under Section 271B. Consequently, the penalty of Rs.1.50 lakhs was deleted, and the appeal was allowed.

What were the facts?

The assessee, Perurchettipalayam PACCS, a Primary Agricultural Co-operative Credit Society, is in appeal against the order of the CIT(A) dated 18.11.2024 for Assessment Year 2018-19. The appeal challenges the penalty of Rs.1.50 lakhs levied by the AO under Section 271B of the Income Tax Act, 1961. The assessee filed its return of income on 13.02.2019. The AO passed the assessment order on 09.04.2021, noting that the Tax Audit Report (TAR) in Form No.3CD, required under Section 44AB, was not filed by the due date of 15.10.2018. The assessee explained that the delay was due to the statutory audit process mandated by the Tamil Nadu Co-operative Societies Act, 1983, where auditors are appointed by the government. The government audit was completed on 08.01.2019, after which the TAR was prepared on 06.02.2019 and filed on 13.02.2019, which was before the assessment order.

What were the issues?

1. Whether the penalty levied under Section 271B of the Income Tax Act, 1961, for belated filing of the Tax Audit Report is sustainable when the delay was caused by the statutory audit process mandated by the Tamil Nadu Co-operative Societies Act, 1983, and was beyond the assessee's control. Assessee's contentions: The assessee argued that the delay in filing the TAR was not deliberate and was due to the statutory audit by the Tamil Nadu State Government, which was completed on 08.01.2019. The TAR was subsequently prepared and filed on 13.02.2019, before the assessment order was passed. The assessee relied on the principle that a venial technical breach without mala fide intention should not warrant a penalty, citing decisions in M/s.Balaji Logistics (ITA No.2248/Chny/2019) and M/s T.P.D. 101, Uthangarai Milk Producer Co-operative Society Ltd. (ITA No.152/Chny/2021). Revenue's contentions: The judgment records no specific contentions for the revenue.

Which sections of the Income-tax Act were involved?

Section 271B,Section 44AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI JAGADISH

आदेश / O R D E R

PER ABY T. VARKEY, JM:

1.

1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 18.11.2024 for the Assessment Year (hereinafter referred to as "AY”) 2018-19 confirming the penalty levied by the AO u/s.271B of the Income Tax Act, 1961 (hereinafter referred to as "the Act”) by levying an amount of Rs.1.50 lakhs as penalty.

2.

The brief facts are that the assessee is noted to be a Primary Agricultural Co-operative Credit Society, governed by the provisions of the Tamil Nadu Co-operative Societies Act, 1983; and objects of the Society is, inter-alia, noted to provide credit facility to the members of the society; and all the Co-operative Societies like assessee in the state of Tamil Nadu are subject to audit as provided under the Tamil Nadu Cooperative Societies Act, 1983; and the Auditors are appointed by the Director of Cooperative Audit/Registrar and not by the assessee Society.

1.

The assessee society is noted to have filed its return of income (RoI) on 13.02.2019 for AY 2018-19 which return was selected for scrutiny and the AO passed the assessment order on 09.04.2021 by assessing income of Rs.32,26,418/-. The AO noticing that the assessee didn’t file the Tax Audit Report (TAR) in Form No.3CD u/s.44AB of the Act before the due date for filing the ITR i.e. 15.10.2018, the AO issued notice to the assessee ‘as to why’ penalty u/s.271B of the Act should not be levied against the assessee for belated filing of the Audit Report on 13.02.2019.

Pursuant to it, the assessee is noted to have brought to the notice of the AO that the belated filing of TAR was not deliberate and since, it is registered under the Tamil Nadu Cooperative Societies Act, 1983, statutory audit needs to be carried out by the Tamil Nadu State Government and thereafter only assessee could file the TAR in Form No.3CD. And accordingly, when the government audit was completed on 08.01.2019, the assessee got the TAR prepared on 06.02.2019 and filed its on 13.02.2019. It was pointed out to the AO that the TAR had been filed before the assessment order was passed on 09.04.2021. Therefore, it was pleaded that no penalty be levied on the assessee. However, the AO didn’t accept the explanation of the assessee and levied penalty of Rs.1.50 lakhs u/s.271B of the Act. On appeal, the Ld.CIT(A) confirmed the action of the AO. Aggrieved by the aforesaid action of the Ld.CIT(A), the assessee is before us.

3.

We have heard both the parties and perused the material available on record. We note that the assessee is a co-operative society registered under the Tamil Nadu Co-operative Societies Act, 1983 and was subject to audit as per the Tamil Nadu Cooperative Societies Act, 1983 by the Auditor who are appointed by the Director of the Co-operative Audit or the Registrar of the Societies. The government auditor is noted to have conducted the statutory audit of the accounts of the assessee and given the report on 08.01.2019 and thereafter, the assessee’s auditor has completed the TAR on 06.02.2019 and filed Form No.3CD on 13.02.2019.

The delay in filing of the Audit Report was due to the belated completion of statutory audit by the State / Co-operative Department which got completed on 08.01.2019 which led to the delay in filing of the TAR in Form No.3CD on 13.02.2019. The completion of statutory audit was beyond the control of the assessee as the matter related to the appointment and completion of audit by the State / Co-operative Department; and it is a fact that the assessee would not stand to gain anything by completing the audit belatedly. And it is a fact that the assessee would be able to get Tax Audit Report only after finalization of financial accounts and completion of audit by the State Co-operative Department. In such a scenario, the explanation of the assessee is accepted as a reasonable cause for belated filing of TAR. In this regard, we note that the coordinate bench in the case of M/s.Balaji Logistics (ITA No.2248/Chny/2019 dated 07-09-2022), which relied on another decision of Tribunal in M/s T.P.D. 101, Uthangarai Milk Producer Co-operative Society Ltd. (ITA No.152/Chny/2021 dated 29-06-2022) held that when Tax Audit Report was made available to the AO before completion of assessment proceedings, then mere venial technical breach without any mala fide intention would not call for levy of penalty u/s 271B. Similar are the other decisions as placed on record. Therefore, by following the same, we delete the impugned penalty and allow the appeal of the assessee.

4.

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

More judgments on Section 271B

All 1,993 judgments and leading authorities on Section 271B →

Recent GST High Court judgments

Search GST case law →