THE SASWAD MALI SUGAR FACTORY LTD,SOLAPUR vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 2, SOLAPUR

Coming to the assessee‟s sole substantive grievance that both the learned lower authorities have erred in law and on facts in imposing section 271B penalty of Rs.1,50,000/- on account of its failure to get the books of account audited, we note that the CIT(A)‟s detailed discussion affirming the same reads as under: “3. Brief facts of the case are that the appellant field his return of income for A.Y. 2013-14 on 04.03.2014. The appellant has uploaded the audit report u/s 44AB on 07.02.2014 as against the statutory specified date of 31.10.2013. As the audit report was not filed within the time limit, the AO issued penalty notice u/s 271B seeking the appellant’s explanation. The appellant is in reply claimed that the management was busy with the erection and commissioning of 14.8 MW co-generation plant, during the F.Y. 2013-14 which lead to delay in getting the accounts approved by AGM and preparation of the Tax audit. It was claimed that complete attention of the Managing Director was required to complete the project before the beginning of the sugar crushing season. It was claimed that the same was necessitated in view of the competition and sugar recession cycle. It was claimed that the project was completed only on 10.11.2013 and after which the appellant was able to hold AGM and get the accounts audited for tax purposes. It was also claimed that Registrar of Company (ROC) granted extension of 3 months vide letter dated 26.08.2013 for holding the AGM. It claimed the accounts were finalized and approved by the AGM on 29.12.2013. The tax audit was taken up and completed at the end of January 2014. The Tax audit report was uploaded on 07.02.2014. Thus, it claimed there was a reasonable cause for the delay in carrying out and obtaining the audit report u/s 44AB. The AO has rejected the appellant claim holding that the erection and co- generation plant is an independent activity and has no relation with auditing the accounts. The AO levied a penalty of Rs.1,50,000/- vide order dated on 30.09.2016. 4. During the appellate proceedings the appellant had reiterated the submissions made before the AO in the written submissions dtd. 13.12.2018. It was claimed that the managing Director was physically present at the site of the co-generation project everyday for nearly 12 hours for ensuring the co-ordination between various parties in the project implementation. It was also claimed that holding the General Body Meeting before 30.09.2013 would have been a time consuming and resource consuming process in view of the large numbers attending these AGMs and would take 4-5 days to complete the meetings.

I find the explanation filed by the appellant not convincing as the activity of commissioning the project cannot be the reason for not getting the books audited and approved by the AGMs. The claim that the Managing Director has to be available on the site for coordinating the activities among various projects implementing agencies is also not convincing as a week’s time would have been sufficient for completing the formalities of AGM. Thus, I find no reasonable cause for not submitting the audit report on time. Therefore, the penalty levied by the AO u/s. 271B is upheld.”

We have given our thoughtful consideration to the vehement rival contentions against and in support of the impugned penalty. Suffice to say, there is no dispute between the parties that it is not an instance of default on assessee‟s part in getting its books of account audited followed by submitting tax audit report but delay therein caused due to institution of proceedings before the Registrar of Companies as per its AGM dated 16.08.2013. That being the case, we are of the opinion that the same sufficiently indicates the reasonable cause in assessee‟s delay in getting the impugned tax audit report as per provisions of the Act. We hold in this factual background that the learned lower authorities have erred in levying impugned section 271B penalty in the given facts and circumstances. Same is directed to be deleted accordingly.

This assessee‟s appeal is allowed in above terms.