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Facts
The appellant, a co-operative society, filed its audit report under Section 44AB beyond the due date for AY 2016-17, attributing the delay to the Co-operative Department's audit process. The Assessing Officer imposed a penalty of Rs. 1,50,000/- under Section 271B, which the CIT(A) upheld.
Held
Following the Jurisdictional High Court's decision in Chavakkad Service Co-op. Bank Ltd. v. ITO, the Tribunal ruled that delay in obtaining audit reports from statutory auditors under the Kerala Co-operative Societies Act constitutes a reasonable cause for late submission of the report under Section 44AB. Consequently, the penalty levied under Section 271B was directed to be deleted.
Key Issues
Whether delay in filing the audit report under Section 44AB, caused by delays in audit completion by the State Co-operative Department, constitutes a reasonable cause for non-imposition of penalty under Section 271B.
Sections Cited
44AB, 271B, 273
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI KESHAV DUBEY, JM
O R D E R Per: Inturi Rama Rao, AM These appeals filed by the assessee are directed against the orders of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 24.05.2022 for Assessment Years (AYs) 2012-13 to 2016-17.
Since identical issues are involved in these appeals, they are heard together and disposed of vide this common order. For the sake of convenience and clarity the facts relevant to the appeal bearing for AY 2016-17 are stated herein.
Pattom Service Co-op. Bank Ltd.
Brief facts of the case are that the appellant is a co-operative society engaged in the business of providing credit facilities to its members. The return of income for AY 2016-17 was filed on 28.03.2018 declaring Nil income. The gross receipt of the appellant was Rs. 3,95,78,238/-. Therefore, the appellant society was liable to get the accounts audited and submit the report as prescribed under the provisions of section 44AB of the Income Tax Act, 1961 (the Act) within the due date for filing the return of income. However, the appellant society had submitted the report in Form 44AB ON 11.05.2018. Hence, the AO issued show cause notice under section 273 r.w.s. 271B of the Act, calling upon the appellant to show cause as to why penalty should not be levied u/s. 271B of the Act. In response to the show cause notice the appellant submitted that the delay in getting the books audited had occurred on account of the delay in completion of audit by the Co-operative Department of the State Government. However, the AO rejecting the above explanation had proceeded with levy of penalty of Rs. 1,50,000/- u/s. 271B of the Act vide order dated 22.07.2021.
Being aggrieved, an appeal was filed before the CIT(A) contending that the delay in getting the accounts audited under the Co- operative Societies Act constitutes reasonable cause placing reliance on the decision of the coordinate bench of this Tribunal in the case of T.T. Kuruvilla vs. DCIT, dated 22.01.2019. However, the CIT(A) confirmed the levy of penalty by holding that the Pattom Service Co-op. Bank Ltd. mere fact that the audit of the appellant was conducted under the provisions of Co-operative Societies Act cannot be sufficient reason for non compliance by placing reliance on the decision of the Hon'ble Jurisdictional High Court in the case of Peroorkkada Service Co- operative Bank Ltd. v. ITO [2020] 424 ITR 422.
Being aggrieved, the appellant is in appeal before us in the present appeal.
It is submitted that subsequent to the decision of Peroorkkada Service Co-op. Bank Ltd. (supra) the Hon'ble Jurisdictional High Court in the case of Chavakkad Service Co-op. Bank Ltd. v. ITO [2024] 169 taxmann.com 45 held that the delay in obtaining the audit report under the Kerala State Co-operative Societies Act constitute reasonable cause for delay in submission of audit report us 44AB of the Act and, therefore, no penalty was leviable.
On the other hand, the learned Sr. DR submits that no interference in the impugned order is called for.
We have heard the rival contentions of both the parties and perused the material available on record. The solitary issue that arises for our determination is that having regard to the explanation given by the appellant, whether there was sufficient and reasonable cause for delay in submission of the audit report as prescribed u/s. 44AB of the Act. There is no dispute as to the fact of delayed submission of the prescribed report u/s. 44AB of the Act. In Pattom Service Co-op. Bank Ltd. response to the show cause notice, the appellant submitted that the delay had occurred on account of the delay in obtaining the audit report under the Kerala State Co-operative Societies Act. The submission made by the appellant society remains uncontroverted by the department. The Hon'ble Jurisdictional High Court in the case of Chavakkad co-operative society (supra) held that the delay in obtaining the audit report under Kerala State Co-operative Societies Act constitutes reasonable cause for delay in submission of the audit report u/s. 44AB and, therefore, no penalty is leviable. The relevant portion of the order is extracted as under: - “Where assessee co-operative societies did not file audit report as mandated under section 44AB within time limit specified thereunder, however, audit reports were made available before Assessing Authority at time of finalization of assessments, since delay in obtaining audit reports from statutory auditors under Kerala Co-operative Societies Act and Rules could be seen as a reasonable cause for delayed submission of audit reports, no penalty under section 271B was to be imposed on assessee.”
The ratio of the above decision of the Hon'ble Jurisdictional High Court is squarely applicable to the facts of the present case. The ratio of the decision in the case of Peroorkkada Service Co- operative Bank Ltd. (supra) have not application to the facts of the present case, inasmuch as, it was a case where sufficient cause was shown for the delay in submission of audit report. Respectfully following the ratio laid down by the Hon'ble Jurisdictional High
In the result, the appeals filed by the assessee are allowed.
Order pronounced in the open court on 18th March, 2025.