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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2008-09. The appeal is directed against the order of the Commissioner of Income Tax-3, Nasik [in short ‘CIT(A)’] and arises out of the penalty levied u/s 271B of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal filed by the assessee read as under : 1) On the facts and in circumstance of the case and in law Ld. CIT(A) erred in confirming the penalty under section 271B of income tax Act 1961.
2) The Ld. CIT(A) placed incorrect statement in his appeal order para-6 by ignoring the submission given by the appellant during the course of hearing. Extract from the Appeal order….. “Even if the date of certificate is taken as 20-03-2009 it means assessee having a chronic problem for the last two years it is notice that for AY 2007- 08 .The assessee able to file the audit report and return in time. Likewise for A Y 2010-11 Audit report file in time. Actual fact Assessment year Due date Date of filling the return 2007-08 31/10/2007 02/11/2007 2008-09 30/09/2008 31/03/2009 2009-10 30/09/2009 17/02/2010 2010-11 15/10/2010 09/10/2010,Revised as on 01/11/2011 2011-12 31/10/2011 01/06/2012,Revised as on 04/06/2012 3) On the facts and in circumstance of the case and in law Ld. CIT(A) had confirmed the penalty by ignoring the submission of the appellant and it’s based on various presumption and assumptions not directly related with illness and bad health of the proprietor of the business. 4) The order appeal against is based on surmises and conjectures.
Briefly stated, the facts of the case are that the assessee filed his return of income for the assessment year (AY) 2008-09 on 31.09.2009 declaring total income of Rs.12,37,700/-. During the course of assessment proceedings, the Assessing Officer (AO) observed that the books of accounts were audited on 31.03.2009, whereas as per section 44AB the same should have been done on or before 31.10.2008.
Observing that the assessee is liable for penalty u/s 271B, as he has failed to get his books audited within the statutory limit, the AO issued a show cause notice dated 30.12.2010 u/s 271B to the assessee to explain why penalty should not be imposed on him for non-compliance of section 44AB. In response to it, the authorised representative of the assessee filed a reply dated 25.03.2013 submitting as under : "With reference to your notice for furnishing Audit Report as required u/s 44AB, for which we have to state that our Assessee Shri Haridas T. Kanani was sick, & he was advised for the bed rest due to which he was unable to file return and gets his accounts audited within the due date. We are herewith enclosing doctor's medical certificate of 20/03/2010 where doctor has stated that he was suffering of Hypertension, Myopath, Diabetes & other diseases as per certificate for last two years. Hence we request your goodself not to levy penalty u/s 271B.” However, the AO was not convinced with the above explanation of the assessee for the reason that the assessee had sales turnover of Rs.3,33,12,720/- during the financial year (FY) 2008-09 which was more than the sales turnover of Rs.3,22,25,182/- in FY 2007-08 and therefore, sickness cannot be a sole reason for not getting accounts audited within the statutory limit. As per section 271B, the assessee is liable for penalty @ 0.5% of turnover or Rs.1,00,000/- whichever is less. The assessee’s turnover for the year under consideration being Rs.3,33,12,720/-, the penalty leviable @ 0.5% comes to Rs.1,66,564/-. The AO levied a penalty of Rs.1,00,000/-.
In appeal, the Ld. CIT(A) observed that even if the date of the certificate is taken as 20.03.2009, it means the assessee was having this chronic problem for the last two years. Further, he noticed that for AY 2007-08, the assessee was able to file the audit report and return of income in time. Likewise for AY 2010-11, the audit report was filed on time. The date of filing audit report for AY 2009-10 is not available on record. Observing the above, the Ld. CIT(A) agreed with the AO that the illness of the assessee could not be the reason for delay in filing the audit report, when he has been doing normal business with the same illness. Further observing that the certificate in much after the due date of the audit report which was 31.10.2008, the Ld. CIT(A) came to a finding that there was no reasonable cause as required u/s 271B and therefore dismissed the appeal filed by the assessee.
Before us, the Ld. counsel for the assessee files a copy of the affidavit in original and certified copies of the medical certificate. Also reliance is placed by him on the decision in Attinkara Electronics v. ITO 601/Cochin/2018) (ITAT Cochin) dated 01st March, 2019, Maxpro Associates v. ACIT (ITA No. 2087/PN/2014) (ITAT Pune), CIT v. Capital Electronics (2003) 261 ITR 4 (Cal.) and Thanjavur Silk Handloom Weavers Co-operative Production & Sales Society Ltd. v. Union of India & Ors (W.P. No. 1212 of 1998) (Mad.). Also the Ld. counsel submits that the delay in filing of the audit report was because of ill health of the appellant due to which the accounts were not completed upto the prescribed date of filing of audit report. It is explained that the audit report was submitted on 31.03.2009, whereas the AO completed the assessment u/s 143(3) on 30.12.2010 and therefore, the delay in submission of the audit report has not caused any loss to the exchequer. Further explaining that there is a reasonable cause for delay in submission of the audit report within the meaning of section 273B, it is argued that the penalty of Rs.1,00,000/- levied by the AO u/s 271B be deleted.
On the other hand, the Ld. Departmental Representative (DR) submits that there is no reasonable cause on the part of the assessee for delay in filing the audit report. Thus it is argued by him that the order passed by the Ld. CIT(A) be affirmed.
We have heard the rival submissions and perused the relevant materials on record. The assessee was required to get his books of account audited as per the provisions of section 44AB of the Act on or before 31.10.2008. However, the assessee got the books of account audited on 31.03.2009. The AO completed the assessment u/s 143(3) on 30.12.2010. From the materials available on record, we are convinced that the delay in filing of audit report was because of ill health of the appellant due to which the accounts were not completed till the prescribed date on filing of the audit report. A similar issue arose before the ITAT Cochin Bench in Johns Biwheelers v. CIT (ITA No. 411/Coch/2018 dated 05.02.2019) wherein it is held as under :
7.1 From the material available on record, we are of the view that the assessee got his books of accounts audited on 28/03/2014 which was made available to the Assessing Officer and no prejudice has been caused to the Revenue. Now the short question that arises is whether in this scenario, penalty u/s. 271B of the Act can be levied or not. In our considered opinion, the assessee had only committed technical venial breach which does not create any loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings. The Madras High Court in the case of CIT vs. A.N. Arunachalam (208 ITR 481) in the context of filing of audit report for claiming deduction u/s. 80J of the Act, observed that once audit report has been made available before the Ld. Assessing Officer before the completion of assessment proceedings, the assessee should be granted deduction u/s. 80J of the Act. We observe that this judgment was rendered in the context of adjudication of quantum of deduction claimed by the assessee. Hence, the said analogy can very well be drawn and used in the penalty proceedings like that of the assessee. To sum up, we hold that the assessee had committed only technical venial breach for which he cannot be penalized. In view of the above, we are inclined to delete the penalty made by the assessee u/s. 271B of the Act.
7.1 Facts being identical, the ratio laid down in the above decision is squarely applicable to the present case. The assessee has committed only technical venial breach which does not create any loss to the exchequer. The audit report was filed before the AO before the completion of assessment. The ill health of the appellant was reasonable cause for not furnishing the audit report before the AO within the stipulated time. Therefore, we are inclined to hold that this is not a fit case for levy of penalty u/s 271B.