MAHARASHTRA ERECTORS PVT. LTD.,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

Shri C.H. Naniwadekar appearing on behalf of the assessee submitted that the assessment for assessment year 2010-11 was completed by Assessing Officer u/s. 143(3) r.w.s. 147 of the Act vide order dated 22-03-2013. Since, the assessee failed to file return of income for the impugned assessment year. Penalty proceedings u/s. 271F were initiated. The ld. AR submitted that the assessee company is owned by Sanghvi family (brothers). Shri C.P. Sanghvi and Shri A.P. Sanghvi, Directors of the company are having serious disputes amongst themselves, as a result the accounts of the company could not be finalized and audited in time. The final accounts of the assessee for the Financial Year 2006-07 could be prepared in December, 2010. Since, earlier years accounts were finalized after considerable delay, the assessee could not file return of income and Audited Balance Sheet for the assessment year under appeal in time.

On the other hand Shri Sanjeev Ghei representing the Department vehemently supported the order of Commissioner of Income Tax (Appeals) in confirming levy of penalty u/s. 271F of the Act.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The solitary reason for not filing return of income for assessment year 2010-11 is dispute amongst the brothers/Directors of the assessee company has caused delay in finalization of accounts and audit of accounts.

In ITA No. 2140/PUN/2016 the assessee is aggrieved against confirming of levy of penalty Rs.1,50,000/- u/s. 271B of the Act for failure to submit Tax Audit Report for the Financial Year 2009-10. The ld. AR submitted that due to on-going dispute between the brothers the affairs of assessee company are not conducted in the desired manner. Consequently, the accounts of assessee company could not be finalized. Hence, statutory Tax Audit could not be conducted. The ld. AR pointed that in the assessment year 2009-10 the penalty u/s. 271B levied by the Assessing Officer was deleted by the Commissioner of Income Tax (Appeals) vide order dated 07-02-2014 on same set of facts and reasoning.

On the other hand ld. DR vehemently supported the order of Commissioner of Income Tax (Appeals) in confirming levy of penalty u/s. 271B of the Act. The ld. DR submitted that the reasoning given by the AR seeking immunity from levy of penalty does not fall within the meaning of reasonable cause u/s. 271B of the Act. The ld. DR prayed for confirming the order of Commissioner of Income Tax (Appeals) and dismissing the appeal of assessee.

Both sides heard. Orders of the authorities below perused. We have also considered the decision on which the ld. AR has placed reliance. The non-filing of Tax Audit Report for the impugned assessment year in time has been attributed to delay in finalization of accounts and Tax Audit of accounts of earlier financial years. We observe that on similar set of facts the Commissioner of Income Tax (Appeals)-5, Pune had deleted the levy of penalty u/s. 271B of the Act in the immediately preceding assessment year 2009-10.

The Hon‟ble Bombay High Court in the case of Shree Swastik Stills Pvt. Ltd. Vs. ACIT (supra) has upheld the observations of Tribunal in holding that inter se disputes between the stake holders of a company cannot be termed as a reasonable cause for waiving or dispensing with the penalty u/s. 271B of the Act. However, we find that the Hon‟ble High Court deleted the levy of penalty as the assessee could not have obtained Tax Audit Report for subsequent assessment years owning to delay in finalization of accounts for the preceding financial year. In the instant case as we have observed that the Commissioner of Income Tax (Appeals)

In the result, the appeal of assessee in ITA No. 2139/PUN/2016 is dismissed and the appeal of assessee in ITA No. 2140/PUN/2016 is allowed.