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Facts
The assessee, a Co-operative Society, did not file its income tax return under section 139(1) of the Income Tax Act. The Assessing Officer initiated proceedings under section 148A after discovering cash deposits in the assessee's bank accounts. Subsequently, the assessee filed a return declaring income, which was accepted, but a penalty of Rs. 4,46,715/- was levied under section 270A for under-reporting of income, applying section 270A(2)(b) as the return was filed for the first time under section 148. The CIT(A) upheld the penalty.
Held
The Tribunal held that the assessee had a bona fide explanation for not filing the return of income within the statutory due date. The delay was attributed to the Directorate of Cooperative Audit appointing auditors for five financial years, including the assessment year under appeal, only on 29.11.2021, long after the due date of 30.09.2019 for filing returns under section 139(1). This constituted a reasonable cause under section 270A(6)(a).
Key Issues
Whether the penalty levied under section 270A for under-reporting of income is sustainable when the delay in filing the return was due to the late appointment of auditors by the Directorate of Cooperative Audit, providing a bona fide explanation under section 270A(6)(a).
Sections Cited
Section 139(1), Section 148, Section 148A, Section 143(3), Section 147, Section 144B, Section 250, Section 270A, Section 270A(2)(b), Section 270A(6)(a)
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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
Before: BEFORE SHRI GEORGE MATHANMANISH AGARWAL
This is an This is an appeal filed by the assessee against the order of the ld against the order of the ld CIT(A), NFAC, Delhi dated CIT(A), NFAC, Delhi dated 21.11.2024 in Appeal No. in Appeal No.NFAC/2018- 19/10380281 for the ass for the assessment year 2019-20 confirming the penalty 20 confirming the penalty levied u/s.270A of the Act levied u/s.270A of the Act.
P a g e 1 | 9 Assessment Year : 2019-20
Shri S.K.Sarangi, ld AR appeared for the assessee and Shri S.C.Mohanty, Sr. DR appeared for the revenue.
The assessee has taken following grounds of appeal:
“1. For that order u/s.250 of the I.T.Act dated 21.11.2024 as passed by the ld CIT(A), NFAC is illegal and arbitrary on the facts in the circumstances of the case. 2. For that the penalty of Rs.4,46,715/- imposed u/s.270A of the I.T.Act is illegal without jurisdiction on the facts and in the circumstances of the case.”
Brief facts of the case are that the assessee is a Co-operative Society and has not filed the return of income 139(1 of the Act. The Assessing Officer had the information that the assessee had made cash deposit in the bank accounts with State Bank of India and HDFC Bank, therefore, after following due procedure of section 148A of the Act, notice u/s.148 of the act was issued. In response to which, the return of income was filed declaring total income at Rs.28,73,560/-. Thereafter assessment was completed u/s.143(3)/147 r.w.s 144B of the Act, wherein, the income declared by the assessee was accepted and penalty proceedings u/s.270A of the Act were initiated for under reporting of income. Subsequently, vide the impugned order dated 9.5.2024, the Assessing Officer has levied the penalty of Rs.4,46,715/- y/s.270A of the Act for under reporting of income being 50% of the amount of tax payable on under reported income. For levying the penalty, the Assessing Officer has resorted to apply the P a g e 2 | 9 Assessment Year : 2019-20 provisions of 270A(2)b) of the Act, whereby, it has been provided that where the assessee has not filed the return of income and for the first time, the assessee has filed income u/s.148 of the Act, the income returned be treated as the amount of under reported income.
In the first appeal, the ld CIT(A) confirmed the levy of penalty. Hence, the present appeal is before us.
During the course of hearing, ld AR submits that the assessee is a Co-operative Society and its accounts are subject to audit by the auditors appointed by the Directorate of Cooperative Audit, who vide order dated 29.11.2021 has appointed the auditors to get the accounts audited for five financial years starting from 2016-17 to 2019-20, which include the year under appeal also. Being the assessment year under appeal i.e. 2019-20, the due date for filing of return of income u/s.139(1) of the Act was upto 30.9.2019 and since the accounts were not get audited and only after appointment of auditor by the Directorate of Audit, Odisha, Bhubaneswar on 29.11.2021, the same are audited, thus the assessee could not be able to file the return u/s.139(1) of the Act. Ld AR submits that the circumstances as explained are beyond the control of the assessee and there is reasonable cause for not filing the return of income in time, therefore, in view of the provisions of sub-section (6)(a) of Section 270A of the Act, there is bonafide explanation and the assessee has been able to P a g e 3 | 9 Assessment Year : 2019-20 substantiate its claim and therefore, levy of penalty may directed to be deleted.
On the other hand, ld Sr DR vehemently supported the orders of lower authorities and further submitted that the assessee has not filed the return of income u/s.139(1) of the Act, therefore, the AO has rightly levied the penalty u/s.270A of the Act for under reporting the income. He further submitted that if notice u/s.148 of the act was not issued, there is every possibility that no return was filed and due taxes were not paid. Therefore, he prayed for confirmation of levy of penalty.
We have considered the rival submissions and perused the record of the case. From the perusal of the orders of Directorate of Cooperative Audit, Odisha, Bhubaneswar dated 29.11.2021, it is seen that for the year under appeal, i.e. F.Y. 2018-19 relevant to A.Y. 2019-20, the Directorate of Cooperative Audit vide letter dated 29.11.2021 has appointed the auditors namely M/s. N. Pradhan and Associates, C.A. to get the accounts audited. The letter dated 29.11.2021 of is reproduced as under:
P a g e 4 | 9 Assessment Year : 2019-20 P a g e 5 | 9 Assessment Year : 2019-20 P a g e 6 | 9 Assessment Year : 2019-20
P a g e 7 | 9 Assessment Year : 2019-20 Therefore, it is not possible on the part of the assessee to file the audited books of account within the statutory time limit u/s.139(1), which expires on 30.9.2019. This constitutes reasonable explanation and bonafide on the part of the assessee, where the assessee has been able to substantiate its explanation with plausible evidence such as the letter of appointment of auditors by the Directorate of Cooperative Audit. In our opinion, it is a bonafide explanation and the circumstances were beyond the control of the assessee, therefore, in view of the provisions of section 270A(6)(a) of the Act, the penalty levied is hereby deleted by treating the explanation of the assessee as bonafide.
In the result, appeal of the assessee is allowed.
Order dictated and pronounced in the open court on 29/01/2025.