M/S KENCHAMBA & CO,HASSAN vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1, HASSAN

This appeal by the assessee is against the order dated 30.11.2017 of the CIT(Appeals), Mysore relating to assessment year 2011-12.

The assessee is a partnership firm carrying on business as IOC Dealers and running rice mill. In the course of assessment proceedings for AY 2011-12, the AO noticed that the assessee was under an obligation in terms of section 44AB of the Income-Tax Act, 1961 [“the Act”] to get his books of account audited and furnish report of such audit on or before the specified date. The admitted position is that the assessee got the books of account audited and filed the audit report after the specified date referred to in section 44AB of the Act. Failure to furnish a report after the getting the tax audited before the specified date invites penalty u/s. 271B of the Act. In terms of section 273B, no penalty shall be imposed if the failure to comply wit the provisions of section 44AB was on occasioned owing to reasonable cause.

The AO initiated penalty proceedings u/s. 271B of the Act. The assessee did not appear in response to the show cause notice u/s. 271B of the Act and therefore the AO proceeded to impose penalty on the assessee u/s. 271B of the Act by his order dated 22.03.2016.

Aggrieved by the aforesaid order, the assessee has preferred appeal before the CIT(Appeals). It appears that the appeal of the assessee was fixed before the CIT(Appeals) on 27.11.2017 and at the request of the assessee, the case was adjourned to 27.11.2017. It appears that on 27.11.2017, none appeared on behalf of the assessee. The CIT(Appeals) therefore proceeded to decide the appeal of the assessee ex parte. The CIT(Appeals) found that the reason given for failure to comply with the provisions of section 44AB of the Act was the sickness of the person who was entrusted with the work of accounts. Since no supporting evidence was filed by the assessee, the CIT(Appeals) was of the view that there was no reasonable cause for the failure and he therefore confirmed the order of the AO imposing penalty on the assessee.

Aggrieved by the order of CIT(Appeals), the assessee has preferred the present appeal before the Tribunal.

After hearing the rival submissions, we are of the view that the order of the CIT(Appeals) has to be set aside and the issue remanded to the CIT(Appeals) for fresh consideration. The ld. counsel for the assessee submitted before us that necessary evidence regarding sickness of the Accountant of the assessee is available and could not be produced before the CIT(Appeals). It was submitted by him that it was due to illness of the partner that there was no proper representation before the CIT(Appeals). We accept the statement made across the Bar by the ld. counsel for the assessee and set aside the order of the CIT(Appeals) and remand for fresh consideration by the CIT(Appeals) the existence of a reasonable cause for failure u/s. 44AB of the Act and other legal or factual issues that may be raised by the assessee.

In the result, the appeal by the assessee is allowed for statistical purposes.