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Income Tax Appellate Tribunal, ‘A’ BENCH, BENGALURU
O R D E R
Per INTURI RAMA RAO, AM :
This is an appeal filed by the assessee directed against the order of the learned Commissioner of Income-tax (Appeals), Gulbarga (Kalburgi), [CIT(A)] dated 30/09/2016 for the assessment year 2011-12.
The assessee raised the following grounds of appeal:
Briefly facts of the case are that the assessee is a partnership firm. The assessee filed return of income for the assessment year 2011-12
Page 3 of 6 belatedly on 26/02/2013 declaring loss of Rs.5,16,867/-. Against the said return of income, the assessment was completed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] vide order dated 13/3/2013 at total income of ‘nil’. Subsequently, the AO initiated penalty proceedings u/s 271B r.w.s. 274 of the Act as the assessee had failed to get the books of account audited and file audit report as prescribed under the provisions of section 44AB of the Act within the specified time i.e. on or before 30/09/2011. In response to show cause notice, the assessee had submitted that there was a search and seizure operation in the premises of the assessee u/s 132 of the Act on 25/10/2010. Consequent to search, books of account and other documents were impounded by the Investigation Wing of the Department. Copies of books of account were not furnished to the assessee despite request made by the assessee, consequently, there was a delay in getting account books audited. Thus, it was submitted that the delay is only on account of non-availability of books of account, for not getting the books of account audited within time. The said explanation was rejected by the AO by holding that the assessee had sufficient time for getting books released and got the auditing done. Therefore, rejected the explanation offered by the assessee and levied penalty of Rs.1 lakhs u/s 271B vide order dated 26/09/2013.
Against the said order, an appeal was preferred before the ld.CIT(A) who, vide impugned order, confirmed the action of the AO on the ground that assessee had not made necessary efforts for getting books of account from Investigation Wing of the department and get the Page 4 of 6 books audited and no proof of having made request to furnish copies before the Investigation Wing, was furnished.
Being aggrieved, the assessee is before us in the present appeal.
5.1 Learned AR of the assessee vehemently contended that there was no willful default in getting books of account audited u/s 44AB of the Act. The delay was caused only on account of bona fide reasons that books of account were impounded b the revenue. He also placed reliance on the decision of the Hon’ble Madras High Court in the case of Sancheti Motors Ltd. vs. ITO in T.C.(A) No.548 of 2007 dated 18/02/2015 and also the decision of the co-ordinate bench of Tribunal in the case of Mrs.Geetha Sridhar vs. ITO in dated 18/06/2010.
5.2 On the other hand, learned Departmental Representative placed reliance on the orders of the lower authorities.
We heard rival submissions and perused the material on record. The only issue in the present appeal is whether having regard to facts and circumstances of the case penalty u/s 271B is leviable for delay in getting the books audited as prescribed u/s 44AB of the Act. The explanation furnished by the assessee is that books of account were impounded by the department consequent to search action in the premises of the assessee on 25/10/2010. Immediately after obtaining copies of books of account from the Department, the assessee got the books audited on 10/02/2013 and filed the same along with the return of income. These facts have not been disputed by the lower authorities. The AO levied penalty only on the ground that the appellant had not Page 5 of 6 made necessary efforts to obtain copies of the impounded material from the department and therefore, according to him, this cannot be a reasonable cause for not getting books audited. The ld.CIT(A) also confirmed the same on the same reasoning. It is not disputed that books of account were impounded by the department. When the books were impounded, it is practically impossible to get the books of account audited. The fact that the assessee had not made a request for furnishing of copies of impounded books of account cannot be a valid reason for levy of penalty. Needless to say it is incumbent upon the department to furnish copies of books of account immediately after the books are impounded. In the light of the decision of the Hon’ble Madras High Court in the case of Sancheti Motors Ltd. (supra) wherein, after referring to the judgments of the Hon’ble Punjab and Haryana High Court in the case of CIT vs. Ashoka Dairy (279 ITR 32), decision of Hon’ble Calcutta High Court in the case of CIT vs. Ramkrishna Stores (253 ITR 175) and decision of Hon’ble Madhya Pradesh High Court in the case of ITO vs. Nanak Singh Guliani (257 ITR 677) held that imposition of penalty for non-compliance with the provisions of section 44AB is not mandatory. It is only discretionary power conferred on the AO to impose or not to impose penalty. Further, in view of the provisions of section 273B which provide that when the audit report is not furnished for reasonable cause, penalty is not leviable. It was further held that delay in submitting audit report due to the fact that the books are impounded by the department constitutes a reasonable cause. In the light of the judgment of the Hon’ble Madras High Court in the case of Sancheti Motors Ltd. (supra), we delete the penalty levied by the AO.
Page 6 of 6 7. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on this 20th April, 2018