METRIC STREAM INFOTECH INDIA PVT LTD ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12(1), BANGALORE

Per Shri N.V. Vasudevan, J.M. : This is an appeal by the assessee against the order dt.29.08.2016

of Commissioner of Income Tax (Appeals)-4, Bangalore confirming the

order of the Assessing Officer imposed penalty on the assessee under

2 ITA No.501/Bang/2017 Section 271F of the Income Tax Act, 1961 (in short 'the Act') for the

Assessment Year 2012-13.

development sales and marketing services. For the Assessment Year

2012-13, the due date for filing the return of income under Section

139(1) of the Act in the case of the assessee was 30.11.2012. The

assessee filed return of income only on 28.5.2013. Under the provisions

of Section 271F of the Act, if a person required to furnish return of

income under Section 139(1) of the Act fails to furnish such return before

the end of the relevant assessment year, the Assessing Officer may direct

such person shall pay, by way of penalty of a sum of Rs.5,000. In the

present case, the date of end of the relevant AY date was 31.3.2013 for

the relevant assessment year under consideration. We have already

noted that the return of income was filed only on 28.5.2013. The

Assessing Officer therefore initiated penalty proceedings under Section

271F of the Act for the assessee's failure to file the return of income on

or before the end of the relevant assessment year. Section 273B of the

Act provide no penalty under Section 271F shall be imposed on an

3 ITA No.501/Bang/2017 assessee for failure referred to in Section 271F of the Act, if the assessee

proves that there was a reasonable cause for the said failure.

issued by the Assessing Officer. The assessee did not respond to the

show cause notice. The Assessing Officer therefore proceeded to impose

penalty under Section 271F of the Act of Rs.5,000. The Assessing Officer

observed that the provisions of Section 271F of the Act was introduced

only by way of a measure to ensure timely filing of return by tax payer

and also to enable the Assessing Officer to carryout investigation and

collect information to verify the return of income within the period of

limitation for completion of assessment prescribed under the Act. The

Assessing Officer accordingly imposed a penalty of Rs.5,000 on the

assessee.

Authorised Representative of the assessee appeared before the

Assessing Officer in response to the show cause notice under Section

271F of the Act and explained the reasons for the delay in filing the

return within the period contemplated under Section 271F of the Act.

4 ITA No.501/Bang/2017 The assessee explained before the CIT (Appeals) that it was a captive

service provider to its holding company M/s. Matric Stream Inc. USA and

was dependent on its holding company to meet its day to day operating

expenses. The assessee also pointed out that the tax liability on the total

income returned by the assessee in the return of income was

Rs.3,12,29,954. The assessee did not have sufficient funds to make the

payment of tax on the income admitted in the return of income. The

assessee pointed out that without payment of tax due on the returned

income, the returns filed by the assessee will not be accepted. The

assessee therefore had no option but to wait for release of funds from its

holding company and hence there was a delay in filing the return of

income. The assessee therefore explained that there was a reasonable

cause for the delay in filing the return of income.

He held that the reasons for the delay as explained by the assessee does

not constitute a justifiable reason for the delay in filing the return of

income. The CIT (Appeals) confirmed the order of the Assessing Officer

imposing penalty under Section 271F of the Act.

5 ITA No.501/Bang/2017 5. Aggrieved by the order of the CIT (Appeals) the assessee has

preferred an appeal before the Tribunal.

in Form No.36, grounds of appeal and other documents which were

signed by authorized signatory of the assessee. The appeal so filed was

well within the time. Later on it was noticed by the assessee that Form

36, grounds of appeal and other documents have to be signed by the

Director of the company. Accordingly, the revised Form No.36, grounds

of appeal and other documents were filed duly signed by the Director of

the Company. Registry has not raised any objection in this regard that

there is a delay in filing the appeal. The assessee, however, on its own

has filed petition for condonation of delay, in the event the revised Form

No.36, Memor of grounds etc., filed on 1.3.2017 is treated as not proper

and the time of filing the appeal is to be reckoned only from the date on

which Form 36, grounds of appeal and other documents singed by the

Director is considered as the date of filing of the appeal. There will be a

delay of 130 days in filing the appeal if it is construed that Form 36,

grounds of appeal and other documents signed by the Director of the

6 ITA No.501/Bang/2017 Company alone is considered as proper filing of the appeal. It has been

explained in the petition of condonation of delay that the Directors

controlling the affairs of the assessee was outside India and therefore

they could not sign the same. It has also been submitted that there was

no deliberate or intentional reason for the defective filing of the appeal,

if any.

submitted that the delay if any should not be condoned, We are of the

view that the question of delay is only a technical as the assessee has

filed the appeal within the time on 1.3.2017 though the same was

defective. Accordingly, we hold that the appeal filed is within the time

and in any event there was a reasonable cause for the delay in filing the

appeal.

the question that needs to be determined by the Tribunal is as to

whether there was a reasonable cause for the delay in filing the return of

income for the Assessment Year 2012-13 by the assessee beyond the end

of the Assessment Year 2012-13 i.e. on or before 31.3.2013. In this

7 ITA No.501/Bang/2017 regard, the first aspect we notice is that the return of income was filed

by the assessee on 28.5.2013 and the delay in terms of Sectin 271F of the

Act is only one month 28 days. Apart from the above, the reasons for the

delay being non-availability of funds to pay the tax due on the income

declared in the return of income is the reason pleaded by the assessee

for filing the return of income. In this regard, the learned counsel for the

assessee has drawn our attention to a decision of the Hon'ble Kerala High

Court in the case of M. Rajan Vs. Prin. CIT (2016) 76 Taxmann.com 164

(Ker) wherein the Hon'ble Kerala High Court in the context of condoning

the delay in filing the return of income under Section 119(2)(b) of the Act

took view that severe financial crisis would be reasonable cause for

condoning the delay. The learned counsel for the assessee also drawn

our attention to the decision of Hon'ble Madras High Court in the case of

S. Jayanti Vs. ACIT 2015 75 Taxmann.com 248 wherein in the context of

penalty under Section 271F of the Act, non-furnishing of the seized

documents was held to be reasonable cause for the delay in filing the

return of income. The learned counsel for the assessee also pointed out

that though the assessee submitted financial hardship as a cause for the

8 ITA No.501/Bang/2017 delay in filing the return of income, the necessary evidence and

documents were not filed. The learned counsel for the assessee filed an

application for admission of the following additional evidences under

Rule 29 of the IT (AT) Rules, 1963 :

The learned Departmental Representative has submitted that the

additional evidence, if admitted, requires to be scrutinized by the AO and

in that event the AO should be afforded an opportunity to rebut the plea

of the assessee in the light of the additional evidence.

the additional evidence now sought to be filed by the assessee before

9 ITA No.501/Bang/2017 the Tribunal are necessary and required proper adjudication of the issues

involved in the appeal. These evidence, according to the assessee, show

that the assessee was dependent on its holding company for day to day

affairs and for financial support including payment of self-assessment

tax. The additional evidence is therefore admitted for consideration.

examine the additional evidence now admitted by the Tribunal, we deem

it proper to set aside the order of the CIT (Appeals) and remand the

question of the existence of reasonable cause under Section 273B of the

Act for fresh consideration by the Assessing Officer in the light of the

additional evidence now admitted by the Tribunal. The Assessing Officer

shall afford an opportunity of being heard to the assessee before

deciding the issue.

Order pronounced in the open court on the 25th day of Oct., 2017.

Sd/- Sd/- (JASON P BOAZ) (N.V. VASUDEVAN) Accountant Member Judicial Member Bangalore, Dt. 25.10.2017. *Reddy gp