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Income Tax Appellate Tribunal, “D”, BENCH KOLKATA
Before: SHRI A. T. VARKEY, JM &DR. A.L.SAINI, AM
Appellant by :Shri Siddharth Agarwal, Advocate Respondent by :Shri A. Bhattacharjee, Addl. CIT सुनवाईक�तार�ख/ Date of Hearing : 24/05/2018 घोषणाक�तार�ख/Date of Pronouncement : 06/06/2018 आदेश / O R D E R Per Dr. A. L. Saini: The captioned appeal filed by the Assessee, pertaining to Assessment Year 2013-14, is directed against an order passed by the Ld. Commissioner of Income Tax (Appeals)-6, Kolkata, in appeal No.372/CIT(A)-6/Kol/2014-15, dated 09.02.2017, which in turn arises out of a penalty order passed by the Assessing Officer u/s 271B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), dated, 30.12.2014.
The grievances raised by the assessee read as under:
“1. For that the order of penalty dated 30.12.2014 passed u/s 271B by the ITO is bad in law and is liable to be quashed.
2. For that on the facts and in the circumstances of the case, the ld. CIT(A) erred in upholding the penalty of Rs.1,50,000/- imposed by the Assessing Officer u/s 271B.
3. For that on the facts and in the circumstances of the case, the ld. CIT(A) failed to consider the fact that penalty cannot be imposed where there is technical and venial breach of law particularly when the assessee had made substantial compliance of law.
That the appellant craves leave to add, alter or delete all or any of the grounds of appeal.”
Rajib Dey Assessment Year: 2013-14
The brief facts qua the issue are that the assessee had filed his return of income electronically for the Assessment Year 2013-14 on 29.09.2013. The assessee was engaged in wholesale Cement & Rod business. It was found from the return of income that his gross turnover was to the tune of Rs.6,73,28,988/-, therefore, as per section 44AB of the Act 1961,the assessee was liable to get his accounts audited by Chartered Accountant. By virtue of the proviso to Rule 12(2) of the l. T. Rule 1962 read with CBDT’s notification No.34 dated 01.05.2013, effective from 1st April, 2013, which the assessee was required to furnish the report of audit specified u/s 44AB of the Act electronically. But the assessee had failed to do so. This attracted penal provision u/s 271B of the Act. The Assessing Officer issued notice u/s 271B and in compliance, the assessee has filed a written submission on 29.09.2014 stating that assessee’s accounts had been audited as per Form No- 3CB & 3CD in due time on 25/09/2013 and the assessee had submitted income tax return in due time, prescribed u/s 139(1) of the Act. The assessee submitted that due to Computer sever problem in the income Tax site, the auditor could not upload or furnished Audit report through on line electronically, but the Audit report was submitted by assessee, manually before Income tax authority on 08/10/2013, therefore, the penalty proceeding u/s 271Bshould not be initiated against assessee. However, the Assessing Officer rejected the contention of the assessee and held that the assessee did not submit audit report even manually within the prescribed due date on, 30/09/2073.The AO also noted that the assessee submitted the report before erstwhile lTO, Ward-1(2), Hooghly instead of the jurisdictional Assessing Officer and also failed to furnish the Audit Report electronically on or before 31.10.2013. Therefore, the Assessing Officer imposed penalty to the tune Rs.1,50,000/- u/s 271B of the Act.
Rajib Dey Assessment Year: 2013-14 4. Aggrieved by the stand of the Assessing Officer, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is aggrieved and is in further appeal before this Tribunal.
Learned counsel for the assessee begins by pointing out that audit report for Assessment Year 2013-14, supposed to be electronically filed on 30.09.2013 but the CBDT had extended the date of filing of audit report electronically up to 31.10.2013. However, the assessee filed the Income tax return within the due date prescribed u/s 139(1) of the Act. Moreover the assessee has submitted manually the tax audit report on 08.10.2013 within the extended period by the CBDT up to 31.10.2013. The ld. Counsel for the assessee also pointed out that the audit report in Form No.3CB and 3CD, under section 44AB of the Act shows that audit had been completed on 25.09.2013. The ld. Counsel for the assessee explained before us the reasonable cause, stating that the Chartered Accountant who was working for the assessee, was of the impression that the audit report may be filed manually within the extended period by the CBDT up to 31.10.2013, therefore, he filed tax audit report manually on 08.10.2013. The assessee does not have knowledge about the income tax proceedings, therefore, he has always been depending on the Chartered Accountants/professionals who has committed mistake in filing the tax audit report.
The ld. DR for the Revenue did not have much to say but nevertheless he relied on the penalty order passed by the Assessing Officer u/s 271B of the Act.
We have heard learned arguments on both sides, perused the material available on records and we proceed to record our view and opinion on the issue under consideration. First of all, we think that at this Rajib Dey Assessment Year: 2013-14 juncture, it is appropriate to quote the provisions of section 271B of the Income Tax Act, which read as below:
Section 271B: Failure to get accounts audited. If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under s. 44AB, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less.
We may draw the conclusion from the plain language of section 271B of the Act, mentioned above, that there can be two circumstances, where penalty can be imposed:
(1) If any person fails to get his accounts audited in respect of any previous. (2) Fails to furnish a report of such audit as required under section 44AB.
From the facts narrated above, it seems to us that assessee has fulfilled and satisfied the first circumstance, as the assessee under consideration gets the accounts audited on25.09.2013, that is, before the due date of filing audit report, which is 30.09.2013 in the assessee`s case under consideration.
So far second circumstance or condition is concerned, we note that the assessee has furnished the tax audit report manually on 08.10.2013, before the due date of filing electronically tax audit report under section 139(1) read with section 44AB of the Act. However, the manually tax audit report should have been submitted by the assessee on or before
Rajib Dey Assessment Year: 2013-14 30.09.2010 but the assessee filed it within the extended period by CBDT up to 31.10.2013. During the course of hearing, we are told by the counsel for the assessee that the assessee`s Chartered Accountant, filed the tax audit report manually on 08.10.2013 with the impression that extended period of filing tax audit report electronically would be applicable to file the tax audit report manually as well. We also note that this was the first year where the CBDT announced to file the tax audit report electronically therefore, as we are told by Counsel for the assessee, that most of the assessees were grappling with the computer system and sometimes the Computer-server of the Income Tax department did not work properly, therefore Chartered Accountants could not upload the tax audit report on the site and hence the assessee was forced to file the tax audit report manually on 08.10.2013, within the extended period by CBDT for filing tax audit report electronically. In these circumstances, we should not say that the assessee has failed to furnish the audit report U/s 139 (1) read with section 44AB of the Act, as the circumstances were beyond the control of the assessee.
We note that penalty is not mandatory under section 271B of the Act, because the word used in the said section is “may” that is,“………… the Assessing Officer may direct…..” . Therefore, u/s 271B of the Act, the legislation has used the word “may” and not “shall”. We note that if the assessee demonstrates that there was a reasonable cause for lapse for which the penalty was prescribed to be imposed then that penalty is not leviable.
We note that CBDT issued Circular to relax the requirement of furnishing tax audit report electronically which is given below for ready reference:
“CBDT in exercise of power under sec 119(2)(a) of the l. T Act, 1961 read with Sec 139 and Rule 12, has decided to relax the requirement of furnishing the Report of Audit electronically as prescribed under the proviso to sub-rule (2) of Rule 12.of the l. T Rules for the Assessment Year 2073-14 as under-
Rajib Dey Assessment Year: 2013-14 (a) The assessee, who are presently finding it difficult to upload the prescribed Reports of Audit (as referred to above) in the system electronically may also furnish the same manually before the jurisdictional Assessing Officer within the prescribed due date. (b) The said Report of Audit should however be furnished electronically on or before 31.10.2013”.
From the plain reading of the Circular of CBDT, it is understood that CBDT has extended time of uploading of audit report to 31.10.2013. Taking note of the extended period of one month, the Chartered Accountant, though accounts were audited on 25.09.2013, filed it manually on 08.10.2013, on the bona fide belief that the report being filed manually in time before 31.10.2013.Since the assessee got the audited accounts before 30.09.2013 and the income tax return has been filed in time and, therefore, there is no prejudice caused to the Revenue. The technical and venial breach on the part of Chartered Accountant of the assessee, the assessee cannot be penalized. For the aforesaid reason, we rely on the judgment of the Hon’ble Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa in 83 ITR 26(SC) wherein it was held as under:
“5. Under the Act penalty may be imposed for failure to register as a dealer: s. 9(1), r/w s. 25(1) (a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi- criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out.”
We also rely on the judgment of the Coordinate Bench of ITAT, Jaipur in the case of Smt. Raj Kumari Bafna in wherein the Coordinate Bench has taken the same view. Considering the Page | 6
Rajib Dey Assessment Year: 2013-14 above facts and position in law, we are of the view that the penalty imposed by the Assessing Officer and confirmed by the ld. CIT(A) needs to be deleted. Accordingly, we quash the penalty.
In the result, the appeal filed by the assessee is allowed.
Order is pronounced in the open court on 06/06/2018.