PRAKASH H MUTHA,THANE vs. DCIT CEN CIR 1, THANE

Date of hearing 09-11-2017 Date of pronouncement 22-11-2017 O R D E R

Per G Manjunatha, AM :

and seized. The assessee has filed return of income for the assessment year 2007-08 on 30-12-2008 declaring total income at Rs.46,31,570. During the course of assessment proceedings, the AO observed that due date for furnishing return of income for the assessment year 2007-08 was on 31-10- 2007 whereas the assessee has filed return of income on 31-12-2008. The AO further observed that the gross sales / turnover of the assessee for the relevant assessment year was Rs.2,36,55,192 and accordingly he was required to obtain and furnish tax audit report u/s 44AB of the Income-tax Act, 1961 alongwith the return of income on or before due date for filing the return.

Since the assessee has filed return of income on 30-12-2008, the AO issued show cause notice and asked as to why penalty u/s 271B of the Act should not be levied for failure to file audit report u/s 44AB within the due date of filing the return of income. In response to show cause notice, the assessee submitted that due to seizure of voluminous information, the assessee was to get copies of the documents seized from the department so as to produce them before auditor for compilation and verification. The assessee further submitted that he could get the copies of the seized documents and CD seized during the course of search only on 24-06-2008 which is evident from the fact that the department has drawn last panchanama after analysis of CD on 24- 06-2008. He has collected all the documents and furnished them to the Auditor, who had issued audit report on 14-07-2008. The assessee further submitted that he got tax audit report on 14-07-2008 because of ill health of his tax consultant, who is different from the Auditor, who carried out the audit work, could file return of income only on 30-12-2008 alongwith tax audit report. Therefore, there is a reasonable cause for not filing the audit report within the time allowed under the Act and hence, penalty u/s 271B cannot be levied. The AO did not convince with the explanation of the assessee and levied penalty of Rs.1 lakh u/s 271B for failure to file tax audit report within the time allowed under the Act.

Before CIT(A), assessee reiterated its submissions made before the AO.

Assessee further submitted that failure to obtain tax audit report and furnish the same within due date allowed under the Act was unintentional and beyond his control because of seizure of various incriminating materials at the time of search pertaining to AY 2007-08, which he could be able to get only in May, 2007. Thereafter, he has furnished copies of seized materials to be auditor.

Therefore, there is a reasonable cause for not filing the tax audit report within the time allowed under the Act and, therefore, the AO was incorrect in levying penalty u/s 271B. The CIT(A), after considering the submissions of the assessee observed that the assessee has not been able to explain with 44AB from 1-10-2007 to 14-10-2008. Therefore, he opined that there was no reasonable cause for not obtaining the tax audit report on or before 31-10-2007. With these observations, the CIT(A) upheld penalty levied by the AO u/s 271B of the Act. Aggrieved by the order of C IT(A), the assessee is in appeal before us.

The tax auditor, after considering the contents of seized material and CD has issued tax audit report on 14-07-2008 and thereafter he had furnished return of income on 3-12-2008. Though there is a gap of almost 4 to 5 months from the date of tax audit report to furnishing of return of income, the tax consultant, who had taken up the work of filing return of income was ill during the period because of which he could not file the return of income immediately, after obtaining tax audit report. The Ld.AR referring to the paper book submitted all correspondence between the department and other evidences to justify his arguments. On the other hand, the Ld.DR strongly

CIT(A) submitted that the assessee failed to explain reasons for not obtaining tax audit report within the time with cogent reasons.

Therefore, the AO was right in levying penalty u/s 271B and his order should be upheld. 5. We have heard both the parties and perused material available on record.

The fact with regard to the seizure of voluminous information pertaining to AY 2007-08 is not disputed by the lower authorities. The assessee has collected copies of seized materials only in the month of May, 2007. It is also an admitted fact that the contents of CD seized during the course of search was extracted and panchanama was drawn on 24-06-2008, a copy of which is enclosed in the paper book at page 51. The due date of filing tax audit report for the assessment year 2007-08 was on 31-10-2007. The assessee has obtained tax audit report on 14-07-2008. The assessee has explained the reasons for not obtaining tax audit report within the time allowed under the Act. According to the assessee, the tax audit auditor refused to issue tax audit report unless seized documents pertaining to AY 2007-08 contained in CD was not furnished for verification. The copies of seized documents and contents of CD was handed over to the assessee on 24-06-2008. The assessee has obtained tax audit report immediately after getting copies of seized papers and contents of CD. Therefore, we are of the view that there is a reasonable cause

Act. The explanations offered by the assessee appears to be bona fide and there is no mala fide intention for not obtaining the audit report within the time allowed under the Act. Therefore, we are of the view that the AO was erred in levying penalty u/s 271B of the Income-tax Act, 1961. The CIT(A) without appreciating the facts has confirmed penalty levied by the AO. Hence, we set aside the order passed by the CIT(A) confirming levy of penalty and direct AO to delete penalty levied u/s 271B of the Act, 1961.