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Facts
The assessee, an educational trust, filed its return of income for AY 2011-12. The Assessing Officer (AO) completed the assessment with additions for anonymous donations, as the assessee was not granted registration u/s 12AA. Subsequently, the AO levied a penalty of Rs 1,50,000 under section 271B for failure to get accounts audited.
Held
The Tribunal held that the penalty should not be levied. The assessee, being a trust, acted under a bonafide belief that it was not required to get its accounts audited under section 44AB. The default was without malafide intentions or wanton act, constituting a reasonable cause.
Key Issues
Whether the penalty under section 271B for failure to obtain a tax audit report is sustainable when the assessee had a bonafide belief that such audit was not required, and this constitutes a reasonable cause.
Sections Cited
271B, 250, 147, 263, 143(3), 12A(b), 148, 2(13), 44AB, 273B, 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
O R D E R
PER PAVAN KUMAR GADALE JM:
The appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC) – Delhi / CIT(A) u/s 271B and 250 of the Act. The assessee has raised the following grounds of appeal:
1. The Officer at National Faceless Appeal Centre (hereinafter referred to as the CIT(A)) erred in upholding the action of the Deputy Commissioner of Income-tax (Exemption), Circle -2, Mumbai (hereinafter referred to as the Assessing Officer) in framing the impugned order levying penalty of Rs 1,50,000 under section 271B of the Act.
The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the Assessing Officer in framing the impugned penalty order without appreciating that as per the faceless penalty scheme, the jurisdiction to frame an order levying penalty is with the National Faceless Assessment Centre and not the Assessing Officer.
The CIT(A) erred in upholding the action of the Assessing Officer in levying penalty Rs 1,50,000 under section 271B pursuant to the assessment order dated 22.03.2022 passed under section 147 r.w.s. 263 of the Act which is framed pursuant to the order passed by the CIT(E) under section 263 of the Act dated 22.03.2021.
The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer inasmuch as the Honourable Tribunal per their order dated 15.12.2022 have quashed the order of the CIT(E) which is the genesis to pass the assessment order dated 22.03.2022 under section 147 r.w.s. 263 of the Act, during the course of which the penalty proceedings to levy penalty under section 271B have been initiated.
The appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in levying the impugned penalty inasmuch as the action of the Assessing Officer in levying the impugned penalty is beyond the directions issued by the CIT(E) pursuant to the order passed under section 263 of the Act dated 22.03.2021.
The appellants further, contend that on the facts and in the circumstances of the case and in law, the impugned penalty order framed is barred by limitation inasmuch as, the Assessing Officer had already framed an order dated 14.12.2018 under section 143(3) r.w.s. 147 of the Act, wherein he did not initiate any penalty under section 271B of the Act.
The CIT(A) erred in upholding the action of the Assessing Officer in levying penalty of Rs 1,50,000 under section 271B of the Act.
The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have confirmed the action of the Assessing Officer in levying the impugned penalty under section 271B of the Act inasmuch as the CIT(A) failed to appreciate that the appellants are not engaged in any business activity within the meaning of section 2(13) and as such, is not required to get the books of account audited under section 44AB of the Act.
The appellants further, contend that the CIT(A) failed to appreciate that there is reasonable cause within the meaning of section 273B of the Act inasmuch as the appellants being a charitable trust, though not a registered charitable trust, were under a bona fide belief that the they are required to get their accounts audited and obtain the audit report under section 12A(b), which was done, and the audit report was filed with the Assessing Officer during the course of assessment proceedings pursuant to the notice dated 26.03.2018 issued under section 148 of the Act. The appellants crave leave to add to, alter or amend the aforestated grounds of appeal
2. The brief facts of the case are that, the assessee is an educational trust registered under societies registration Act of Maharashtra. The assessee has filed the return of income for the A.Y 2011-12 on 30.03.2018 disclosing total loss of Rs.5,30,22,672/.- The assessing Officer (AO) in the course of assessment proceedings found that the assessee was not granted the registration u/s 12AA of the Act and therefore assessment was completed with addition of anonymous donations of Rs.5,52,04,903/- received in cash and total income was determined at Rs. 21,82,230/- and the order was passed u/sec 143(3) r.w.s 147 of the Act dated 14.12.2018. Subsequently the Pr.CIT on perusal of the records and information found that the order passed by the AO is erroneous and prejudicial to the interest of revenue and passed revision order u/sec 263 of the Act dated 22-03-2021. Further as per the directions issued in the revision order U/sec263 of the act, the A.O has assessed the total income of Rs,5,52,04,903/- and passed the order u/sec 147 r.w.s 263 r.w.s 144B of the Act dated 31.03.2022.
3. Whereas the assessee has filed an appeal against the order u/sec 263 of the Act and the Hon’ble Tribunal has set aside the order of the Pr.CIT vide order dated 15.12.2022. Meanwhile the Assessing officer subsequent to the passing of order u/sec 147 r.w.s 263 r.w.s 144B of the Act dated 31.03.2022 has initiated penalty proceedings u/sec 271B of the Act as the assessee has failed to get the books of accounts audited as the recipts exceeds prescribed limit under the provisions of Sec. 44AB of the Act and has issued notice u/sec 274 r.w.s 271B of the Act dated 31.03.2022. The A.O has dealt on the facts, information of the scrutiny assessment and in spite of issuing the penalty notices on various dates there was no proper compliances and the reasonable cause was not explained and finally the AO has levied a penalty of Rs.1,50,000/- and passed the order u/s 271B of the Act. Dated 29-09-2022.
Aggrieved by the penalty order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the penalty proceedings but has confirmed the levy of penalty and dismissed the assessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal.
5. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the levy of penalty as the assessee being a trust and was under the bonafide belief that the assessee’s is not required to get books of accounts audited u/sec 44AB of the Act. Further the Ld.AR mentioned that it is not a wanton act and the reasonable cause was explained and contended that in the original assessment order u/sec 143(3) of the Act, no penalty was initiated u/sec 271B of the Act and whereas the A.O has initiated penalty proceedings in the consequential order passed u/sec 147 r.w.s 263 r.w.s 144B of the Act dated 31.03.2022. Further the CIT(A) has erred in not accepting the facts that the Hon’ble Tribunal has set aside the order U/sec263 of the Pr.CIT vide order dated 15.12.2022 which is the genesis/ basis to pass the assessment order u/sec 147 r.w.s 263 r.w.s 144B of the Act dated 31.03.2022 and the Ld.AR supported the submissions with the judicial decisions and factual paper book and prayed for allowing the appeal. Per Contra, the Ld. DR submitted that the penalty proceedings are separate and the A.O has correctly initiated the penalty proceedings in the order u/sec 147 r.w.s 263 r.w.s 144B of the Act and the Ld.DR supported the order of the CIT(A).
We heard the rival submissions and perused the material on record. The sole matrix of the disputed issue that the CIT(A) has erred in confirming the Levy of penalty U/sec 271B of the Act. The Ld.AR contentions are that the penalty should not be levied as there was a bonafide belief that the assessee’s is not required to get books of accounts audited u/sec 44AB of the Act. Further the Ld.AR mentioned that it is not a wanton act and the reasonable cause was explained in the appellate proceedings and also the fact that the asssesssee is a trust and was not engaged in the business activities. The levy of penalty is always a discretionary and not automatic and the revenue authorities has to consider the facts and circumstances of the case, that the Hon’ble Tribunal has set aside the order u/sec263 of the Pr.CIT vide order dated 15.12.2022 which is the genesis/ basis to pass the assessment order u/sec 147 r.w.s 263 r.w.s 144B of the Act dated 31.03.2022 and in the original assessment order u/sec 143(3) r.w.s147 of the Act, no penalty was initiated u/sec 271B of the Act and whereas the A.O has initiated penalty proceedings in the consequential order passed u/sec 147 r.w.s 263 r.w.s 144B of the Act.The Honlbe Tribunal in ITA.No.1284/Mum/2021 dated 15-12-2022 has quashed the order U/sec263 of the Act and hence any subsequent proceedings where the genesis being the Revision order U/sec263 of the Act become non operative. The Ld.AR demonstrated the copy of penalty notice dated 31-03-2012, where the A.O. has not applied his mind and non striking of charge in the penalty notice i.e. whether the charge is for failed to get accounts audited or failed to furnishing the audit report u/sec44AB of the Act. When the query was raised to the Ld. DR, why the penalty proceedings are not initiated in the original proceedings U/sec 143(3) r.w.s147 of the Act, the submissions are not satisfactory. We considering the facts and circumstances find that the asssessee being a trust and was under bonafide belief that there is no obligation of Tax Audit under section 44AB of the Act and same constitute a reasonable cause for not getting the books of accounts audited U/sec44AB of the Act and the default committed in not getting the Audit report is without any malafide intentions or any wanton act on the part of the asssessee. Accordingly, we set aside the order of the CIT(A) and direct the Assessing officer to delete the penalty and allow the grounds of appeal in favour of the assesse.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 01.03.2024.