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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-6, Chennai in 15 dated 11.03.2016.
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M/s. Gee Gee Steels & Alloys Pvt. Ltd., the assessee, filed return for assessment year 2013-14 on 29.09.2013 admitting a total income of Rs. 12,05,350/-. Its total turnover was Rs. 3,57,01,185/-. As it exceeded Rs. 1 crores, the assessee ought to have filed tax audit report as mandated u/s. 44AB of the Act. Since, the same was not done, the AO issued a show cause notice u/s. 271B. The assessee submitted that though the tax audit report and Form 3CD dated 21.08.2013 duly singed by the statutory auditor and it had the same, it did not know the new requirement of filing the tax audit report mandatorily online w.e.f. assessment year 2013-14. Further, when the assessee tried to upload the tax audit report after receiving the show cause notice u/s. 271B, the IT filing return site did not permit uploading. So, the assessee enclosed the hard copy of tax audit report. Further, stated that the failure was due to ignorance of new requirement of filing the tax audit report online and requested to drop the penalty proceedings u/s. 271B. It also relied on the case laws reported in Hindustan Steel Ltd Vs State of Orissa 83 ITR 26 (SC) and CIT Vs SS Banga 153 Taxmann.313 (P&H). The DCIT, Corporate Circle -2(1), Chennai, inter alia, held that the assessee is advised by professionals in its tax matters. The assessee could have filed the tax audit report manually vide Board’s notification in F.No.
255/117/2013/ITA.II dated 26.09.2013 in case of difficulties in filing the same online. Thus, the AO found that the assessee without reasonable cause failed to file the tax audit report and hence levied penalty of Rs. One lakh and Fifty thousand. Aggrieved, the assessee filed an appeal before the CIT(A)-6, Chennai The CIT(A), inter alia, relying on this Tribunal decision in the case of Paragon
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Aggrieved, the assessee filed this appeal with the following grounds “2. The Ld. CIT(A) failed to consider that omission to file audit report before the prescribed date is in the nature of a technical or venial breach of law not warranting levy of penalty.
The Ld CIT(A) erred in being very harsh in interpretation of the words ‘reasonable cause which would have been interpreted liberally so as to advance the cause of justice and harsh legalistic approach should have been avoided by soft practical approach in applying penal provisions’.
The Ld CIT(A) failed to consider that the appellant company had always filed the Return of income and the tax audit reports before the prescribed date in all the 17 years since the incorporation of the Company in the year 1995-96, and he omission had occurred only in the year 2012-13, the first year of change introducing the online filing of Tax audit reports. The hard copy of the reports in Form No. 3CA dated 21.08.2013 and Form 3CD was filed before the Assessing Officer along with the reply to penalty notice u/s. 271B.”
The AR submitted that this is the first year in which there was a change in the procedure for filing return from manually to electronic filing and sections 139C and 139D were brought by the Finance Act, 2007 w.e.f. 01.06.2006. He sought our attention to the paper book wherein a copy of the CBDT notification No. 42/2013/F.No. 142/5/13 TPL dated 11.06.2016 was available, in which the audit report required to be filed u/s. 44AB was also notified to be furnished electronically w.e.f. 01.04.2013. The AR pleaded that such change in law was :-4-: I.T.A. N0. 1448/Mds/2016 not noticed by the assessee, although, it complied filing of its return and audit report in all the 17 years, since its incorporation 1995-96, without delay. The AR sought our attention to the provisions of section 139(9) and explanation, the relevant portion which is extracted as under:
“(9) Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, them, notwithstanding anything contained in any other provisions of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return:
Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.
Explanation – For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely:- (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (aa) . . . . . . . . . . . . . . . . (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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(bb) the return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report;]”
From the above, the AR submitted that it is clear that the assessee’s return is defective u/s. 139(9) for the reason that the return was not accompanied by the report of the audit referred to in the section of 44AB. Had the AO invoked the above provision and informed the assessee, it could have enabled the assessee to rectify the defect. Instead of invoking this provisions, the Assessing Officer wrongly invoked the penalty provisions and levied penalty. He sought our attention to the communication reference no. CPC/13-14/c31/100024418707 dated 28.10.2014 which is a letter from the department on the subject “response to the defective notice issued u/s. 139(9) for PAN AAACG3007G, AY 2013-Reminder”, wherein, the defect notified to the assessee were (1) pay the taxes due and file the corrected return u/s. 139(9) and (2) if you have already paid taxed then fie a corrected return u/s. 139(9) only. Thus, the AR submitted that the assessee was not notified for furnishing the impugned audit report at all.
In the assessee’s case, but for the proceedings u/s. 143(1) no other proceedings are initiated except the impugned levy of penalty. Thus, the AR pleaded that on the facts and circumstances, the correct action should have been notification of the defect and curing the same. Instead, the AO initiated penalty proceedings and levied the penalty. The CIT(A) without considering the merits of its past conduct, its plea etc, upheld the levy of penalty. Per contra, the DR relied on the CIT(A) order.
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We heard the rival submissions and find merit in the submissions made by the AR. It is clear from the provisions of sub section 9 of section 139, where, the assessee’s return is not accompanied by the report of audit referred to section 44AB, the AO should have considered such a return as a defective one ought to have given an opportunity to the assessee to rectify the defect in accordance with section 139(9). He has not done so. The facts and circumstances of this case indicate that this was a curable one as per the ratio laid by the High Court of Allahabad in the case of CIT Meerut Vs Medicare P Ltd 41 Taxmann.com 89 (Allahabad). However, the assessee was not given an opportunity to cure it further, the return filed is also accepted. On such facts and circumstances the penalty levied is not justifiable and hence it is deleted.
In the result, the assessee’s appeal is allowed.
Order pronounced on Wednesday, the 14th day of June, 2017 at Chennai.