ARUN AGARWAL PROP. VICTOR ENTERPRISES,NEW DELHI vs. ITO, NEW DELHI

At the very outset, it is mentioned that the Department has moved adjournment applications in all the cases fixed before the Bench today.

Briefly stated, the fact of the case are that the assessee is an individual engaged in trading business. The return was filed electronically and the assessee mentioned against the column of ‘audit information’ that he was not liable for audit u/s 44AB of the Act. From the penalty order, it is seen that the AO found the turnover of the assessee at Rs.36,90,127/-. On being called upon to explain as to why penalty u/s 271B be not imposed, the assessee submitted that he filed tax audit report with the Department in time which was obtained before the due date of 30.9.2009. The AO imposed penalty of Rs.1 lac as the assessee did not file any evidence that the tax audit report was filed with the Department in time. The ld. CIT(A) echoed the penalty order.

After going through the relevant material on record, it is observed that the penalty has been imposed by the AO on the ground that the assessee did not file: “any evidence upto the completion of assessment proceedings” in support of the “claim that the copy of audit report has filed to your department.” Circular No.5/2007 discusses certain aspects concerning e-filing of returns. Para 6 deals with the filing of audit report, which states that the audit report u/s 44AB is not required to be attached with the return and it should not be furnished separately before or after the due date. The assessee should get the report of audit from the Chartered Accountant before the due date of furnishing the return and should fill up the relevant columns of these forms on the basis of such report. This para further states that the assessee should retain the report with himself and it may be furnished in original during the assessment proceedings. Penalty u/s 271B shall be attracted if the audit report has not been obtained before the due date. It transpires on going through this para that pursuant to the e-filing of the returns, it is no more required to either upload the tax audit report or file it physically with the Income- tax Department before the due date u/s 139(1) of the Act. The only 3 requirement is to obtain the audit report before the due date and furnish the same during the course of assessment proceedings.

It is manifest that the AO has imposed penalty in view of the fact that the assessee failed to file any evidence in support of its claim that copy of the audit report was filed with the Department in time. On the other hand, page 2 of the assessment order passed u/s 143(3) of the Act clearly records that the assessee has mentioned in the return that he was not liable for audit : “However, during the course of assessment proceedings, he has filed Tax Audit Report.” There is an apparent contradiction in the stand taken by the AO during the course of assessment proceedings por una parte and penalty proceedings por otra parte. When it has been clearly acknowledged in the assessment order that the assessee did file a copy of tax audit report, the objection of the AO in the penalty proceedings about the assessee not having filed any evidence in support of its contention that the audit report was filed during the assessment proceedings, does not stand anywhere. The only mistake committed by the assessee is that while e-filing the income-tax return, it inadvertently clicked a wrong column indicating that it was not required to file any audit report. When I consider the fact that the assessee submitted a copy of tax audit report during the course of assessment proceedings, it becomes manifest that clicking a wrong column while e-filing the return of income cannot be considered as fatal.

In the result, the appeal is allowed.