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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: SMT. BEENA PILLAI & SHRI WASEEM AHMED
ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal arises out of order passed by NFAC, Delhi dated 14.03.2023 for A.Y. 2017-18 on following grounds of appeal: “1. It is respectfully submitted that the order passed by the NFAC, Delhi u/s 250 of the Income Tax Act, dismissing the appeal filed against the order u/s. 271B of the Act for the asst. year 2017-18 dt. 14.03.2023 is infirm and unsustainable in law.
2. The lower authorities ought to have found that there is only a delay in getting the accounts audited due to reasonable cause and it is not a case of non-audit of accounts and as such they ought not to have Page 2 of levied/confirmed any penalty u/s. 271B of the I.T. Act, 1961.
3. The Ld. Lower authorities ought to have found that the considering the illness of the part time accountant the short delay of 4 months was due to reasonable cause and as such no penalty u/s. 271B ought to have been levied.
The lower authorities ought to have found that the purpose of audit is served as the assessment is completed u/s. 143(3) of the I.T. Act on the basis of the audit report available to the officer at the time of assessment. The Lower authorities also failed to distinguish the jurisdictional Tribunal decisions cited during the course of hearing and as such the order is infirm and unjustified in law.
5. That the appellant craves leave to add, alter, amend or vary any or all of the aforesaid grounds of appeal
at the time of hearing of the above appeal.
6. In the above facts and circumstances of the case, the petitioner most humbly prays the Hon'ble Income Tax Appellate Tribunal, Cochin Bench, may kindly be pleased to cancel the orders of the lower authorities and the consequential demand and allow the appeal and render justice.”
Brief facts of the case are as under: 2.1 The assessee individual filed his return of income for the asst. year 2017-18 on 17.04.2018 declaring a total income of Rs.8,93,170/-. This return was selected for scrutiny and the assessment completed as per order u/s. 143(3) dt. 15.11.2019 on a total income of Rs. 8,93,170/-. Proceedings u/s. 271B was initiated for the delay in filing the audit report along with the return of income. A reply dt. 02.12.2019 was filed. However the Assessing Officer levied a penalty of Rs. 1,33,665/- on the assessee vide order dt. 19.02.2020. An appeal was preferred against the said order to the National Faceless Appeal Centre on 05.06.2020. An argument note was uploaded on 19.01.2023.
Page 3 of Without properly considering and appreciating the contentions raised by the assessee in its argument note The Commissioner of Income tax Appeals, National Faceless Appeal Centre dismissed the appeal vide order No. ITBA/NFAC/S/250/2022- 23/1050729882(1) dt. 14.03.2023.
2.2 Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before this Tribunal.
The Ld.AR submitted that during the year under consideration, the accounts were audited and the audited report was obtained on 31.03.2018. He submitted that there was an accountant who was appointed part- time by the assessee and due to his illness there was some delay on his part to finalise the accounts that constituted the delay. The Ld.AR submitted that the assessee’s case is of filing the belated audited accounts and return of income as against non-audit of accounts.
4. The Ld.AR further submitted that the assessee furnished the audit reports on 17.04.2018 thereby causing about a little more than 5 months delay. He submitted that, there was a reasonable cause for the delay as the accountant was not keeping well and he took some time to finalise the accounts. The Ld.AR submitted that in the assessment proceedings u/s. 143(3), there was no addition that was made and the assessee had efiled the return of income on 30.03.2019. He thus prayed for the deletion of penalty levied u/s. 271B is there is no incidence of tax determined in the assessment order.
On the contrary, the Ld.DR relied on the orders passed by authorities below.
We have perused the submissions advanced by both sides in the light of records placed before us.
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 guilty of conduct, contumacious or dishonest, or acted in conscious disregard to its obligation. Penalty will not also be imposed merely because it is lawful to do so.
Section 273B starts with the onobstante clause and provides that notwithstanding anything contained in several provisions enumerated therein including section 271B, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision, if he proves that there was reasonable cause for the said failure. A clause beginning with ‘notwithstanding anything’ is sometimes appended to a section in the beginning with a view to give the enacting part of the section in case of conflict an overriding effect over the provision or the Act mentioned in the non obstante clause. A non obstante clause may be used as a legislative device to modify the ambit of the provision or law mentioned in the non obstante clause, or to override it in specified circumstances. The true effect of the non
Page 5 of Act mentioned in the non obstante clause, the enactment following it will have its full operation or that the provisions embraced in the non obstante clause will not be an impediment for the operation of the enactment. Therefore, to bring in the application of section 271B in the backdrop of section 273B, the absence of reasonable cause, which has to be established by the assessee, is the sine qua non.
Levy of penalty under section 271B is not automatic. Before levying a penalty, the Ld.AO must find out that even if any failure was referred to in the concerned provision, the same was without a reasonable cause. The initial burden is on the assessee to show that reasonable cause existed. Thereafter the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause. ‘Reasonable cause’ as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences will follow.
In this case, it is found that the assessee could not file the Audit report within the due date as the accountant was not well because of which the data were not ready. There is nothing contrary that has been brought on record by the Ld.DR at the time of the hearing. Further, the assessee has only committed a technical breach without any loss to the exchequer of the Government as there was no addition made by the Ld.AO during the assessment proceeding. In any event, the audit report was made available before the Ld.AO before the assessment proceeding
In our view, non-consideration of the plea raised by the assessee regarding the existence of reasonable cause, by the authorities below, vitiated the orders passed by them. On that score, the order passed by the Ld.CIT(A) is non-maintainable. Accordingly, the grounds raised by the assessee stand allowed. In the result appeal filed by the assessee stands allowed. Order pronounced in the open court on 12th July, 2024.