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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri Aby.T Varkey & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), Central-1, Kolkata dated 19.03.2014. Penalty levied by ACIT, Central Circle-IV, Kolkata u/s 271B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 21.06.2012 for assessment year 2009-10.
At the outset it was noticed that the Revenue has neither appeared before us nor moved any adjournment petition. In such situation, we decided
ITA No.1173/Kol/2014 A.Y. 2009-10 Inland World Logistics Pvt. Ltd. Vs. ACIT, CC-IV, Kol. Page 2 to proceed to adjudicate the matter after hearing Shri B.C. Jain, Ld. Authorized Representative appeared on behalf of assessee.
Only issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the penalty ₹1.50 lakh under the provision of Sec. 271[1]B of the Act.
Facts in brief are that assessee in the present case is a Private Limited Company engaged in transport business. The assessee, for the year under consideration, has declared gross turnover of ₹354,96,70,837/-. The assessee was liable to gets its account audited and to file audit report u/s. 44AB of the Act along with income tax return within due as specified u/s. 139(1) of the Act. Accordingly, Assessing Officer issued notice u/s. 271B of the Act dated 30.12.2011 seeking reasons for non-filing of tax audit report within due date. The assessee in compliance thereto submitted that software used for accounting purpose became obsolete and therefore new software was installed. As a result, assessee could not comply with the provision of Sec. 44AB of the Act. However, AO disregarded the plea of assessee by observing that assessee-company is a very old company and it should have taken necessary steps to replace its old software well in advance in order to avoid delay of filing tax audit report u/s. 44AB of the Act. Accordingly, AO imposed penalty of ₹ 1.50 lakh u/s 271(1)B of the Act. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the order of AO by observing as under:- “3. Ground no 1 relates to the levy of penalty u/s. 271B. The AO found that the gross turnover of the assessee during the relevant year exceeded the prescribed limit for audit u/s. 44AB. The assessee was therefore liable to get its accounts audited as per the provisions of section 44AB and submit the tax audit report within the due date as prescribed u/s. 139(1). As there was failure on the part of the assessee to get it accounts audited and submit the tax audit report, the AO initiated penalty proceedings u/s. 271B. The assessee submitted before the AO that the audit report could not be obtained due to change in relation to the software of its computers. The AO rejected the argument; and then, levied penalty of Rs1,50,000/-. The Ld AR appeared for the assessee and reiterated the submissions, it is an admitted fact that the tax
ITA No.1173/Kol/2014 A.Y. 2009-10 Inland World Logistics Pvt. Ltd. Vs. ACIT, CC-IV, Kol. Page 3 audit report was obtained by the assessee on 19-08-2010 whereas the due date was 29-09-009. I do not find merit in the argument that there was reasonable cause for the delay. I agree with the AO that the assessee is an old company which was fully aware about the provisions of law. If the software was to be changed, the assessee should have taken necessary steps in advance. The judicial decisions cited by the Ld AR are not applicable in the case of the assessee. The penalty order of the AO is upheld. Ground no 1 s dismissed. Ground no 2 is general in nature.”
Aggrieved by this, assessee has come up in appeal before us. 6. Ld. AR for the assessee before us submitted that delay occurred due to change of outdated software which was based on DOS. As software based on DOS became obsolete due to continuous advancement of technology. Therefore, the new software was developed by assessee. As a result, lot of time has gone in converting the old date into new system and simultaneous managing within new software. He requested the Bench to decide the issue on merit. 7. We have gone through the submissions made by ld. AR and orders of the lower authorities as well as the judgments relied upon before us. Put shortly, the facts necessary for adjudication of the present appeal as narrated therein are that the assessee was required to obtain the tax audit report for the year under consideration dated 29th September 2009 but the same was obtained dated 19 August 2010. The delay in obtaining the tax audit report was occurred for almost for 10 months. The assessee explained the reason for the delay due to change of old software which became obsolete and outdated with that of new software.
However the AO disregarded the plea of the assessee by observing that it should have taken the necessary steps for the change of software well in advance. The assessee is an old company and was conscious to the fact of getting the accounts audited under section 44AB of the Act. The learned CIT(A) also confirmed the order of AO.
It is a settled principle of law that the penalty as a specified under section 271B of the Act is neither mandatory nor automatic but discretionary in nature.
ITA No.1173/Kol/2014 A.Y. 2009-10 Inland World Logistics Pvt. Ltd. Vs. ACIT, CC-IV, Kol. Page 4 The use of expression may in section 271B of the Act confers discretion on the Assessing Officer to impose penalty for the breach of section 44AB of the Act. Admittedly the compliance of section 44AB of the Act is mandatory for the assessee and its non-compliance within time attracts the rigor provisions of section 271B of the Act. However the AO is vested with the discretion to condone the non-compliance and relieve the assessee from the payment of penalty amount provided he is satisfied that there was reasonable cause which prevented the assessee to file tax audit report in time. Now the rigmarole of the issue is the interpretation of reasonable cause which needs to be checked in each and every case independently. In the instant case the assessee has explained the reasonable cause for the delay of getting the tax audit report is due to the changes of software. Indeed the technology is changing very rapidly nowadays and to keep the pace with the changed technologically it is really necessary to use the upgraded software. However the ld. AR has not produced any evidence whatsoever as proof of the averments. If pleadings are to be accepted on face value, then it will have disastrous results, insofar as persons with imagination would come up with many such explanations. Unless the same is proved through some evidence, it cannot be accepted on face value. Even otherwise, what the ld. AR has stated is that the delay occurred due to changed in the technology. But the assessee at the same is an old assessee and was conscious to the consequences of the failure of tax audit as specified under section 44AB of the Act viz-a-viz the provisions of section 271B of the Act. The ld. AR cannot simply evade responsibility by saying so. It was the duty of the assessee to ensure and to keep the upgraded technology. Moreover we also find that the turnover (Rs.354,96,70,837.00) of the assessee is substantial enough and accordingly the assessee cannot take the risk for maintaining the necessary data in old software in parallel. The delay in this case is almost for ten months. Similarly the case laws relied by the learned AR for not supporting to the facts of the case. Therefore we are not satisfied that the decisions relied on by the learned counsel for the assessee lay down any law to the contrary in
ITA No.1173/Kol/2014 A.Y. 2009-10 Inland World Logistics Pvt. Ltd. Vs. ACIT, CC-IV, Kol. Page 5 these facts & circumstances. Therefore, we are not inclined to interfere with the impugned orders and accordingly the appeal filed by the assessee is dismissed. 8. In the result, assessee’s appeal stands dismissed. Order pronounced in the open court 23/02/2017 Sd/- Sd/- (Aby. T. Varkey) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- 23/02/2017 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-Inland World Logistics Pvt. Ltd. P-221/2 Strand Bank Road, Kol-001 2. ��यथ�/Respondent-ACIT, Central Circle-IV, Aykar Poorva, Kolkata 3. संबं�धत आयकर आयु�त / Concerned CIT Kolkata 4. आयकर आयु�त- अपील / CIT (A) Kolkata 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता ।