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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Sanjay Arora, AM & Shri Manomohan Das, JM
O R D E R
Per Sanjay Arora, AM:
This is an Appeal by Assessee directed against the confirmation of penalty levied under section 271B of the Income Tax Act, 1961 (‘the Act’) dated 11.01.2022 for Assessment Year (AY) 2017-18 by the Commissioner of Income Tax (Appeals), Income Tax Department (‘CIT(A)’), vide it’s order dated 24.8.2022.
The brief facts of the case are that assessment of income of the assessee- company for the relevant year was completed u/s. 143(3) of the Act on 30.12.2019, noticing the non-furnishing of the Audit Reports u/s. 44AB of the Act within the prescribed time. In the penalty proceedings, the assessee’s explanation for the delayed conduct and furnishing the said reports, both of which were on 30.01.2018, as against the due date, being the date specified for filing the return u/s. 139(1) for the relevant year, i.e., 07.11.2017 (as extended), among others, was the health issues being faced by it’s Auditor, Sh. Vijayakrishnan R. Nair, the assessee’s learned counsel before us, who met with an accident in August, 2017. This, however, did not (AY 2017-18) Oriental Metals India P. Ltd. v. Dy. CIT find favour with the assessing as well as the first appellate authority inasmuch as no evidence to show any attempt, much less serious, having been made by the assessee to change it’s Auditor, had been produced. Reliance stands placed by Revenue on the decisions in Metro Agencies v. Dy. CIT [2014) 45 taxmann.com 97 (Ker); Khuda Wood Products (P.) Ltd. v. CIT [2008] 172 taxmann.com 49 (Gau), besides by the Tribunal in Paragon Inds. v. ITO [2012] 19 taxmann.com 273 (Chny).
Before us, the assessee reiterated it’s stands with reference to the medical certificate dated 21.11.2023 by Dr. M. Rajasekhar, the surgeon who operated Shri Nair on 03/10/2017, and an affidavit of even date by the latter. Smt. Devi, the ld. Sr. D.R., would, on the other hand, rely on the orders by the Revenue authorities.
We have heard the parties, and perused the material on record. 4.1 The default u/s. 44AB being admitted, the only saving from penalty u/s. 271B of the Act would be, in terms of s. 273B, on proving ‘reasonable cause’, a term judicially well-defined, as in CWT v. Sri Jagdish Prasad Chaudhary [1995] 211 ITR 472 (Pat)(FB). A reasonable cause is almost invariably, as in the instant case, a matter of fact, which is to be therefore judicially determined in the conspectus of the case. Reliance on precedents, inasmuch as it is only the ratio decidendi, i.e., the principle or the statement of law laid down, which has precedent value and is binding, may therefore not be of much relevance. The ratio of the decisions relied upon, as we discern, is that the penalty u/s. 271B of the Act cannot be regarded as a technical breach, so that furnishing the audit reports u/s. 44AB during the course of assessment proceedings would not by itself constitute a reasonable cause. This is only understandable as the same, i.e., ‘reasonable cause’, is toward explaining the delay in furnishing the report/s, and not the consequence of delayed filing, even as explained by this Bench of the Tribunal in several orders, as in The Mannarakkad Rural SCB Ltd. v. ITO (in ITA 871/Coch/2022, dtd. 14/11/2023). Reliance on the cited decisions, with which we are in agreement in principle, would therefore be of little moment. 2
(AY 2017-18) Oriental Metals India P. Ltd. v. Dy. CIT 4.2 In the facts of the instant case, Shri Nair tore the ligament of his right knee in August, 2017, which was diagnosed as complete ACL tear, and advised reconstruction surgery, requiring total rest for a month prior thereto. Post-surgery, he was advised a 3-month rest, and post-operative physiotherapy. The return of income, stated as having been filed on 08.11.2017, Shri Nair, on being questioned by the Bench as how was the return filed without the audit being completed, would explain that the ground work for the same was underway and completed in time, and what remain was a scrutiny thereof by him.
4.3 The medical certificate and the affidavit afore-referred, placed on record by the assessee in substantiation of it’s case, have not been rebutted by the Revenue in any manner, though countered by stating that the assessee could have changed it’s Auditor and qua which no attempts had been shown to be made. There is no question of any evidence toward an effort for change of Auditor in the absence of the assessee stating, at any stage, to have considered or contemplated changing it’s Auditor. The change in Auditor is, firstly, a management decision and, secondly, is not a readily substitutable commodity. Why, the Auditor would be so for several years, over which he would have developed a sound understanding of the assessee’s business and it’s accounts. In our opinion there is, therefore, a reasonable cause for the 53-day delay in furnishing the audit reports u/s. 44AB, and which were so before the filing of the revised return on 16.11.2018 and the issue of notice u/s. 143(2) on 28.8.2018.