M.R. ASSOCIATES,MUMBAI vs. ITO 25(2)(4), MUMBAI

We have heard the parties and perused the record. The assessee is a civil contractor. The assessee filed its return of income for the year under consideration on 2.2.2009 declaring total income at ` 18.44 lakhs. During the course of assessment proceedings, the Assessing Officer noticed that the total turnover of the assessee stood at ` 1.61 crores and hence the assessee was required to get its books of account audited before stipulated time u/s 44AB of the Act. He noticed that the assessee has filed the return of income beyond the stipulated time. Accordingly the AO took the view that the assessee has committed default in terms of sec. 44AB of the Act and accordingly initiated penalty proceedings u/s. 271B of the Act. The assessee submitted before the 2 M/s. M.R. Associates AO that, as per the Circular No. 5/2007 issued by CBDT, filing of audit report along with return of income has been done away with. It was further submitted that the return of income was filed electronically, wherein the details of auditor as well as the date of audit report was duly mentioned. Accordingly, it was submitted that the audit report was obtained by the assessee within due date prescribed u/s 44AB of the Act. However, the Assessing Officer took the view that the assessee would have filed the return of income within due date prescribed u/s 139(1) of the Act, had he obtained the audit report within due date prescribed under sec. 44AB of the Act. Accordingly he inferred that the assessee has not obtained the audit report within the due date. The Assessing Officer further strengthened his view by observing that the audit report does not mention date anywhere. Accordingly, he took the view that the assessee did not get audit report within due date prescribed u/s. 44AB of the Act and accordingly levied penalty of ` 80,529/- u/s. 271B of the Act.

Learned CIT(A) did not agree with the Assessing Officer that belated filing of return would give rise to a presumption that the audit report was not obtained in time. However, since the audit report submitted by the assessee did not carry date of audit, the learned CIT(A) took the view that the same casts a doubt on the claim of the assessee. Accordingly, he agreed with the AO that the assessee has not got his accounts audited within the prescribed time limit and accordingly confirmed the penalty levied by the Assessing Officer u/s 271B of the Act.

We have heard the parties and perused the record. It is an admitted fact the assessee has furnished audit report before the Assessing Officer during the course of assessment proceedings. It is also an undisputed fact that date of audit report and details of auditor have been duly mentioned in the return of income filed electronically by the assessee. We have noticed earlier that the Ld CIT(A) has confirmed the penalty only for the reason that the audit report did not mention the date of audit and hence the assessee would not have got the 3 M/s. M.R. Associates accounts audited by the prescribed date. We notice that the tax authorities have come to such a conclusion purely on presumptions and neither the Assessing Officer nor learned CIT(A) chose to seek clarification or to examine the concerned auditor to find out the facts relating to the same. The omission, in any, to mention the date in the audit report may be an inadvertent omission or laxity on the part of the auditor and, in our view, the same cannot be used to take adverse view against the assessee. On the contrary, the relevant details were given by the assessee in the return of income filed by him u/s 139(4) of the Act. Under these set of facts, we are of the view that there is no material to support the presumption entertained by the tax authorities that the assessee did not obtain audit report within due date prescribed in section 44AB of the Act. Accordingly, we do not agree with the conclusion reached by learned CIT(A). Accordingly, we set aside the order of learned CIT(A) and direct the Assessing Officer to delete the penalty levied u/s. 271B of the Act for the year under consideration.

In the result, appeal filed by the assessee is allowed.