GRAMIN SEWA SAHAKARI SAMITI MARYADIT, ARANG,RAIPUR vs. INCOME TAX OFFICER, WARD-1(2), RAIPUR, RAIPUR

आदेश / O R D E R Per Arun Khodpia, AM :

Date of the Date of the SL. Assessee’s order of the order of the Remarks No. Name Ld. CIT(A) Ld. AO 1 209/RPR/2023 21.03.2023 11.09.2015 Penalty M/s.Gramin levied 2 210 /RPR/2023 31.02.2023 09.09.2015 Sewa u/s.271B 3 111/RPR/2023 28.04.2023 09.09.2015 Sahakari 2012-13 of the Act 4 112/RPR/2022 37.01.2022 09.09.2015 Samiti Maryadit

1. That the Ld. CIT (Appeals) NFAC, Delhi erred in confirming Rs 1 the penalty levied u/s 271B by the Ld. Assessing officer at Rs.1,50,000/- Prayed that there is no delay on the part of the Appellant. The Statutory auditor was not appointed timely by the Registrar of Cooperative Society which was not in the hands of the appellant. only after completion of statutory audit tax audit was done. There is reasonable cause u/s 271B for delay, therefore the penalty levied kindly be cancelled. 2 That the Appellant is functioning in a remote small village at sakri. The Notices fixation by the Ld. CIT (Appeals), NFAC Delhi did not come to the knowledge of the Appellant and therefore, proceeding could not be attended.

4. The brief facts of the case are that the assessee is a Primary Agricultural Co-operative Society engaged in carrying out business of banking, paddy procurement, sale of fertilizers, seeds, manures, and pesticides and of control items under Public Distribution System. During the course of assessment proceedings, it was noticed that the assessee has failed to get its accounts audited within the specified due date i.e. 30.09.2012. Audit was done in the case on 30.03.2013 i.e. after the due date stipulated u/s 44AB of the Act. Thus, the AO observed that the assessee had committed default within the meaning of sec.44AB of the Act. Accordingly, penalty proceedings u/s 271B was 4 to 212/RPR/2023 initiated. Notice u/s.271B of the Act, was issued to show cause ‘as to why penalty should not be imposed’. In response the assessee submitted that the assessee is a cooperative society governed by provisions of the Chhatisgarh Cooperative Act 1965. Audit of society is conducted by the Auditor appointed by the Registrar of Cooperative Societies u/s 68 of the Chhatisgarh Cooperative Act 1965. As the Auditor has not completed audited the accounts of the assessee within the specified due date as prescribed u/s 44AB, the assessee was not in a position to comply with the provisions of section 44AB.

5. The aforesaid response of the assessee was not found, convincing and acceptable by the Ld.AO, therefore, after noting the satisfaction, penalty u/s.271B of the Act, was levied for Rs.1,11,145/- i.e. (i) ½ percent of gross-receipts of the business of the assessee’s society which was Rs.1,11,145/- ( ½ percent of Rs.2,22,29,099/- ) or (ii) Rs.1,50,000/- whichever is less. Aggrieved with the penalty imposed by the Ld.AO, alleging that there was no reasonable cause in delaying the completion of audit u/s.44AB of the Act, assessee preferred an appeal before the Ld.CIT(A), NFAC. But the contentions of the assessee were not found satisfactory, accordingly disregarding the same the appeal of assessee was dismissed by the Ld.CIT(A) by sustaining the levy of penalty u/s 271B.

7. At the beginning of the hearing, it was pointed out by the Registry that the appeal of the assessee is delayed by 10 days, for which, an affidavit was submitted by Shri Santosh Sahoo, Manager of the Co- operative Society, stating that the assessee’s society is situated in a remote village viz., Arang having population of about 8000, the assessee is a Primary Agricultural Co-operative Society and he is working of benefit of farmers and also providing items to Below Poverty Line (BPL) people. The assessee is not well versed with electronic medium, have tried to contact his Counsel in the matter also due to involvement of society people for procuring paddy from farmers as per policy of the State Government, necessary action could not be taken in due time, it was, therefore, prayer that the delay in filing of the appeal may kindly be condoned. In view of the submissions of the assessee with regard to delay in filing of the appeal, we find that there were reasonable and sufficient cause, whereby the assessee was prevented to file its appeals in the prescribed time. Therefore, we find it appropriate to condone the delay. Accordingly, having similar facts and circumstances 210 & 212/RPR/2023 having delay of 9, 58, 62 days are permitted to be allowed for adjudication by granting of condonation of delay.

8 to 212/RPR/2023 11. On perusal of the written submissions of the assessee, and the submissions of the Ld. Sr. DR, who have vehemently supported the orders of authorities below. It is noticed that the issue raised in the present case pertaining to leaving of penalty u/s 271B for not getting the accounts of the society audited within the prescribed time period was discussed and dealt with by the Co-ordinate Bench of this Tribunal in the case of another group assessee of the present appellants i.e. M/s Gramin Sewa Sahakari Samiti Maryadit, in ITA No. 108/RPR/2023, wherein the observation of the ITAT are as under:

“12. The Ld. DR, on the other hand, submitted that since the assessee was non-compliant before the Ld.CIT(A), the appeal of the assessee should be dismissed on this count itself or alternatively, the issues in the present appeal needs to be restored back to the file of the Ld.CIT(A) for fresh adjudication of the same on merits.

9 to 212/RPR/2023 7. We have heard both the parties and perused the materials available on record and gone through the orders of the authorities below. The assessee supposed to have been filed audit report as required u/s.44AB of the Act, on or before 31.10.2015. However, such audit report has been filed on 05.03.2016, which is before the date of completion of assessment proceedings u/s.143(3) of the Act. In other words, although the assessee has filed tax audit report beyond the stipulated period, but such tax audit report was made available to the AO before he completes assessment proceedings. The assessee has given reasons for delay in filing tax audit report. As per which, the audit of accounts of society done by the Dept. of Cooperative Audit, could not be completed on or before 31.10.2015 and said delay was not in the hands of the assessee. Therefore, there is a reasonable cause for not filing the tax audit report within prescribed time limit ad thus, penalty cannot be levied. We find merits in the submission of the assessee for the simple reason that non-filing of audit report within the due date is a venial technical breach without any mala fide intention on the part of the assessee. Because, completion of audit of books of accounts of the society is under the control of Dept. of Cooperative Audit and thus, unless the Dept. of Cooperative Audit completes audit, the assessee cannot file return of income along with tax audit report. Therefore, we are of the considered view that reasons given by the assessee for not filing tax audit report prescribed u/s.44AB of the Act, is neither intention nor any mala fide intention, but it is venial technical breach and for this reason, penalty u/s.271B of the Act, cannot be levied. This principle is supported by the decision of the Hon’ble jurisdictional High Court in the case of P.Senthil Kumar v. PCIT reported in 416 ITR 336, where an identical issue had been considered by the Court and held that for venial technical breach without any mala fide intention, penalty cannot be levied. The ITAT Cochin Bench in ITA No.411/Cochin/2018 vide order dated 05.02.2019 had held that once audit report has been made available before the AO, when the assessment proceedings were completed, then, there is no reason for levy of penalty.

9. In the present case also the assessee could not obtain and file the tax audit report as required u/s. 44AB of the Act due to delay in appointment of auditors by the co-operative department for statutory audit. This appointment is not in the control of the assessee. It is only then after that the assessee appoints tax auditor. The assessee filed the tax audit report immediately after obtaining the same from its Tax Auditor in Form No.3CA on 14-09- 2009. We find that the issue on hand is similar to that case decided by order dated 03-06-2016 by the Coordinate Bench of this Tribunal passed in ITA No.2396/Kol/2013 in the case of supra. Following the same, we are of the view that it is not a fit case to impose ITA Nos. 804 & 805/Kol/14-A-JM M/s. Arambagh Co-op Agrl. Mktg. Society Ltd 4 the penalty of Rs.1,00,000/- u/s. 271B of the Act. Therefore, we cancel the penalty imposed by the AO and confirmed by the CIT(A). Therefore, the ground raised

by the assessee is allowed. iv) Ahmedabad Co-operative Dept. Stores, [2001] 73 TTJ 784 (Ahmedabad- ITAT), wherein the Tribunal has held as under :-

5. I have given careful thought to the rival submissions advanced before me. There is no dispute that assessee is a cooperative society and its activities are governed by Gujarat Cooperative Societies Act, 1960. The accounts of the assessee are required to be audited by a special auditor appointed by the Registrar of Cooperative Societies. It is well known that Government auditors audit accounts of such cooperative societies. They carry out audit as per the statutory requirements and the assessee can have no control or authority over such auditors. It is settled law that penalty is to be imposed for defiance of law or for not carrying out a statutory obligation. It cannot be imposed on the assessee for nonperformance of duties by public agencies like Government auditors. The assessee right from beginning contended that delay is attributable to late auditing done by the statutory auditors. For the act of statutory auditor, the assessee cannot be held to be responsible under a provision like section 271B. It has been a settled law since the decision of Hindustan Steel Ltd. v. State Of Orissa. [1972] 83 ITR 26 (SC) that the levy of penalty is discretionary and penalty is not to be imposed for technical or venial breach of a statutory provision. In the present case, statutory audit was completed only on 17-1-1990. The auditors raised some points in the audit report which were required to be looked into and complied with by the assessee. After complying with the various points the assessee submitted return on 26-2-1990. It is not a case in which the assessee did not take proper care to comply with various statutory provisions. No default is attributable to the act and conduct of the assessee. Therefore, in my opinion, it is not a fit case for levy of penalty under section 271B of the IT Act. The penalty levied is held to be unjustified and is cancelled. In the light of above finding I deem it unnecessary to go into several other legal issues raised by the learned counsel for the assessee. The penalty imposed is cancelled. v) Mathana Model Co-op Credit & Services Society Ltd., [2008] 299 ITR 70 (Punjab & Haryana), wherein the Hon’ble Punjab & Haryana High Court held as under :- Section 271B, read with section 273B, of the Income-tax Act, 1961 - Penalty - For failure to get accounts audited - Assessment year 2004-05 - As assessee-co-operative society failed to get its accounts audited within stipulated date, a show-cause notice under section 271B was issued to it - 11 to 212/RPR/2023 Assessee submitted copy of audit report along with its reply stating that it being a co-operative society was required to get its accounts audited by auditor appointed by Registrar, Co-operative Societies and since auditor was not appointed by Registrar within stipulated time, audit report could not be submitted in time - Assessing Officer rejected assessee's explanation and imposed penalty upon it - Whether any penalty could be levied upon assessee - Held, no. vi) Iqbalpur Cooperative Cane Development Union Ltd. [2013] 218 Taxman 70 (Uttarakhand)(Mag.), wherein the Hon’ble Uttarakhand High Court has held as under :- Section 44AB, read with sections 271B and 273B of the Income-tax Act, 1961 - Tax audit [Appointment of auditor] - Assessee was a cooperative society, registered under U.P. Co-operative Societies Act, 1965 - Accounts of assessee was required to be audited in accordance with section 64 of U.P. Co-operative Societies Act - Since assessee's account was not audited within stipulated date, penalty under section 271B was imposed on assessee - Tribunal granted relief to assessee under section 273B holding that assessee established that appointment of auditor was not within his domain and, it was also not within his domain to have auditor to be appointed by Registrar or such person as appointed by State Government, to complete audit within specified date - Whether on fact there was no scope of interference with this appeal - Held, yes [Para 2] [In favour of assessee] vii) Hindustan Steel Ltd., [1972] 83 ITR 26 (SC), wherein the Hon’ble Supreme Court has held as under :- Section 270 of the Income-tax Act, 1961 - Penalty - General - Penalty is not to be imposed if there is no conscious breach of law 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. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.

14. On perusal of the ratio of law emerged in the aforesaid orders, respectfully following the judicial pronouncements, considering the facts and issue in the present appeal wherein it was the admitted fact that the Audit certificate was issued by the Tax Auditor on 20.02.2013, which was after the due date of completion of the audit u/s 44AB, which was contented by the assessee as beyond its control, and rightly so, we find merit in the submission of the assessee, however in the submissions of the assessee there was no whisper pertaining to delayed appointment of the Auditor, which could be the key fact or event justify the contention of the assessee that there was nothing on the part of assessee which makes asseseee responsible for the delay. It is therefore necessary to verify when the statutory auditors and tax auditor were appointed by the regulatory 12 to 212/RPR/2023 authority i.e. registrar of cooperative society, thus, we are of the considered opinion that order of penalty levied by the Ld.AO u/s.271B of the Act and confirmed by the Ld.CIT(A) is liable to be set aside with a direction to verify that the appointment of the statutory/tax auditor was done after the due date of completion of audit u/s 44AB of the Act, and if same is the case and audit was completed within a reasonable time of such appointment, then the penalty u/s 271B cannot be held as justified. We, therefore, set aside the order of the Ld.CIT(A) and restore the issue to the files of AO to verify the documents as discussed herein above, accordingly, in terms of our aforesaid observations herein either enforce or vacate the penalty-imposed u/s.271B of the Act in the present case.”

13 to 212/RPR/2023 13. In the result, the appeals filed in the present ITA 210, 211 and 212/RPR/2023, wherein facts and grounds of appeal are identical having similar facts and circumstances, therefore our decision in ITA 109/RPR/2023 shall be mutatis mutandis apply on these appeals, thus, the same are likewise partly allowed for statistical purposes.

Order pronounced in the Court on 25th August, 2023.