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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: SHRI SANJAY ARORA, AM & SHRI ABY T. VARKEY, JM
O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the assessee against the order of the Ld. CIT(A)/NFAC dated 24.08.2022 for AY. 2012-13.
The main grievance of the assessee is against the action of the Ld. CIT(A) confirming the penalty levied against the assessee society u/s 271B of the Income Tax Act, 1961 (hereinafter “the Act”). 3. Brief facts as noted by the AO is that the assessee is a Primary Credit Society and turnover was to the tune of Rs.3,12,85,157/-. Therefore, according to AO, since the assessee’s turnover was more than Rs.1 crores [as per Section 44AB of the Act] it was liable to get its accounts audited by an accountant before the specified date; and furnished by that date, report of such audit, in the prescribed form duly signed and verified by accountant by setting forth such particulars as may be prescribed. According to the AO, the assessee failed to furnish
Kanippayyur Service Co-op its audit report before the specified date. Therefore, the AO during the assessment proceedings, initiated proceeding against the assessee u/s 271B of the Act, for neither auditing its books of accounts nor furnishing the report of such audit as required under section 44AB of the Act. And therefore, issued show-cause notice to the assessee on 25.11.2019 and asked the assessee to give reasons as to why an order imposing the penalty should not be made under section 271B of the Act. The assessee explained that it is a Co-operative Society registered under the Kerala Co-operative Societies Act and was under the bonafide belief that it was not liable to be conduct audit u/s 44AB of the Act, since its books of accounts were liable to be audited under the Kerala Co-operative Society Act, 1969 and cited the decision of the Hon’ble Uttarakhand High Court in the case of CIT Vs. DCIT VS. Iqbalpur Co-operative Care Development Union Ltd. (2009) (179 Taxman 27) (Uttarakhand) and also cited various decisions. The submission of Assessee was as under: - “The assessee is a Service Co-operative Society registered under the Kerala Co-operative Societies Act, 1969. Assessee was under the bonafide belief that they were not liable to conduct audit u/s 44AB Books of accounts of Co-operative Society was liable to be audited under Kerala Cooperative Societies Act, 1969. Honourable High Court of Uttarakhand held in the case of CIT & DCIT v. Iqbalpur Care Develo«ment Union Ltd (2009) 179 Taxman 27 (Uttarakhand) that when assesse is under bonafide belief that they are not liable to get its accounts audited, penalty u/s 271B cannot be imposed. A bonafide omission to file a statement, that was required to be filed because the assessee was new to the scenario and was unaware of the requirements of law, the Tribunal's finding that the omission was not intentional or deliberate so as to merit penalty was supported by the High Court in CIT v. Schell International [2005] 278 ITR 630 (Bom). While coming to the conclusion, following the precedents on the subject, the High Court cited from the decision of the Supreme Court in Motilal Padampat Sugar Mills Co Ltd v. State of Uttar Pradesh [1979] 118 IT 326 (SC) citing a passage from English decision of House of Lords in Evans v. Bartiam [1937] AC 473 (HL) to the following effect” the fact is that there is not and never has been a presumption that everyone knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and Kanippayyur Service Co-op application”. It is not often realized that the oft-repeated maxim that ignorance of law is no excuse, has its exceptions. Considering the above, we request your goodself to kindly not to invoke any penalty proceedings against us.”
The above reply filed by the assessee on 10.12.2019 and 13.08.2021 has been duly considered and found not tenable. Further, the assessee has also cited various case laws, however the same are not applicable as the assessee was well aware of the fact that his total turnover exceeded Rs. 1 crore and as per provisions of section 44AB of the Act he was liable to get his account audited from the accountant and should furnish his audit report before the specified due date with the income tax department. Further, for specificity purposes, the provisions of section 271B of the IT Act are re- produced as under: “if any person fails to get his account audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required u/s 44AB,the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, tumover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less.”
From the above facts and circumstance of the case as well as provisions of section 271B of the Act, it is quite clear that assessee has knowingly and willingly violated the provisions of section 44AB of the Act by not furnishing his audit report in form no 3CB before the specified date. Since the assessee has failed to furnish his audit report within the due date of furnishing return of income as required under the provisions of Section 44AB of the Act. The assessee is liable for penalty u/s 271B of the I. T. Act, a sum equal to one half per-cent of total turnover of Rs.3,12,85,157/- which comes to Rs. 1,56,426/- or Rs.1,50,000/-, whichever is less. The Lesser amount is Rs. 1,50,000/-. Therefore, a penalty of Rs. 1,50,000/- u/s 271B of Income Tax Act, 1961 is imposed upon the assessee.”
The AO did not accept the aforesaid submission of assessee. According to him, the assessee has violated the provisions of section 44AB of the Act by not furnishing its audit report in Form No. 3CB before the specified date. Therefore, according to him, it is liable for penalty u/s 271B of the Act. And therefore, the AO levied Rs.1,50,000/- u/s 271B of the Act. On appeal, the Ld. CIT(A) confirmed the addition by noting that the assessee failed to show at least reasonable cause for not imposing the penalty. Before us, the Ld. AR submitted that the assessee is a Primary Agricultural Credit Society eligible for deduction u/s 80P of the Act and the assessee filed Kanippayyur Service Co-op its return of income for the subsequent year i.e. AY. 2013-14 in the year 2015, which was pursuant to the notice issued u/s 148 of the Act. Since the assessee was under the bonafide belief that since its income was not taxable, it believed that there was no requirement to get its books audited. According to the Ld. AR, the assessee came to know about the requirement of filing income tax return and audit u/s 44AB of the Act only while filing the return of income for the AY. 2013-14 (subsequent assessment year) pursuant to the notice issued by AO u/s 148 of the Act for that year.
5. Coming to the relevant AY. 2012-13, the assessee filed its return of income during the year 2019 (12.04.2019) pursuant to the notice u/s 148 of the Act issued by the AO on 29.03.2019. Thereafter, the AO issued notice u/s 271B of the Act for non-filing of tax audit report as contemplated u/s 44AB of the Act. The assessee other than pleading that it was under bonafide belief that since its income would be eligible for deduction u/s 80P of the Act it neither filed return of income nor furnished report u/s 44AB of the Act (tax audit report). And pleaded that this omission was not deliberate on the part of the assessee to violate the provisions of the Act and relied on the Hon’ble Supreme Court decision in the case of Hindustan Steels Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC). During hearing before us, we asked the assessee/Ld AR as to whether there was any reasonable cause for not filing of Tax Audit Report, other than the reasons stated aforesaid, and the assessee could not give any reason. We note from the averment stated (supra) that for AY. 2013-14 when it received notice u/s 148 of the Act in the year 2015 itself, we note assessee became aware of the Kanippayyur Service Co-op necessity of filing of return of income and tax audit report u/s 44AB of the Act. Then in such a scenario (year 2015), the assessee ought to have got it account audited for AY. 2012-13 as early as possible, which is not the case; and if such an event had taken place, then the factual situation would have been different and ‘bonafide belief’ claimed by the assessee could have some legs to stand. But since that is not the case, even though, the assessee was aware about filing of return and tax audit report in the year 2015 itself, albeit for AY. 2013- 14 (subsequent year), but still the assessee did not think it prudent to get its earlier year i.e. relevant assessment year (AY. 2012-13) accounts audited, which could have avoided such an action from the AO. After examining the materials on records, we do not find any reasonable cause for assessee not getting its account audited as contemplated u/s 44AB of the Act. And therefore, we confirm the action of the Ld. CIT(A) and for that we rely on the decision of Hon’ble Jurisdictional High Court in case of Peroorkkada Services Co- operative Bank Ltd Vs. ITO of 2019 dated 07.01.2020.