M/S. TODARMULL INFRASTRUCTURES PVT. LTD.,RAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3(1), RAIPUR

O R D E R

Per Arun Khodpia, AM :

1. That, on the facts of the case the ACIT erred in levying and CIT(A) erred in confirming the penalty u/s.271B to the tune of Rs.1,19,032.00 and it is liable to be deleted.

2. That, the assessee reserves right to add or alter other ground at any time.

2. Brief facts of the case are that the assessee filed Return of income on 28.12.2016 declaring total loss at Rs.34,16,512/-. The case of the assessee was selected for limited scrutiny. Accordingly, scrutiny assessment u/s.143(3) of I T Act, 1961 was completed in this case on 31.10.2017.The assesses derives income from business of contract works of Indian Railways. During the year under consideration, the assessee 2 has shown total turnover of Rs.2,38,06,321/-. Since the turnover exceeded Rs.1 crore, the assessee was statutorily required to get its accounts audited u/s.44AB of the I. T. Act, 1961. In the course of assessment proceedings, the AO found that the assessee had uploaded the audit report for A.Y 2015-16 online on e-filing portal on 27.12.2016 i.e. beyond the due date of filing the ITR u/s. 139(1) of the Act. Therefore, the AO observed that the assessee got its books of account audited u/s.44AB of the Act only on 27.12.2016, thus, penalty proceedings u/s.271B of the Act was initiated in the case. It was also noted by the AO that one of the directors, Mr. Balchand Sharma who is stated to have handled accounts of the assessee company passed away on 12.09.2014 is reasonable cause for the delay in getting the books of account audited and late uploading of the audit report was found unsatisfactory and insufficient to be construed as reasonable cause. Accordingly, the AO imposed penalty of Rs.1,19,032/-, computed at 0.5% of total turnover of Rs.2,38,06,321/-. Aggrieved by the above penalty imposed, appellant is in appeal.

3. Against the above order of AO, the assessee preferred appeal before the ld. CIT(A) and the ld. CIT(A) upheld the findings of the AO and dismissed the appeal of the assessee.

4. Now, the assessee is in further appeal before the Tribunal.

5. Ld. AR before us submitted that the accounts of the assessee company were got audited in the Companies Act on 21.08.2015, however, there was a delay under the tax audit conducted under the provisions of Section 44AB of the Act due date for the same was 31.10.2015 but was 3 completed on 27.12.2016. Ld. AR offered certain justifications towards the cause of delay in preparation and filing of the tax audit report. The company has five directors, all are family members. The senior and most experienced director Mr. Balchand Sharma was seriously ill for a long period and he expired on 12th September, 2014 i.e. during the financial year 2014-2015 relevant to assessment year 2015-2016. Copy of death certificate was also shown to us, which is placed on page No.1 of the assessee’s paper book. Due to death of Mr. Balchand Sharma, the business of the assessee company was disturbed and the business of the assessee company was badly affected during the year. The assessee company is a contractor having undertaken railway contracts, all the running contracts with the railway could not be carried out by the assessee company in time and due to that delay huge amount of security amount i.e. Rs.36.68 crores were seized by the railways. Ld. AR also drew our attention to the details of terminated contracts in aggregate of Rs.37.68 crores, copy of which is placed at page 6 of the paper book. It was the submission of the ld. AR that the assessee company has faced a hardship of financial loss of Rs.41.17 lacs which is evident from the audit report of the assessee available at page 41 of the paper book. Looking to the circumstances of the assessee’s business and financial deficits, ld. AR prayed that the delay in completing the tax audit and submission of the same was on account of reasonable cause and, therefore, levy of penalty u/s.271B of the Act for delay in filing of tax audit report may be dropped. Reliance was placed on the judgment of the Hon’ble Punjab & Haryana 4 High Court in the case of Haryana Agro Services, reported in [2005] 279 ITR 113 (P&H), wherein it has been held that penalty is not to be imposed if the assessee proves that there was reasonable cause for said non-compliance-accounts having been audited within specified time, mere delay in filing audit report did not attract penalty. Ld. AR also placed before us the judgment of the Hon’ble Calcutta High Court in the case of Ramkrishna Stores, reported in (2002) 253 ITR 175 (Cal), wherein it has been held that penalty u/s.271B-delay in filing audit report-reasonable cause-CIT(A) has accepted that the assessee’s accountant was ill for a long time and ultimately expire-There was marginal delay in filing the audited accounts-Reasonable cause having been shown for not getting the accounts audited on or before the due date, penalty not leviable.

6. Ld Sr. DR, on the contrary, has submitted that the ld. AO demonstrated the principle of natural justice. The case laws relied on by the assessee were rebutted properly. The AO’s order itself is self- explanatory. The assessee was not responsive in appeal, hence, the CIT(A) has rightly confirmed the penalty.

7. We have considered the rival contentions and perused the orders of the authorities below along with the relevant documents placed on record. As per the assessee due to death of one of the senior and experienced directors of the assessee company, business was disturbed and, therefore, the tax audit could not be conducted in time for which delay was occurred. While going through the dates of events it is observed that the death of one of the director was occurred on 12.09.2014, eventually 5 the statutory audit as required under the Companies Act was also completed on 21.08.2015. However, the tax audit u/s.44AB of the Act was delayed by more than one year and completed on 27.12.2016. As per the submissions and evidence produced before us, it is also transpired that the company has suffered huge loss during the assessment year 2014- 2015 and it was also fact that the several contracts with the railways were terminated which have further shattered the financial position of the assessee company. In view of such facts and circumstances of the case, we may be sympathetic towards the assessee’s stressed financial circumstances but we cannot accept the contention of the assessee that the assessee was stopped by reasonable cause in preparing and filing the tax audit report specifically when the statutory audit under the Companies Act was completed on 21.08.2015, more than a year before the completion of tax audit. Moreover, the auditor who have conducted the statutory audit under the Companies Act and the tax audit u/s.44AB of the IT Act was the same auditor. With the above observations, we do not see any reasonable cause for delay in completion of tax audit by the assessee company and, therefore, the decision of the ld. CIT(A) to concur with the stand of the AO that the assessee’s case is fit for imposing penalty u/s.271B of the Act, cannot be disturbed. Thus, we refrain ourselves to interfere with the findings recorded by the ld. CIT(A) in this regard and we uphold the same. Accordingly, the appeal of the assessee is dismissed.