CHACK DE INDIA FOREX PVT. LTD.,DEHRADUN vs. ITO, RISHIKESH

ORDER Per: Yogesh Kumar U.S., Judicial Member: The present appeal is preferred by the assessee against the order dated 01.02.2017 passed by the Ld. Commissioner of Income Tax (Appeals), Haldwani under Section 256 of the Income Tax Act, wherein the ld. CIT(A) has confirmed the penalty levied by the AO under Section 271B of Income Tax Act, 1961(‘Act’ for short).

1) Notification of submission of 3CA The notification for submission of Audit Report is promulgated after completion of Audit under the provisions of I.T. Act. It is relevant to mention here that the assessee has completed its audit in all respects on or before issue the notification, i.e. 12.07.2013. The copy of audit report is being submitted before you on 30.09.2013.

2) Applicability of Notification submitted electronically upon the assessee The notification about submission of audit report electronically is not applicable to assessee because as per notification, the right of filing the audit report is passed to the auditor hence auditor is responsible to file the audit report electronically and it is also submitted that one requested issued by the CBDT the audit report may be filed to the income tax department on 30.09.2013 as per notification the issue filed the audit report in your office on 30.09.2013. the copy of the same is being annexed hereto.

3) Submission of 3CA before Assessing Officer The assessee has filed his audit report in 3CA before ITO Ward-1, Rishikesh on 30.09.2014, the copy of the same is being annexed hereto.

4) Duty of submission of Form 3CA It is relevant to mention here that it is prima duty of submission of 3CA is upon the relevant Chartered Accountant in this regard. Unfortunately the fails to submit the 3CA electronically in due time, please give an opportunity to file the same because it not a default by the assessee so that proceedings cannot be initiated upon the assessee under the provision of the Income-tax Act.

5) Under these circumstances of the case, this office may graciously be pleased to drop the penalty proceeding against the issued notice under section 271B of the Act.

“The above named appellant hereby most respectfully craves to leave to object the impugned order dated 01.02.2017 and order dated 22.04.2015 (Annexure No.2) passed by the Ld. Respondent No.2 and 3 respectively of the Income Tax Act, 1961. The following Grounds of Appeal of the case are being precisely disclosed for your kind perusal:- a) Because on the finding of the respondent, the respondent erred in law as well as wrong interpretation of notification in his order so that the appellant is being submitted the frequent questions which was called up and make direction on it as below: b) a.

1. Responsibility of Auditor Point No. 11 of Frequently asked questions on e-filing of Tax Audit Reports-Other Issues:- Guidance Note on Tax Audit states that normally it is the professional duty of the CA to ensure that the audit accepted by him is completed before the due date. Yes, if delay is attributable to his part. The copy of the same is being annexed hereto for your kind perusal. a.2 For a variety of reasons and mainly for the following reasons, a number of CAs could not upload / file ROI and / or TAR within 30.09.2013 - a.

3. Online filling of report is a new system implemented by the department this year. Notifications for the same had been issued too late, i.e. in the month of May & June (Notification no. 36 dated 23rd May, 2013 & Notification no. 44 dated 19th June, 2013) a.4 Lot of time was wasted in understanding the system as it was a new system. a.

5. Initially, there was a faulty system of uploading the Tax Audit Report. a.

6. There was a constant change in the utility by the department (12 times). Actually, the department had changed utility every week and sometimes two or three times in a week. a.7 The CAs were under tremendous mental pressure due to the uncertainty arising out of the above reasons. a.8 In exercise of power u/s. 119(2)(a) r.w. sec. 139 and Rule 12, CBDT relaxed the requirement of furnishing the Audit Report u/s. 44AB as prescribed under Rule 12(2) for the A.Y.: 2013 - 2014. As per the said order u/s. 119, following requirements were stated - a.9 The assessee who were finding it difficult to upload the prescribed Reports of Audit in the system electronically may also furnish the same manually before the jurisdictional Assessing Officer within the prescribed due date.

10 The said Report of Audit should however be furnished electronically on or before 31.10.2013.

The professionals reasonably instructed / aware of the rules of statutory interpretation interpreted the CBDT circular/order as under- b.1 There was extension of time for furnishing of the audit report electronically till 31.10.2013. b.2 The requirement of furnishing of TAR manually to the AO was optional since the word "may" was used in clause (a) of the circular. b.3 On the same date, CBDT issued a Press Release.

The Press Release dated 26.09.2013 has imposed the following two conditions for availing the benefit of the circular which were not present in the circular issued - (i) Mandatory requirement to file audit report manually with the A.O. by 30.09.2013.

(ii) Mandatory requirement to file ROI electronically by 30.09.2013. c) Because of the above-mentioned circular r.w., Press Release, there is a likelihood of initiation of penalty u/s. 271B for the violation of sec. 271B in a case where TAR could not be uploaded / filed manually by 30.09.2013 and the ROI also could not be uploaded by that time. d) Because It must be clearly understood that penalty u/s. 27IB is not mandatory in nature. As per sec. 273B, penalty shall not be imposable u/s. 271B, amongst others, if a reasonable cause is shown by the assessee for his failure. e) To take advantage of the provisions of sec. 273B, the professionals should ensure that there is no further delay in submission of the TAR, online or manually, if the same could not be submitted / uploaded by 12 o’clock night of 30 September, 2013. If TAR is submitted / uploaded on the very next day or next few days, penalty is not leviable since it will show the bonafide conduct of the assessee. In the case of Stay well Hotels (P) Ltd. vs. CIT 283 ITR 92 (MP), Hon’ble High Court held that where there was a short delay and the assessee offered explanation for the delay, penalty u/s. 27IB cannot be levied. Hon’ble Calcutta High Court in the case of CIT vs. Ramakrishna Stores 253 ITR 175 (Cal.) held that where there is a marginal delay in filing TAR (in this case, a delay of PA months was held to be marginal) and some reasonable cause was shown (in this case, the reasonable cause was shown to be the illness of the accountant), no penalty u/s.271B can be imposed. f) Because on receipt of the show-cause notice from the A.O., the assessee should submit a proper reply to the show-cause notice and annex evidence in support of the plea taken.

Thus, where due to slowing down of the departmental software, the TAR was uploaded next day, this fact should be stated in the reply and a certificate / affidavit from the CA should be annexed in support of the stated fact. g) Because In the reply, the assessee should also state that the delay in completion of audit was due to a variety of reasons stated above in para 1 above, which should also find reflection in certificate of CA concerned. h) Because the assessee should also take a legal plea before the A.O. in his reply to the show-cause that he was under the “bonafide belief’ that CBDT circular dated 26.09.2013 has extended the date of furnishing of TAR electronically till 31.10.2013 and the requirement to file the TAR manually by 30.09.2013 was optional.

It may also be stated that the contents of the Press Release asking for mandatorily filing of TAR manually by 30.09.2013 came to the knowledge of the assessee subsequently and by that time the said date had expired and in any case, the assessee had made substantial compliance of circular dated 26.09.2013 r.w. the Press Release by submitting TAR electronically much before the extended date 31.10.2013. i) In the case of Wadiwala & Co. vs. ACIT 72 TTJ (Ahd.) it has been held in the context of sec. 27IB r.w. sec. 44AB that “bonafide belief’ is a reasonable cause for avoiding penalty.

In this case, the assessee who was a sub-broker, had taken the plea that the turnover of dealings in shares on behalf of various buyers and sellers of shares was not included for determining the applicability of sec. 44AB.

Income Tax Appellate Tribunal - Ahmedabad R. Wadiwala & Co. vs Asstt. Cit on 20 March, 2001 Equivalent citations: (2001) 72 TTJ Ahd 35 “It was pointed out by the assessee before us that similar issue has been decided in favour of the assessee in order dt. 30-11- 2000 for assessment year 1990-91 [reported as R. Wadiwala & Co. v. Asstt. CIT (2001) 72 TTJ (Ahd-Trib) 34] by Ahmedabad Bench 'B' of the Tribunal wherein it has been held that there is no justification for levy of penalty under s. 27IB in the facts and circumstances of the case. The assessee could entertain bona fide belief that the turnover of dealing in shares made on behalf of various buyers and sellers of shares through the assessee in the capacity of sub-broker is not includible for determining the applicability of section 44AB. Such bona fide belief was fortified by the fact that in several past assessments and the assessments for subsequent years, the assessing officer himself has not initiated any penalty proceedings under section 27IB. Such bona fide belief constitutes a reasonable cause within the meaning of section 273B which justifies the cancellation of penalty levied in the aforesaid facts and circumstances of the case. Accordingly, assessing officer was directed to canncel the penalty. Most respectfully following the same, we direct the assessing officer to cancel the penalty under section 271B.” j) Because the Hon’ble High Court of Allahabad in case of Bharat Shoe Co. Vs. CST, Lucknow, the revenue officer must remember it little to loose revenue to loose goodwill of taxpayer. k) Under the above circumstances of the case, this office may graciously pleased to quash the penalty orders and to vacate the demand notice dated 22/04/2015 otherwise the assessee will suffer irreparable losses.

8. Per contra the learned DR submitted that, the Assessee has not filed the TAR electronically even after repeated issuance of the show cause Notices and the reminders, further assessee has sought permission to file the same in the reply filed to the show cause Notice, which is contrary to Section 44AB of the Act. By relying on the orders of the lower authorities the learned DR contended that, no interference is called for by the Tribunal.

9. We have heard learned counsel for the assessee and also learned DR and perused the material on record.

“8. We have heard the rival contentions and perused the record. The assessee was required to get his books of account audited as per the provisions of section 44AB of the Act before 30/09/2012 for the A.Y. 2012-13. The assessee got the books audited on 24/03/2014 and the same was furnished before the Assessing Officer on 27/03/2014. The assessment order was passed by the Assessing Officer on 26/03/2015. However, there was delay in furnishing the audit report in compliance with section 44AB of the Act. The contention of the Ld. AR is that the reason for delay in furnishing the audit report belatedly was due to the ill health of the partner Shri Naushad S. from 20.09.2012 to 19.10.2012 coupled with malfunctioning of the computer and loss of entire data due to hardware damage. For this purpose, the Ld. AR relied on the decision of the co-ordinate Bench of this Tribunal in the case of Star Agencies vs. ITO (23 CCH 646) wherein I. T.A. No.601/Coch/2018 it was held that even though assessee could not get the accounts audited within time but having filed the audit report along with the return, no penalty u/s. 271B was attracted. Further, illness of one of the partners constituted reasonable cause for the delay. He also relied on the recent decision of this Tribunal in the case of Johns Biwheelers vs. ACIT in dated 05/02/2019 wherein it was held as under:

”7. We have heard the rival submissions and perused the record. In this case, the assessee was required to get his books of account audited and filed along with the return of income u/s. 44AB within the due date of30/09/2012 for the assessment year 2012-13.. However, the audit report was furnished only on 28/03/2014. The contention of the Ld. AR was that the delay in filing the return of income was due to damage to computer system due to virus infection which is a reasonable cause as prescribed u/s. 273B of the LT. Act. The Ld. AR relied on the following judgments in support of his contentions: i) CIT vs. Malayalam Plantations Ltd. (1976) (103 ITR 835) (Ker.) ii) ACIT vs. Amar Chand Raj Kumar (2004) (89 ITD 96)(HAT, Chandigarh)

Hi) Prem Prakash Senapati vs. ITO (ITA No.459&185/CTK/2017 dated 17/04/2018) (ITAT, Cuttack).

7.1 From the material available on record, we are of the view that the assessee got his books of accounts audited on 28/03/2014 which was made available to the Assessing Officer and no prejudice has been caused to the Revenue. Now the short question that arises is whether in this scenario, penalty u/s. 271B of the Act can be levied or not. In our considered opinion, the assessee had only committed technical venial breach which does not create any loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings. The Madras High Court in the case of CIT vs. A.N. Arunachalam (208 ITR 481) in the context of filing of audit report for claiming deduction u/s. 80J of the Act, observed that once audit report has been made available before the Ld. Assessing Officer before the completion of assessment proceedings, the assessee should be granted deduction u/s. 80J of the Act. We observe that this judgment was rendered in the context of adjudication of quantum of deduction claimed by the assessee. Hence, the said analogy can very well be drawn and used in the penalty proceedings like that of the assessee. To sum up, we hold that the assessee had committed only technical venial breach for which he cannot be penalized. In view of the above, we are inclined to delete the penalty made by the assessee u/s. 27IB of the Act.

8.1 In our opinion, the case of the assessee will squarely fit into the ratio laid down in the above cases cited supra. The assessee has committed only technical venial breach which does not create any loss to the exchequer. The audit report was filed before the Assessing Officer before the completion of the assessment. The ill health of the partner Shri Naushad S and the malfunctioning of the computer due to hardware damage are reasonable causes for not furnishing the audit report before the Assessing Officer within the stipulated time. Hence, we are inclined to hold that this is not a fit case for levying penalty u/s. 27 IB.

Order Pronounced in the Open Court on 27/04/2022.