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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
Per Dr. M. L. Meena, AM: Both the above appeals have been filed by the Assessee against the common order of the Ld. CIT(A)/NFAC, Delhi each dt. 10/01/2023.
Firstly we shall deal with the appeal in for the A.Y. 2017-18 wherein assessee has raised the following grounds:
1. That the CIT(A) has erred in confirming the penalty order passed by Ld. A.O u/s 271B of the income tax act 1961 is against the fact of the case and bad in law.
2. That the CIT(A) has erred in confirming penalty u/s 271B levied by the AO for non filing of audit report. The LD. AO failed to appreciate the fact that the assessee has been regularly filing audit report for years previous to A.Y.2017-18 and also for the future assessment years. 3. That the CIT(A) has erred in not appreciating that the failure to file audit report for A.Y.2017-18 was solely on account of expiry of digital signature and as such was prevented by reasonable cause to file audit report.
& 71/Asr/2023 Assessment Year: 2017-18 2
4. That the CIT(A) has erred in confirming penalty u/s 271B levied by the AO for failure to file audit report even when the assessee duly submitted the audit report along with balance sheet, P&L A/C and other annexure during the assessment proceedings. Furthermore, the Id. AO had also examined the financials submitted in audit report and the same was accepted by the Ld. AO in Para no 2 at page no 2 of the order u/s 144 dated 19.12.2019,
5. That the CIT(A) has erred in not appreciating that the AO while confirming the penalty u/s 271B has not considered the submissions of the assessee.
6. That the appellant craves leave to add or amend any of the grounds of appeal before the appeal is finally heard or disposed off.
3. At the outset the Ld. Counsel for the Assessee has submitted that the Assessing Officer has initiated the penalty under section 271B of the Income Tax Act, 1961 for late filing of audit report under section 44AB of the Act. He has further submitted that the gross receipt of the assessee for the year under consideration was Rs. 1,70,27,553/- and hence the assessee was required to get its account audited and liable to file the audit report as required under section 44AB of the Act before the due date. Accordingly, the Assessing Officer has levied minimum penalty of Rs. 1,50,000/- on violation of provisions of Section 271B of the Act for non filing the Tax Audit Report within time as prescribed under the law.
3.1 The Ld. AR has argued that the assessee has obtained its Tax Audit Report from the Chartered Accountant on 31/10/2017 and furnished the same before the Assessing Officer during the course of assessment proceeding. Therefore he contended that when the Tax Audit Report was made available to the Assessing Officer before completion of assessment proceedings, then for venial technical breach without any malafide intention, penalty cannot be levied under section 271B of the Act.
3.2 The Ld. AR has brought to the notice of the Bench that the same fact has duly been brought to the knowledge of the Assessing Officer during the course of assessment proceeding that the only delay in not filing the Audit Report in time was due to technical glitch in the system on account of old digital signature of the assessee were expired and new digital signature could not be updated due to the reasons that there was mismatch in the particulars as uploaded on the online portal and as per the Aadhaar Card. & 71/Asr/2023 Assessment Year: 2017-18 3 3.3 Thus, the assessee was prevented by sufficient cause as per the provisions prescribed under section 273B of the Income Tax Act for not filing the Audit Report in time. He argued that thought the assessee has filed Tax Audit Report beyond the stipulated time but the said Tax Audit Report made available to the Assessing Officer before completing the assessment with explaining the reasons for delay in filing the Tax Audit Report (Assessment Order page 12). He has also explained that the Assessing Officer has considered the Audit Report and passed the Assessment Order accepting the return of income subject to nominal disallowance of Rs. 28,092/- in respect of personal nature. In support he placed reliance on the following decisions:
• 2023(3) TMI 661-ITAT Chennai, Shri Ramunaicker Raja, Prop: M/s R.R. Plaza Vs. The ACIT,Circle 2(1), Salem • 2019(1) TMI 222-Madras High Court other Citation: [2019] 416 ITR 336(Mad) P. Senthil Kumar Vs. Principal CIT-5, Chennai
The Ld. DR on the other side relied on the impugned order.
We have heard both the sides, peruse records, impugned order and citation placed before us.
5.1 It is seen that the Ld. CIT(A)/NFAC, Delhi has confirmed the penalty under section 271B of the Act, levied by the Assessing Officer for not filing the Audit Report without appreciating the fact that the assessee has explained the detailed bonafide reasons for the delay in filing the Audit Report, on account of expiry of digital signature and due to technical glitch in the system. Thus, he was prevented by reasonable cause to update the digital signature and upload the required Audit Report.
5.2. The Ld. Counsel for the assessee contended that the Ld. CIT(A) was not justified in confirming the penalty under section 271B, ignoring the bonafide reasons for failure in filing of Audit Report even though the assessee has duly explained the bonafide reasons for the delay is covered under the exceptional circumstances as the provisions of Section 273B of the Act and moreover the assessee has filed the Audit Report alongwith balance sheet, statement of account and other Annexures during the assessment proceedings which have been examined by the Assessing Officer.
5.3 From the assessment order, it is evident that the assessee has filed its reply alongwith financial statement and computation of income for the assessment year & 71/Asr/2023 Assessment Year: 2017-18 4 under consideration alongwith Audit Report in prescribed form for the year under consideration. It is noted that although the Audit Report could not be filed within prescribed time limit due to expiry of digital signature. But the assessee has submitted all the requisite information called for by the Assessing Officer alongwith Audit Report under section 44AB of the Act before passing the assessment order. The Assessing Officer being satisfied with the said information and statement of accounts of the assessee, has accepted returned income subject to minimum disallowance on estimate basis against expenses claimed amounting to Rs. 28,092/- of personal nature.
5.4 ITAT Chennai Bench in the case of Shri Ramunaicker Raj Prop: M/s R.R. Plaza Vs. The ACIT (supra) has observed that when the Tax Audit Report was made available to the Assessing Officer before completion of assessment proceedings, then for venial technical glitch without any malafide intention, penalty cannot be levied under section 271B.
5.5 In another case of P. Snthil Kumar Vs. Pr. CIT (supra) the Hon’ble Madras High Court has observed that the non filing of Tax Audit Report before the due date is a technical glitch and admittedly the reasons assigned by the assessee have not been found to be false nor with any malafide intention. That the explanation filed by the assessee can be taken as a reasonable cause for his failure to file the Audit Report within time.
5.6 In the present case, the non filing Tax Audit Report before the due date has been a technical glitch and admittedly, the assessee filed the Audit Report under section 44AB. During the course of assessment proceedings and the assessment was framed by the Assessing Officer after considering the Audit Report and statement of account. In our view the explanation filed by the assessee can be accepted as a reasonable cause for his failure to file Audit Report with in time and it is not a fit case for imposing penalty under section 271B of the Act. Accordingly, the penalty levied under section 271B of the Act is deleted.
Now we take up the appeal in 2017- 18 wherein the assessee has raised the following grounds:
1. That the CIT(A) has erred in confirming penalty order passed by Ld. A.O u/s 272A(1)(d) of the income tax act 1961 which is against the fact of the case and bad in & 71/Asr/2023 Assessment Year: 2017-18 5
law.
2. That the CIT(A) has erred in confirming the penalty u/s 272A(1)(d) levied by the A.O for non compliance to notices without appreciating the fact that the notices were not being received by the assessee personally. The same fact was duly brought to the knowledge of the AO and the assessee has duly complied with all the questionnaires and further queries raised by the AO.
That the CIT(A) has erred in not appreciating that the assessee did not have facility of computers and he personally cannot operate computer at all and as such the notices uploaded on portal could also not be complied with due to sufficient cause.
4. That the CIT(A) has failed to appreciate that the assessee was prevented by sufficient cause in not replying to the earlier notices issued u/s 142(1). That the assessment for the AY 2017-18 was framed u/s 144 due to non-filing of return and not due to non- cooperation of the assessee.
5. That the CIT(A) has erred in not appreciating that the AO while confirming the penalty u/s 272A(l)(d) has not considered the submissions of the assessee.
6. That the appellant craves leave to add or amend any of the grounds of appeal before the appeal is finally heard or disposed off.
During the course of assessment proceedings the Assessing Officer issued multiple notices before completion of the assessment under section 142(1) dt. 12/03/2018, 25/04/2019, 23/05/2019, 27/08/2019 and 18/09/2019 and final show cause notice was issued on 18/09/2019.
7.1 The assessee has failed to comply multiple notices issued on the five dates prior to the show cause notice issued. Accordingly, the Assessing Officer has initiated the penalty under section 272A(1)(d) of the Act for non compliance to the multiple notices separately issued under section 142(1) as above and levied penalty to the tune of Rs. 50,000/- in each and every default for the such five non compliance to the notice under section 142(1) of the Act.
In appeal the Ld. CIT(A) has confirmed levy of penalty under section 272A(1)(d) by observing that the assessee has failed to bring on record any cogent reason which is reasonable enough to make his case exceptional.
The Ld. Counsel for the assessee submitted that the law is settled that issue of penalty under section 272A(1)(d) that the said penalty cannot be levied for multiple default. In the present case the Assessing Officer has levied penalty to the tune of Rs. 50,000/- for each and every default inspite of the fact brought to the knowledge of the Assessing Officer that notice under section 142(1) were not received by the assessee & 71/Asr/2023 Assessment Year: 2017-18 6 personally. In support he placed reliance on judgment delivered by the ITAT Delhi Benches in the case of Smt. Rekha Rani Vs. DCIT [2015] (5) TMI 1100.
The Ld. DR stands by the impugned order.
After hearing both the sides and perused the impugned order it is noted in the present case that multiple notices have been issued and that the Assessing Officer has levied penalty to the non compliance of the each and every notice issued under section 142(1) of the Act, amounting to Rs. 50,000/-. In our view penalty under section 272A(1)(d) may not be imposed for each and every default to the notices issued under section 142(1) which remained non complied on the part of the assessee. The provisions of Section 272A(1)(d) is of deterrent in nature and not for earning revenue. The remedy available with the Assessing Officer lies in framing of best judgment assessment under the provisions of Section 144 of the Act, as he did and not to impose multiple penalties under section 272A(1)(d) of the Act again and again. We therefore restrict the penalty levied under section 272A(1)(d) of the Act to one default as against multiple defaults of non compliance with these notices under section 142(1) of the Act. Accordingly, penalty imposed is restricted to Rs. 10,000/-.
In the backdrop of the above discussion these two appeals of the assessee are disposed of in the manner discussed as above.