Income Tax Appellate Tribunal - Mumbai
Echjay Forgings P. Ltd , Mumbai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "E"
Before S/Shri P.M. Jagtap (AM) & N.V. Vasudevan (JM)
I.T.A.No. 923/Mum/09 (Assessment year : 2005-06)
M/s. Echjay Forgings Pvt. Ltd. ITO 10(3)(1)
603, Raheja Chambers Aayakar Bhavan
213, Backbay Reclamation Vs. M.K. Road
Nariman Point Mumbai-400 020.
Mumbai-400 021.
APPELLANT RESPONDENT
PAN/GIR No. : AAACE1902A
Assessee by : Shri M. Subramanian
Department by : Shri M. Khare
ORDER
PER N.V. VASUDEVAN, JM :-
This is an appeal by the assessee against the order dated 28.11.2008 of learned CIT(A)-Assessee, Mumbai relating to A.Y. 2005-06.
2. In this appeal, the assessee has challenged the order of learned CIT(A), whereby learned CIT(A) confirmed the order of the Assessing Officer imposing penalty on the assessee u/s. 271B of the Act.
3. The assessee is a company. It is engaged in the business of manufacture of steel forgings, automobile parts etc. Admittedly, the assessee's turnover was more than 40 lakhs; and therefore there was an obligation on the part of the assessee to get its books of account audited and file report of such audit before specified date as contemplated u/s. 44AB of the Act. Specified date in the case of the assessee for A.Y. 2005- 06 was on or before 31.10.2005. It is not in dispute that the assessee obtained audit report before specified date but filed the said audit report along with the return of income only on 27.12.2005. Thus, there was delay of 2 months in filing audit report. U/s. 44AB, audit report could be 2 M/s. Echjay Forgings Pvt. Ltd.
filed even independently and not necessarily with the return of income. The assessee in the belief that audit report has to be filed only along with return of income filed it on 27.12.2005. Failure to file audit report before the specified date, invites penalty u/s. 271B of the Act. However, penalty will not be levied, if there is reasonable cause for failure of the assessee to file audit report before specified date. Plea of the assessee was that it had fund crunch and it could not pay self assessment tax due on income declared in the return of income; and therefore it filed return of income late and the audit report was also filed late along with return of income. On this issue, learned CIT(A) after examining the fund position of the assessee, noticed that the assessee's peak credit balance in the bank account with Bank of India, Ghatkopar was 2.6 crores. This was in the month of October, 2005. Again in the month of October 2005, peak balance in the assessee's account with Saraswat Bank was 1.8 crores. Learned CIT(A) therefore held that there was no sufficient cause established by the assessee so as to file audit report beyond specified date.
4. Before us, learned counsel for the assessee submitted that the fact that there was some balance in the bank account should not have been taken as adverse circumstance. It was submitted by him that the assessee had turnover running into more than 13 crores and it had to maintain some balance to enable it to carry on its business. It was submitted that there was a fund crunch; and hence, the delay in filing the return of income and the audit report along with the return of income.
5. Learned DR submitted that paying tax at a right time is one of the prime obligations of the tax payer and payer cannot be heard to say that he wanted to utilize funds for its business rather than for paying the tax.
6. We have considered the rival submissions. We are inclined to agree with the submissions made on behalf of the assessee. Admittedly, 3 M/s. Echjay Forgings Pvt. Ltd.
there was a fund crunch; consequent to which, the assessee could not pay self assessment tax and consequently, could not file return of income along with audit report. The self assessment tax of Rs.1,55,90,653/- was paid by the Assessee only on 23.12.2005. The ITAT Cochin Bench in the case of Oriental Medicines (P) Ltd. Vs. ACIT, 163 Taxman 142 has held that non-availability of funds and delay in filing the return of income and audit report would be a sufficient cause for not filing audit report in time and penalty u/s. 271B should not be levied in such circumstances. We are of the view that learned CIT(A) has taken a very technical view of the matter. As rightly submitted on behalf of the assessee ultimately assessed income is less than returned income and no adverse view can be taken for non furnishing of the audit report before the specified date. We also find force in the contention by the learned counsel for the Assessee that funds are required for carrying on business also and one cannot compel the Assessee to give first priority to pay tax. We are also inclined to accept the plea of the Assessee that it believed that audit report has to be filed only along with return of income. The general practice is to file the audit report only along with the return of income and not independently. The plea of the Assessee is therefore accepted as bonafide. For the reasons given above, we direct that the penalty imposed on the assessee be cancelled.
7. Appeal of the assessee is allowed.
Order has been pronounced on 23rd Day of March, 2010.
Sd/- Sd/-
(P.M. JAGTAP) (N.V. VASUDEVAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 23rd March, 2010
Copy to : 1. The Assessee
2. The Respondent
3. The CIT(A)-concerned.
4. The CIT, concerned.
4
M/s. Echjay Forgings Pvt. Ltd.
5. The DR concerned, Mumbai
6. Guard File
BY ORDER
True copy
ASSTT. REGISTRAR, ITAT, MUMBAI
PS