Income Tax Appellate Tribunal - Jaipur
Raj Kumari Bafna, Beawar vs Ito, Beawar on 14 December, 2016
vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj
IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES (SMC), JAIPUR
Jh HkkxpUn] ys[kk lnL; ds le{k
BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER
vk;dj vihy la-@ITA No. 837/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2013-14
Smt. Raj Kumari Bafna Cuke The ITO
Prop. M/s. Kesharia Cotton Suppliers Vs. Ward- 1
Mewari Gate, Beawar Beawar
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AJPPB 3050 M
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@Assessee by: Shri Mukesh Agarwal
jktLo dh vksj ls@ Revenue by :Smt. Poonam Rai, DCIT-. DR
lquokbZ dh rkjh[k@ Date of Hearing : 08/12/2016
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 14 /12/2016
vkns'k@ ORDER
PER BHAGCHAND, AM
The assessee has filed an appeal against the order of the ld.
CIT(A), Ajmer dated 13-07-2016 for the assessment year 2013-14 raising therein following ground:-
''That the lower authorities were not justified in law and on facts of the case in imposing penalty of Rs. 1,50,000/- u/s 271B of the Act on the low educated and innocent appellant for failure on part of the auditor or A.R. in uploading the audit report as introduced and required first time.'' 2 ITA No. 837/JP/2016 Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
2.1 Brief facts of the case are that the return of income was filed by the assessee electronically on 21-06-2013 declaring total income of Rs. 5,45,030/-. During the assessment year under consideration, the assessee had shown total turnover of Rs. 5,31,88,064/- and thus the assessee was liable to get her accounts audited as per the provisions of Section 44AB of the I.T. Act, 1961 and to upload the same electronically on e-filing portal on or before 31-10-2013. The AO while going through the e-filed return of the assessee observed that the assessee was liable for audit u/s 44AB of the Act and as per information available on e-return, she got her accounts audited on 12-06-2013 as per following information furnished.
(a) Name of the auditor signing the tax audit report : MukeshAgarwal
(b) Membership No. of the auditor : 74805 © Permanent A/c (PAN) of the proprietorship/firm : AAIFM 6783 G
(d) Date of audit report : 12-06-2013 The AO observed that in this case an information was received from the Commissioner of Income (CPC), Bangalore vide letter F.No. CIT (CPC)/Audit Report/2014-15 dated 15-07-2014 addressed to Chief Commissioner of Income-tax Jaipur which was subsequently 3 ITA No. 837/JP/2016 Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
communicated to his office vide Addl. CIT Ajmer's endorsement No. 434 dated 28-07-2014 and the contents of the same are as under:-
''As you kindly be aware, in terms of Notification No. 34 dated 01-05-2013 issued by CBDT, effective from 1 April 2013, where as assessee is required to furnish a report of audit u/s 44AB or 92E of the I.T. Act, 1961 such audit report is to be uploaded electronically. Accordingly, filing of tax audit reports in Form 3CA/3CB, 3CD and 3 CEB in electronic form was made mandatory for A.Y. 2013-14. However it is observed that in a number of case the taxpayers have not submitted the audit report in form 3CA/3CB and 3CD through electronic mode in compliance with the above requirement based on the information provided by them in their returns electronically for A.Y. 2013-14. The All India chargewise summary of such cases as on 13th June 2014 is enclosed.
In this connection a CD containing Assessing Officer wise list of cases pertaining to your charge is enclosed where the taxpayer have not uploaded the relevant audit report in this e-filing portal even though they may not be liable for audit u/s 44AB as per the returns of Income for assessment year 2013-14. The information may kindly be disseminated to concern Assessing Officer of your charge for examination and action u/s 271B of the Act, if deemed fit.'' The AO thus observed that the name of the assessee was contained in the said CD and the assessee had not uploaded the audit report u/s 44AB of the I.T. Act in form 3CB and 3CD electronically on e-filing portal which was to be uploaded on or before 31-10-2013 as per CBDT Notification No 34 dated 01-05-2013 for which the assessee was show caused by the AO vide his letter dated 19-09-2014 and the same was served upon the 4 ITA No. 837/JP/2016 Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
assessee through Speed Post AD. The ld. AR of the assessee filed the detailed reply on 23-09-2014 which was not found convincing by the AO. However, in the interest of natural justice, one more opportunity was given to the assessee by the AO vide notice dated 13-02-2015 with direction to appear personally or through his authorized representative or to furnish a written reply on 19-02-2015. In response to said notice, the assessee furnished reply on 19-02-2015 which was almost copy of the reply already furnished before the AO. The AO thus examined both the replies of the assessee and observed that the assessee had committed default of non-uploading of audit report on e-filing portal in electronic mode. The assessee had got her accounts audited on 12-06-2012 as mentioned in the e-return filed by the assessee and the assessee had ample time to upload the audit report in electric form on or before 31-10-2013 as CBDT had extended the date of uploading audit report from 30-09-2013 to 31-10-2013 after considering the genuine difficulty of the assessee in uploading the audit report in electronic form. The AO thus observed that the assessee could not prove the reasonable cause for failure to furnish the audit report in electronic form as her audit was completed by her CA on 12-06-2013 as mentioned in e-filed return. The AO thus observed that it was a deliberate defiance of law and no cogent reasons for compliance of 5 ITA No. 837/JP/2016 Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
statutory provisions of law could be proved in this case. In view of above facts and circumstances of the case the AO imposed a penalty of Rs. 1.50 lacs vide his order dated 17-03-2015.
2.2 Being aggrieved, the assessee carried the matter before the ld.
CIT(A) who had confirmed the action of the AO by observing as under:-
''4.3 I have gone through the penalty order, statement of facts, grounds of appeal and written submission carefully. It is seen that the assessee did not file the audit report u/s 44AB. The appellant has justified this non-compliance on the ground that it was due to mistake of the auditor and it was the first year for uploading the audit report. I am of the considered view that none of the reason given by the appellant can be accepted as reasonable cause for not filing the audit report. If such type of excuses are acceptable as reasonable cause for not furnishing the audit report then no penalty u/s 271B could be levied in any case because the audit reports has to be uploaded by the auditor only and assessee can always claim that it was the mistake of the auditor if the audit report as not uploaded, for which he should be penalized. Though it was the first year for uploading the audit report online yet it cannot be accepted that it was not possible for the assessee to upload the audit report just because it was first year. I fail to understand, if other assessee can upload the audit report then why the appellant could not upload the audit report. In view of the facts discussed above, I am of the opinion that there was reasonable cause for not furnishing the audit report u/s 44AB in respect of A.Y. 2013-14. Hence, the penalty of Rs. 1,50,000/- levied by the AO u/s 271B is hereby confirmed.
5.0. In the result, the appeal is dismissed.'' 2.3 During the course of hearing, the ld. AR of the assessee prayed that the lower authorities have erred in imposing the penalty of Rs. 1.50 lacs 6 ITA No. 837/JP/2016 Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
u/s 271B of the Act for which the assessee of the assessee filed the following written submission.
''1. That the appellant is regular income tax assessee since long who has been getting her accounts audited by Chartered Accountants since when she was liable for the same u/s. 44AB. However she was not required to file the audit report to the ld. AO as there was no system of e-filing the same.
2. That in that order the appellant got her accounts audited by Chartered Accountants u/s. 44AB for the year under appeal on 12/6/2013 and e-filed her return of income digitally signed by her on 21/6/2013 as required by law for e-filing of audited return. (Page 1)
3. That the appellant being low educated say IXth standard does not know about the e- filing system particularly uploading of audit report on internet as introduced and required first time. Such notifications bearing nos. 34 dated 1.5.2013 specifying in rules and subsequently procedural notifications bearing nos. 36 dated 23/5/2013 and 44 dated 19/6/2013 came simultaneously that time when her accounts were being audited and return was being filed.
4. As per law itself say notification such audit report was to be uploaded by the Chartered Accountants who audited her books of accunts.
5. That while e-filing the return appellant through her A/R mentioned all facts of auditing of accounts of her business with all required particulars as required to be filled in relevant part of Audit Information in Part A-GEN and "Part A-O1" of the return itself being optional in case of non audit case ,as mentioned in the penalty order too. (Page 30 )
6. That hard copy of the Audit Report duly signed by the auditor has also been furnsined to the ld. AO which he never admitted and mentioned in his order.
7. That such audit report could not be furnished with the return due to limitation in filing of the same with the return. However full details thereof was furnished in the return itself in relevant query "Part A-O1" of the return itself being optional in case of non audit case.
8. Initially, there was a faulty system of uploading the Tax Audit Report and the said utility/software was not functioning properly so the audit reports could not be uploaded. There was a constant change in the utility by the Income Tax Department (12 times). Actually, the department had changed the utility every week and sometimes even two or three times in a week. Further the utility introduced by the Government did not have facility to Print Report hence the Chartered Accountants had to input the Financials thrice, once in the Tax Audit utility and then again in the Word format to enable Print outs and submissions at various forums and then again input into the ITRs for return filing. Further whenever the new utility was updated , there were instances that the old data vanished by itself and the CA had to start his data entry from scratch.
9. The problem being faced by the assessees as well as tax professionals in not being able to file the income tax return and the audit report electronically was further confounded and aggravated, as on 30.09.2013, the server/site of the Income Tax Department crashed with the result that the returns and reports which were required to be filed electronically could not 7 ITA No. 837/JP/2016 Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
be filed. The site of the Department was not working which is evident from the fact that despite several attempts at regular intervals the returns could not be uploaded.
10. A writ petition was also been filed in this regard before the Delhi high court. Consequently in exercise of power u/s. 119(2)(a) r.w.s. 139 and Rule 12, CBDT vide order dated 26.09.2013 extended the due date for obtaining and furnishing of Tax Audit Report under section 44AB of the Act for Assessment Year 2013-14 from 30th September, 2013 to 31st October, 2013 subject to certain conditions.
11. In the instant case, Audit report was obtained on 16.09.2013 and was attempted to be furnished along with ITR on 21.6.2013 however the same was not uploaded due to technical reason beyond the control of the assessee. The copy ITR Form, Acknowledgement, and Tax audit Report dated 12.06.2013 were furnished to the ld. AO. Assessee during this phased was under a bona fide belief that the report is already uploaded. It was only when show cause notice dated 4.3.2015 asking the assessee as to why penalty u/s 271B should not be imposed was received, assessee came to know that the report was not uploaded due to technical and other error and immediately in response to show cause, he filed the tax audit report dated 12.6..2013 before the assessing officer.
12. In the case of R. Wadiwala & Co. vs. ACIT 72 TTJ 0034(Ahd.Trib) it has been held in the context of sec. 271B r.w.s sec. 44AB that "bonafide belief" is a reasonable cause for avoiding penalty. The bonafide explanation of the assessee can also be proved on perusal of the return of income filed on 21.6..2013 as there is no change in figures of profit and loss account and balance sheet of tax audit report. This clearly proves that Audit report was obtained on 12.06.2013 and the same was not uploaded due to technical error.
13. As such e-filing of the audit report might be omitted in following circumstances and misimpressions-
1).Notification for such requirement or obligation came in public after or simultaneously the appellant got her accounts audited.
2). As explained by the auditor, he/his office team tried to submit the same on online system and he was in the misimpression that the same has been submitted/filed.
3).Such report was omitted to be uploaded for inadvertence on part of the auditor. An affidavit duly executed by him was also furnished to the ld. CIT(A).
(Page 34 )
14. That the ld. AO imposed penalty of Rs.150000/- u/s. 271B for not uploading of audit report on internet which the ld. CIT(A) confirmed.
15. In view of following judgements of Hon'ble High Courts and decisions of Hon'ble Tribunals audit report furnished with return filed belatedly is a valid report as the appellant got the same in time.
CIT vs. K.K. SPUN PIPE (2006) 200 CTR (P&H) 107 : (2006) 284 ITR 301 (P&H) CIT vs. JANTA SERVICE STATION (2001) 251 ITR 347 (P&H) : (2002) 121 TAXMAN 9 (P&H) CIT vs. APEX LABORATORIES (P) LTD. (2006) 284 ITR 364 (Mad) : (2006) 156 TAXMAN 385 Penalty under s. 271B--Delay in filing audit report--Audit report filed along with return under s. 139(4)--Audit report under s. 44AB was obtained before the specified date though furnished along 8 ITA No. 837/JP/2016 Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
with the return filed under s. 139(4)--Penalty under s. 271B not leviable--ITO vs. Kaysons India (2000) 163 CTR (P&H) 75 : (2000) 246 ITR 489 (P&H) and CIT vs. Ashoka Dairy (IT Ref. No. 61 of 1995) followed
16. In view of following judgements and decisions of Hon'ble High Courts and Tribunals penalty should not be levied for mistake committed by other person like A/R or chartered Accountant-
ACIT & ANR. vs. DR. K. SATISH SHETTY (2009) 310 ITR 366 (Kar) :
ITO vs. GULABDASS STORES (2000) 69 TTJ (Jd) 472
17. As explained in CBDT's circular No 3 of 2009 "7. Following clarifications are also issued in respect of certain issues arising from furnishing the returns in the above mentioned forms:
(i) An assessee should obtain the report of audit from an accountant under section 44AB of the Act on or before the due date of the furnishing of the return and should fill out the relevant columns of the return forms on the basis of such report. However, the report of audit should not be attached with the return or furnished separately any time before or after the due date. The assessee should retain the report with himself. If called for by any income-tax authority during any proceeding under the Act, it shall be incumbent upon the assessee to furnish/produce the same in original. No penalty under section 271B shall be initiated or levied for not furnishing the tax audit report on or before the due date. However, if the audit report has not been obtained before the due date, provisions of section 271B shall continue to be attracted."
18. 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) 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.
(b) The said Report of Audit should however be furnished electronically on or before 31.10.2013.
But Auditor, appellant and his AR were in the impression that audit report has been filed/uploaded and hence he could not stepped out to file the same manully.
19. Further the same is technical breach taken place first time in the circumstances mentioned above. Non submission or unploading of report renders the return deficitive u/s. 139(9)(bb) which should have first been got rectified by the ld. AO. Further the appellant did not receive any notice from the ld. AO for making correction in the return or to remove deficiency. In view of following judgment of jurisdictional High Court such penalty is not imposable.
BAJRANG OIL MILLS vs. ITO (2007) 207 CTR (Raj) 1 : (2007) 295 ITR 314 (Raj) Penalty under s. 271B--Failure to get accounts audited--Reasonable cause--Not annexing the required audit report with the return would make the return defective--In such event the AO is under an obligation to issue notice calling upon the assessee to furnish the report within 15 days--
9 ITA No. 837/JP/2016Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
Where an objection is raised by the assessee that he is not under an obligation to get his accounts audited under s. 44AB, AO has to decide such objection before taking any decision about validity of the return--In case the AO accepts the objection, he would proceed with the assessment on the basis of return already submitted before him--However, in case the objection is overruled, the AO is required to call upon the assessee to comply with the provisions of s. 44AB within reasonable time--Question of levy of penalty under s. 271B cannot arise until that stage has arisen--It cannot be said that in all cases where ultimately the assessee's objection as to its obligation to get its accounts audited under s. 44AB or for non-compliance of any provision is overruled, the reason for non-compliance is to be considered to be not bona fide--Fact that the Court while considering the admission of this appeal has found that interpretation of s. 44AB is a substantial question of law prima facie suggests that the interpretation of s. 44AB was not self-evident and it needed an examination of provisions--Further, failure to comply with such procedural provisions under a bona fide belief that the assessee is not required to act in a particular manner under the statute amounts to a venial and technical breach for which penalty is not leviable IMRAN-UR-REHMAN KIDWAI vs. ITO (1997) 58 TTJ (Del) 537 : 62 ITD 33 Penalty under s. 271B--Reasonable cause--Copies of balance sheet and trading and P&L a/c contain the seal and signature of auditors with clear remark "as per our report of even date"-- Said audited statements bear the date of 10th April, 1990, as well as the seal of the Chartered Accountant--Copy of auditors' report also shows that auditors had signed the report on 10th April, 1990--Thus assessee duly got his accounts audited before 10th April, 1990 and also obtained the audit report--Omission to furnish it was only due to bona fide belief that it was duly furnished with the return--There was reasonable cause--There could be no guilty intention in not annexing the said report--Law does not provide for levy of penalty for such a technical and innocent mistake-- Assessee has submitted copies of report along with reply to show-cause notice--Penalty cannot be sustained
20. This is first time when assessee or she was required to e-file the audit report and prior to that no such reports were being furnished. And she was in the impression like that. In view of following judgements and decisions of Hon'ble High Courts and Tribunals penalty should not be levied for such default committed first time-
ACIT & ANR. vs. DR. K. SATISH SHETTY (2009) 310 ITR 366 (Kar) :
21. That in view of following judgements of Hon'ble High Courts and decisions of Hon'ble Tribunals that penalty is not imposable in the case when appellant was in bonafide belief that he was not required to furnish the audit report as it was introduced first time during the year under appeal-
CIT & ANR. vs. IQBALPUR CO-OPERATIVE CANE DEVELOPMENT UNION LTD. (2009) 23 DTR (Uttarakhand) 60 : (2009) 179 TAXMAN 27
22. That in view of following judgements of Hon'ble High Courts and decisions of Hon'ble Tribunals that penalty is not imposable in the case when default in furnishing the audit report is mere accidental rather than willful attempt-
JCIT vs. DAINIK ASSAM (P) LTD. (2004) 3 SOT 542 (Gau) SUJATA TRADING (P.) LTD. vs. INCOME TAX OFFICER (2015) 170 TTJ 0396 (Mum) Penalty--Failure to get accounts audited--Assessee company filed its return of income through E-filing process for year under consideration--No dispute that turnover of assessee company exceeded thresh hold limit prescribed under Section 44AB and hence assessee required to get its account audited as per provisions of Section 44AB--AO took view that assessee did not get its accounts audited under Section 44AB and initiated penalty proceedings under Section 271B--CIT(A) confirmed penalty--Held, assessee filed return of income under E filing procedure--"Part A-O1" of return of income requires assessees liable for audit under Section 44AB to furnish certain information--Same is optional for assessees who not liable for audit under section 44AB--Information to be given in "Part A-O1" contains details to be furnished in Form No.3CD--Assessee duly furnished all details under "Part A-O1" of return of income--Audit under Companies Act and under Section 44AB was conducted by very same auditor and he confirmed fact by filing an affidavit--Assessee could have obtained audit report under Section 44AB before filing return of income and had inadvertently filled relevant column wrongly as "NO"--Assessee could have obtained tax 10 ITA No. 837/JP/2016 Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
audit report before due date for filing return of income--No justification for levying penalty u/s 271B-- Order of CIT(A) set aside--AO directed to delete penalty levied in hands of assessee under Section 271B-- Appeal dismissed.
THEREFORE we pray your honour that the ld. lower authorities were not justified in law and on facts of the case in imposing penalty on the low educated and innocent female appellant for failure on part of the auditor or AR in uploading the audit report as introduced and required first time.'' 2.4 The ld. DR relied on the orders of the authorities below.
2.5 I have heard the rival contentions and perused the materials available on record. It is noted from the records that the assessee had not uploaded the audit report on e-filing portal in electronic mode for which the AO imposed the penalty of Rs. 1.50 lacs u/s 271B of the Act which had also been confirmed by the ld. CIT(A). It is noticed from the records that the assessee had filed the return of income for the assessment year 2013-14 on 21-06-2013 electronically and the assessee got her accounts audited on 12-06-2013. It is also noticed from the records that copy of ITR Forms, acknowledgement and tax audit report dated 12-06-2013 were furnished to the AO. The CA of the assessee could not upload the audit report because of technical problem in the server/ site of the Department. The assessee was under bona fide belief that the report is already uploaded. However, the assessee had filed the tax audit report dated 12-06-2013 before the AO. It is also noticed that the assessee being low educated and she was not aware of the e-filing system particularly 11 ITA No. 837/JP/2016 Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
uploading of audit report on internet as it was first time introduced by the Department to upload the same. It appears that it is a technical breach on the part of the assessee as the audit report could not upload on account of site/ server problem of the system. The ld. AR of the assessee relied on various case laws which have been taken into consideration. The ld. AR of the assessee taking the support of the Hon'ble Kerala High Court in the case of ACIT & Anr vs. Dr. K. Satish Shetty (2009) 310 ITR 366 submitted that that this is first time when assessee was required to e-file the audit report and prior to that no such reports were being furnished.
Hence, the penalty should not be levied. In view of the above facts and circumstances of the case, I am of the considered view that the penalty imposed by the lower authorities u/s 271B of the Act on the assessee is not justifiable as the audit report was to be uploaded by the Chartered Accountants who audited her books of account and the assessee was low educated and she had under bona fide belief that the same had been uploaded in the system developed by the Department. In such a situation, I direct to delete the penalty of Rs. 1.50 lacs levied u/s 271B of the Act.
Thus the appeal of the assessee is allowed.
12 ITA No. 837/JP/2016 Smt. Raj Kumari Bafna vs. ITO, Ward- 1, Beawar .
3.0 In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 14/12/2016
Sd/-
¼HkkxpUn½
(Bhagchand)
ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 14 /12/ 2016
*Mishra
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Smt. Raj Kumari Bafna, Beawar
2. izR;FkhZ@ The Respondent- The ITO, Ward- 1, Beawar
3. vk;dj vk;qDr¼vihy½@ CIT(A).
4. vk;dj vk;qDr@ CIT,
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 837/JP/2016 ) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar