Income Tax Appellate Tribunal - Delhi
Imran-Ur-Rehman Kidwai vs Income-Tax Officer on 14 March, 1997
Equivalent citations: [1997]62ITD33(DELHI)
ORDER
1. This appeal by the assessee is directed against the order passed by the learned CIT (Appeals) confirming the levy of penalty of Rs. 1 lakh under section 271B of Income-tax Act, 1961.
2. The Assessing Officer observed that the assessee was required to get his accounts audited before 31st October, 1990 as per provisions of section 44AB. The assessee submitted his return of income on 31st August, 1990 unaccompanied by the audit report in the prescribed form as required under section 44AB. A show-cause notice dated 8-1-1991 was issued. After change of jurisdiction, the successor ITO also issued another show-cause notice on 17-7-1991. The assessee after taking some adjournments finally submitted a reply dated 30th July, 1991. In this reply it was stated that the assessee had filed balance-sheet, trading and profit and loss account and audit report in Form Nos. 3CA and 3CD dated 11th April, 1990 duly signed by the Chartered Accountant. The said report might have been misplaced and hence the assessee submitted one more copy of the audit report in the prescribed form. It was also stated that this audit report was already filed with the Indian Oil Corpn. and Canara Bank in May 1990 itself to get the limit increased. The Assessing Officer after considering the said reply came to the conclusion that no audit report was filed with the return of income. He further observed that the assessee has not produced any evidence having got the accounts audited in time. He, therefore, levied a penalty of Rs. 1 lakh under section 271B of the Act.
3. The learned CIT (Appeals) observed that the provisions relating to section 271B had undergone an amendment by the Finance Act, 1988 w.e.f. 1-4-1989 which, inter alia, provides for levy of penalty in a case where the assessee has failed to furnish the audit report along with the return of income filed under section 139(1) of the Act. The CIT observed that even if it is accepted that the assessee had got its accounts audited before the specified date and had obtained its audit report before that date, the default of non-furnishing of such audit report along with the return of income is still there. The CIT (Appeals) also examined the acknowledgement receipt and the return filed by the assessee and found that no audit report in Form Nos. 3CA and 3CD or forwarding letter thereof had been furnished along with the return. He, therefore, confirmed the said penalty.
4. The learned counsel for the assessee submitted that the assessee had duly submitted the audit report in the prescribed form along with the return of income. He pointed out that the balance sheets and other statements annexed with the return of income clearly contain a footnote indicating that those statements were duly signed by the auditors with the remark's as per our report of event date', beading the date of 10th April, 1990. The audit report submitted by the assessee along with the return of income might have been misplaced. He also drew my attention to section 139(9), which was also simultaneously amended when the provisions of section 44AB were amended. My attention was also drawn towards the Board's Circular No. 274 dated 23rd June, 1980 published in [1981] 131 ITR (St.) page 57 in which it was, inter alia, clarified that where the accounts of the assessee have been audited, the return should be accompanied by copies of the audited profit and loss account, balance sheet and the auditor's report. The omission to enclose these documents should be treated as a defect for which notice under section 139(9) should be issued to the assessee. The learned counsel submitted that no notice under section 139(9) was issued to the assessee. The first notice issued by the Assessing Officer was a letter dated 8th January, 1991 in which it was indicated that the return was not accompanied with the audit report. The assessee submitted a reply dated 16-1-1991 and it was submitted that at the time of filing the income-tax return, the assessee had duly furnished balance sheet, trading and profit and loss account and audit report in prescribed Form Nos. 3CA and 3CD dated 11-4-1990 duly signed by the Chartered Accountant. The assessee once again enclosed copies of the audit reports in Form Nos. 3CA and 3CD along with the balance sheet with the said reply dated 16-1-1991. These facts, according to the learned counsel for the assessee, clearly supports his contention that the assessee had duly obtained the audit report before the specified date and had also furnished the same along with the return of income. Even assuming that it was inadvertently not enclosed with the return of income, the said defect was removed as soon as show-cause notice was received by the assessee from the Assessing Officer. The learned counsel for the assessee also submitted that there was no element of guilty intention on the part of the assessee. The assessee had duly furnished the said audit report not only with the return of income but it was also submitted before authorities such as IOC and Canara Bank. An affidavit of the Chartered Accountant was also submitted before the departmental authorities to prove the correctness of the fact that the audit report was given by him on 11-4-1990. The learned counsel thus strongly urged that the penalty should be cancelled.
5. The learned DR strongly supported the order of the CIT (Appeals). He placed reliance on the elaborate reasons recorded in the penalty order as well as in the order of the CIT (Appeals). The learned DR also produced asstt. records of the assessee. He pointed out that in the list of annexures given in Part V containing list of documents/statement attached with the return, the audit report does not find a mention in the said list. The audit report is also not attached along with the original return lying in the assessee's file. The learned DR thus strongly urged that the order of the CIT (Appeals) should be confirmed.
6. I have carefully considered the submissions made by the learned representatives of the parties and have perused the orders of the learned departmental authorities. I have also perused the various documents submitted in the compilation both by the assessee as well as by the learned DR.
6.1 The photocopy of part V of the return submitted by the assessee, inter alia, shows one of the documents annexed with the return is "Balance sheet as on 31-3-1990". There is no mention of the trading and profit and loss account in the said list of documents mentioned in Para V. However, the copy of audited trading and profit and loss account was also found annexed with the return of income, though it does not find a specific mention in the list of documents stated in para V of the return. It is also evident from the copies of balance sheet and trading and profit and loss account, supplied by the learned DR from records that these documents contain the seal and signature of the auditors with the clear remark "as per our report of even date". The said audited statement bear the date of 10-4-1990 as well as the seal of M/s. B.V. Mahendru & Associates, CA, New Delhi. It is also an undisputed fact that the said audited report was furnished by the assessee to the IOC as well as to the Canara Bank in the month of May 1990 and July 1990 respectively. The copy of the auditors' report submitted in the compilation shows that the auditors had signed the said report on 10th April, 1990. The auditors have also given an affidavit confirming this fact.
6.2 The provisions of section 271B as it stood in the relevant year provided for levy of penalty for failure on the part of the assessee to get his accounts audited before the specified date, for failure to obtain the audit report in the prescribed form before the specified date and for failure to furnish the said audit report along with the return of income submitted under section 139(1).
6.3 In the present case, the assessee had duly got his accounts audited before 10th April, 1990. The audit report was also obtained on 10/11th April, 1990 as is evident from the copy of the audit report itself and from the facts discussed hereinbefore. The only dispute is as to whether the assessee furnished the said audit report along with the return of income submitted by him on 31st August, 1990. The assessee contends that the said audit report was duly furnished. However, according to the records of the Assessing Officer and as per the view taken by the departmental authorities, said audit report was not furnished along with the original return of income.
6.4 The provisions of section 273B, inter alia, provides that notwithstanding anything contained, inter alia, in section 271B, no penalty shall be imposable on the person for any failure referred to in the said provision if he proves that there was reasonable cause for the said failure. In the instant case, the assessee was of the bona fide belief that the audited report duly obtained by him in the prescribed form on 10th or 11th April, 1990 was duly furnished with the return of income furnished on 31st August, 1990. The bona fide belief so formed by the assessee is further supported by the fact that the balance sheet and the trading and profit and loss account which are available in the records of the Assessing Officer along with the original return of income clearly shows that the said balance sheet and trading and profit and loss account was duly signed by the auditors Shri D.V. Mahendru with the clear remark of "as per our report of even date". The said audited statements also bear the date of 10th April, 1990. These facts and circumstances clearly prove that the assessee had duly obtained the audit report within the prescribed time and in the normal course there was no reason for not annexing the said audit report along with the return of income. Even if it is assumed that the report in the prescribed form was not annexed with the return, the same could be only on account of an innocent omission on the part of the person, who prepared and submitted the return. There could be no guilty intention on the part of the assessee in not annexing the said audit report, although it was obviously obtained by him from the concerned auditors' in the month of April 1990. The law does not provide for levy of penalty for such a technical and innocent mistake. The assessee for the first time received a notice from the Assessing Officer in the month of January 1991. In reply dated 16-1-1991, the assessee had submitted that the audited balance sheet, trading and profit and loss account and auditors' report in the prescribed Form Nos. 3CA and 3CD were duly submitted with the return of income. Till that point of time the assessee had the same bona fide belief that the auditors' report was duly annexed with the return of income. However, as a measure of cooperation to the Department, the assessee submitted copies of the auditors' report in the prescribed Form Nos. 3CA and 3CD along with the said reply dated 16-1-1991. The Assessing Officer had not issued any notice under section 139(9) prior to the notice which was sent on 8-1-1991. The assessee within a period of less than 15 days has removed the said defect while supplying the copy of the audit report in the prescribed form. The defect in the original return, namely, non-annexing of the audit report in the prescribed form, even if it existed, was cured and removed by the assessee vide his aforesaid reply dated 16-1-1991.
6.5 The facts of the aforesaid case clearly prove that there was no guilty intention on the part of the assessee. The preponderance of probabilities, as emerging out of the facts and circumstances narrated above indicate that the assessee in the normal course might have submitted the auditors' report along with the original return, which might not have been found available by the Assessing Officer when he took up the case for hearing. Such probabilities are indicated by the fact that in the audited balance sheet and profit and loss account annexed with the return, there is a clear reference of the fact of auditors' report of even date under reference to which the auditors had signed the said balance sheet. Even assuming that the report was inadvertently not annexed with the return, such an innocent and inadvertent mistake on the part of the person, who submitted the said return, would constitute a reasonable cause in terms of section 273B of the Act.
6.6 Considering the totality of the facts and circumstances of the present case, I am of the view that it is not a fit case where any penalty under section 271B can be validly sustained. The Assessing Officer is, therefore, directed to cancel the same.
7. In the result, appeal is allowed.