Income Tax Appellate Tribunal - Pune
Prachin Group,, Raigad vs Assessee on 19 August, 2016
आयकर अपील
य अ धकरण "बी" यायपीठ पण
ु े म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, PUNE
ी आर. के. पांडा, लेखा सद य, एवं ी #वकास अव थी, या%यक सद य के सम& ।
BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No. 877/PN/2015
%नधा(रण वष( / Assessment Year : 2008-09
Prachin Group,
B-1, Ashoka Garden,
Mahatma Phule Road,
Panvel, Distt.-Raigad
PAN : AAIFP8108L
.......अपीलाथ / Appellant
बनाम / V/s.
Asstt. Commissioner of Income Tax,
Panvel Circle, Panvel
......
यथ / Respondent
Assessee by : None (Written Submission)
Revenue by : Shri P.L. Kureel
सन
ु वाई क तार ख / Date of Hearing : 18-08-2016
घोषणा क तार ख / Date of Pronouncement : 19-08-2016
आदे श / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-2, Thane dated 17-04-2015 for the assessment year 2008-09 confirming the levy of penalty u/s. 271B of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for violating the provisions of section u/s. 44AB of the Act. 2 ITA No. 877/PN/2015, A.Y. 2008-09
2. The brief facts of the case as emanating from records are: The assessee is engaged in the business of dealing in properties and services relating to land and properties. The assessee filed his return of income for the impugned assessment year on 30-03-2009 declaring total income of `29,51,840/-. Along with the return of income, the assessee filed audited Profit and Loss account, Balance Sheet and Audit Report. The case of the assessee was selected for scrutiny and accordingly notice u/s. 143(2) was issue to the assessee. The Assessing Officer vide order dated 14-12-2010 accepted the income returned by the assessee by making minor disallowance on account of donations `35,250/- and disallowance u/s. 40(a)(ia) `73,700/-. However, the Assessing Officer initiated penalty proceedings u/s. 271B for delay in filing of Audit Report as envisaged u/s. 44AB of the Act. The Assessing Officer vide order dated 28-06-2011 levied penalty of `1 lakh u/s. 271B for delayed filing of audit report. The assessee filed appeal against the order levying penalty u/s. 271B of the Act. The Commissioner of Income Tax (Appeals) discarded the explanation furnished by the assessee for delay in getting the accounts audited and furnishing the same along with the return of income filed within the extended period for filing of return of income as provided u/s. 139(4) of the Act. Now, the assessee is in second appeal impugning the order of First Appellate Authority in confirming the levy of penalty u/s. 271B of the Act.
3. The ld. AR of the assessee filed written submissions which are as under :
"1. FACTS OF THE CASE:
The appellant is a firm has submitted its return of income declaring total income of Rs.29,51,840/- on 30/03/2009. During the course of 3 ITA No. 877/PN/2015, A.Y. 2008-09 assessment proceedings the appellant firm has revised its computation of income in view of disallowances under section 40(a)(ia) of the Act and declared income of Rs.30,25,544/-. The same has been accepted by the learned assessing officer and made assessment u/s. 143(3) by assessing the income at Rs. 30,25,540/-.
The assessing officer has levied the penalty of Rs.1,00,000/- u/s 271B of the Act on account of getting books of accounts audited u/s. 44AB of the Act on 20TH JANUARY, 2009 whereas the same should have been done before the specified date i.e. 30th September, 2008. The delay was of 3 months and 20 days only.
The learned Commissioner of Income Tax (A), Thane has erred in not considering the submission and explanation furnished before him and confirmed the penalty levied u/s. 271B of the Act. The appellant has reasonable cause which prevented him for not getting books of accounts audited before the specified date.
It is apparent on records that:
1. The Tax Audit Report u/s 44AB of the Act for the assessment year 2008-09 has been obtained on 20/01/2009.
2. In view of this the delay was for only 3 months and 20 days.
3. The said appellant was prevented by reasonable cause not getting books of accounts audited u/s.
44AB before the specified date.
2. LEVY OF PENALTY OF Rs.1,00,000/- U/s. 271B OF THE INCOME TAX ACT:
1. Your honour, it is humbly submitted that the delay in obtaining the tax audit u/s. 44AB of the Act for A.Y. 2008-09 due to major two reasonable causes:
a. The accountant has left the job during the Financial year 2007-08 and the books of accounts were completed later by the new accountant. Therefore, under the such circumstances where the accountant left his services during the impugned year without finalizing accounts and another accountant was engaged and that resulted in delay in 4 ITA No. 877/PN/2015, A.Y. 2008-09 finalizing accounts as well as getting accounts audited. The said reply was submitted during the penalty proceedings vide letter dated 15th June, 2010. The copy of the said letter is being attached herewith for your kind perusal and ready reference.
The appellant has further submitted during the course of penalty proceedings that his major source of income is service charges received from M/s. Maxpro Associates which is his sister concern. The said income is earned on the purchases and sale transactions of land effected through appellant by M/s. Maxpro Associates. The said income is accounted for on the basis of credit notes issued by M/s. Maxpro Associates. M/s. Maxpro Associates could not finalise their books of accounts in time and therefore it could not issue credit notes to the appellant for the last quarter of the year ended on 31.03.2008. The appellant couldn't make necessary entries in its books of account of service charges receivable from M/s. Maxpro Associates. M/s. Maxpro Associates has issued said credit notes in the month of December, 2008 only. The appellant could make necessary entries in its books of account as and when said credit notes are received.
The appellant could finalized his books of accounts only after appointing a new accountant and obtaining credit notes from M/s. Maxpro Associates. The auditor of the appellant firm completed his audits after making necessary verification and handed over tax audit report to the appellant firm on 20/01/2009.
In view of above reasonable causes the penalty u/s. 271 B should have not been levied.
b. Your honour it has been held in various decisions that mere failure to file Audit report in time will not justify levy of penalty as power u/s. 271 B is discretionary (Hon'ble Madras High Court in the case of Thanjavur Silk Union of India reported in 263 ITR 334). Similar view has been taken by the Hon'ble Calcutta High Court the case of CIT Vs. Capital Electronics (Gariahat) reported in 261 ITR 4. Since in the instant case, there is no absolute default 5 ITA No. 877/PN/2015, A.Y. 2008-09 and the assessee has filed Audit report although belatedly, we are of the considered opinion that there was bonafide reasons for not getting the accounts audited before the statutory due date and therefore this is not a fit case for levy of penalty u/s. 271 B of the I.T. Act.
We have also relied upon the decision of Hon'ble Income Tax Appellate Tribunal Pune, Bench "A" in the matter of:
Prachin Land Infra Pvt. Ltd. Vs. I TO, Ward -2, Panvel (ITA No. 917/PN/2013 of Asstt. Year: 2007-08).
c. Your honour, obtaining Tax Audit Report u/s. 44AB of the Act by the appellant, is not a malafide intention of the appellant to defraud the revenue and there is no loss to the revenue. It is a technical breach of law and it should have been pardoned.
In case of Hindustan Steel Ltd. Vs. State of Orissa 86 ITR 26 [Supreme Court] wherein it is held that technical breach of provisions of law has to be pardoned when the same is bonafide and there is no loss to revenue.
d. Your honour, the Appellant has made detailed submission to the Assessing Officer during the course of penalty proceedings vide its letters dated 15/06/2010 in response to its notice u/s. 274 read with Section 271 B of the Act. The copies of letters are enclosed here with for your ready reference and kind perusal.
e. Your honour, the appellant was prevented by reasonable cause as mentioned herein above. There is no mens rea of the appellant in the impugned matter.
We relied upon the following case laws:
The appellant citing the case law of Spectrum Marketing v. ITO humbly submits that there was no deliberate or intentional inaction on the part of the assessee to comply with the requirements of section 44AB before the specified date. So a lenient view must be taken in its case.
f. The appellant has obtained the tax audit report u/s. 44AB of the Act belatedly i.e. after specified due date of obtaining the same. There is no absolute default by the appellant.6 ITA No. 877/PN/2015, A.Y. 2008-09
We rely upon the following case laws:
1. Hemant Ramchandra Oake vs. ITO Ward-2, Panvel [ITA No. 920/PN/2013 of AY 2007-08 of ITAT Pune "A" Bench]
2. Prachin Land Infra Pvt. Ltd. vs. ITO Ward-2, Panvel [ITA No. 917/PN/2013 of AY 2007-08 of ITAT Pune "A" Bench ] Therefore, we request your honour that under these circumstances, the appellant could not get his accounts audited u/s. 44AB of the Act on or before 30/09/2008 since he has been prevented by reasonable cause as narrated hereinabove.
Your honour, in view of the submission made hereinabove and in view of the facts and circumstances of the case, there is reasonable cause and we request your honour to kindly delete the penalty of Rs.1,00,000/- levied u/s. 271 B of the Act against the appellant."
4. On the other hand Shri P.L. Kureel representing the Department vehemently supported the order of Commissioner of Income Tax (Appeals) in confirming the levy of penalty u/s. 271B of the Act. The ld. DR contended that the assessee has violated the provisions of section 44AB of the Act by not filing the audit report within the specified time. The explanation furnished by the assessee for delay in finalization of the accounts and the audit of the accounts has been rightly rejected by the authorities below as the same were not supported by any cogent evidence.
5. We have heard the submissions made by the ld. DR and have perused the written submissions furnished on behalf of the assessee and the orders of the authorities below. As per the provisions of section 44AB of the Act the, the assessee was required to get accounts audited for the assessment year under appeal on or before 30-09-2008. 7 ITA No. 877/PN/2015, A.Y. 2008-09 However, the assessee could get the accounts audited on 20-01-2009. Thus, there was delay of 3 months and 20 days in getting the accounts audited and obtaining tax audit report u/s. 44AB of the Act. A perusal of the written submissions filed by assessee and impugned order shows that the delay in getting the accounts audited was for the reason that the Accountant of the assessee left his service without finalization of the accounts. The assessee engaged the service of another Accountant. The newly appointed Accountant took some time to pick up the threads of the work left in between by the outgoing incumbent. Further, it has been submitted that the major source of income of assessee is service charges received from M/s. Maxpro Associates, a sister concern of assessee. The income from M/s. Maxpro Associates is accounted on the basis of credit notes issued. Since, M/s. Maxpro Associates could not finalize its books of account in time, M/s. Maxpro Associates issued credit notes to the assessee for the last quarter of the financial year ended on 31-03-2008 in December, 2008. The assessee finalized its books after receiving credit notes from M/s. Maxpro Associates.
However, the assessee filed the tax audit report as envisaged u/s. 44AB of the Act along with the return of income within the extended time for filing of return of income u/s. 139(4) of the Act. The explanation furnished by the assessee for delay in finalization of accounts and getting the same audited thereafter seems to be plausible. The delay in finalization of accounts was beyond the control of assessee. In the absence of finalization of accounts it was not possible for the assessee to get the same audited within the time specified under the provisions of the Act. Mere delay in filing of tax audit report as envisaged u/s. 44AB would ipso facto not attract the penalty where the delay in filing of audit report has been reasonably explained. 8 ITA No. 877/PN/2015, A.Y. 2008-09
6. The Co-ordinate Bench of the Tribunal in the case of Prachin Land Infra Pvt. Ltd. Vs. ITO (supra) in similar circumstances where the Assessing Officer levied penalty u/s. 271B for obtaining the Audit Report on 11-02-2009 as against the statutory date of 31-10-2007, deleted the penalty levied u/s. 271B of the Act. The relevant extract of the findings of the Tribunal are as under :
"6.1 ..........It has been held in various decisions that mere failure to file Audit report in time will not justify levy of penalty as power us.271B is discretionary (Hon'ble Madras High Court in the case of Thanjavur Silk Handloom Weavers Co-operative Production and Sales Society Ltd. Vs. Union of India reported in 263 ITR 334). Similar view has been taken by the Hon'ble Calcutta High Court in the case of CIT Vs. Capital Electronics (Gariahat) reported in 261 ITR 4. Since in the instant case, there is no absolute default and the assessee has filed Audit report although belatedly, we are of the considered opinion that there was bonafide reasons for not getting the accounts audited before the statutory due date and therefore this is not a fit case for levy of penalty u/s.271B of the I.T. Act. In this view of the matter, we set-aside the order of the CIT(A) and direct the Assessing Officer to cancel the penalty levied u/s.271B of the I.T. Act."
7. Similarly, in the case of Hemant Ramchandra Dake Vs. ITO (supra) the Tribunal deleted the penalty levied u/s. 271B of the Act where the audit report was furnished belatedly after obtaining the same on 16-01-2009 as against the statutory date of 31-10-2007. In the said case the finalization of accounts were delayed as the Accountant had left the service. The facts of the case are quite similar to the facts of the case in hand.
9ITA No. 877/PN/2015, A.Y. 2008-09
8. The Hon'ble Madras High Court in the case of Commissioner of Income Tax Vs. Apex Laboratories Ltd. reported as 384 ITR 364 deleted the levy of penalty u/s. 271B where the assessee filed Audit Report along with the return of income filed belatedly.
Thus, in view of the facts and circumstances of the case and the various decisions discussed above, we are of the view that this is not a fit case for levy of penalty u/s. 271B of the Act.
9. In the result, the impugned order is set aside and the appeal of the assessee is allowed.
Order pronounced on Friday, the 19th day of August, 2016.
Sd/- Sd/-
(आर. के. पांडा / R.K. Panda) (!वकास अव"थी / Vikas Awasthy)
लेखा सद"य / ACCOUNTANT MEMBER $या%यक सद"य / JUDICIAL MEMBER
पुणे / Pune; &दनांक / Dated : 19th August, 2016 RK आदे श क+ ,%त.ल#प अ/े#षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. आयकर आयु'त (अपील) / The CIT(A)-2, Thane
4. आयकर आयु'त / The CIT-2, Thane
5. !वभागीय %त%न,ध, आयकर अपील य अ,धकरण, "बी" ब/च, पुणे / DR, ITAT, "B" Bench, Pune.
6. गाड1 फ़ाइल / Guard File.
//स या!पत %त // True Copy// आदे शानस ु ार / BY ORDER, %नजी स,चव / Private Secretary, आयकर अपील य अ,धकरण, पुणे / ITAT, Pune