RAJENDRAN SREEDHARAN, KANYAKUMARI V. ACIT,CIRCLE-1, NAGERCOIL

ITA 165/CHNY/2023

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The case revolves around a penalty imposed under section 271B of the Income Tax Act, 1961, for the late filing of a tax audit report as required under section 44AB. The assessee, Rajendran Sreedharan, had a gross business receipt exceeding the threshold that necessitated an audit. Although the audit report was filed along with the income tax return on December 30, 2017, it was after the due date. The Assessing Officer imposed a penalty of ₹1,50,000, which was upheld by the Commissioner of Income Tax (Appeals). The assessee appealed to the Tribunal, arguing that the delay was a minor breach without mala fide intent, and the report was considered during the assessment. The Tribunal, referencing similar cases, decided in favor of the assessee, emphasizing that the report's submission before the assessment completion negated the need for a penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134754 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 06-02-2023
• Other Referred Cases: Balaji Logistics v. ACIT, M/s. T P D 101 Uthangarai Milk Producers Co-operative Society Ltd. v. ACIT, P.Senthil Kumar v. PCIT, ITAT Cochin Bench in ITA No.411/Cochin/2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause
• Section: 143(3); 143(2); 271B; 44AB

Judgement Text

आयकर अपीलीय अिधकरण, ‘ए’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ŵी वी. दुगाŊ राव, Ɋाियक सद˟ एवं ŵी मनोज कु मार अŤवाल, लेखा सद˟ के समƗ । Before Shri V. Durga Rao, Judicial Member & Shri Manoj Kumar Aggarwal, Accountant Member आयकर अपील सं./I.T.A. No.165/Chny/2023 िनधाŊरण वषŊ/Assessment Year: 2017-18 Rajendran Sreedharan, 13-85/42A Parthitta Vilai Veedu, Chitharal, Chitharal Post, Kanyakumari District, Tamil Nadu 629 151. [PAN:AFQPR2835H] Vs. The Assistant Commissioner of Income Tax, Circle 1, Nagercoil. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri T. Vasudevan, Advocate ŮȑथŎ की ओर से/Respondent by : Mrs. Jothi Lakshmi Nayak for Shri AR V Sreenivasan, Addl. CIT सुनवाई की तारीख/ Date of hearing : 30.03.2023 घोषणा की तारीख /Date of Pronouncement : 21.04.2023 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), (National Faceless Appeal Centre [NFAC], Delhi dated 26.12.2022 relevant to the assessment year 2017-18 passed under section 271B of the Income Tax Act, 1961 [“Act” in short]. 2. Brief facts of the case are that the assessee has filed his return I.T.A. No.165/Chny/23 2 of income on 30.12.2017 for the assessment year 2017-18 admitting total income of ₹.7,75,65,120/-. The case of the assessee was selected for complete scrutiny through CASS and notice under section 143(2) of the Act was issued on 10.08.2018 to the assessee which was duly served upon him. After following due procedure, the Assessing Officer has completed the assessment order under section 143(3) of the Act dated 15.04.2019 by accepting the returned income of the assessee. 3. Subsequently, the Assessing Officer initiated penalty proceedings under section 271B of the Act for late filing of audit report under section 44AB of the Act. Since the gross receipt of business of the assessee for the year under consideration was ₹.23,14,80,500/-, the assessee was required to get their accounts audited and liable to file the tax audit report as required under section 44AB of the Act before the due date. Since the assessee has not filed the tax audit report within due date and in view of the provisions of section 271B of the Act, the Assessing Officer levied penalty of ₹.1,50,000/-. On appeal, the ld. CIT(A) (NFAC) confirmed the penalty levied under section 271B of the Act. 4. On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the audit report I.T.A. No.165/Chny/23 3 under section 44AB of the Act were furnished along with the return of income on 30.12.2017 and the assessment under section 143(3) of the Act has been completed on the basis of the audit report and return of income filed by the assessee. It was further submission that the delay in filing the same constituted a venial breach without any mala fide intention and prayed for deleting the penalty levied under section 271B of the Act. 5. On the other hand, the ld. DR has submitted that the assessee has not given any proper explanation either before the Assessing Officer during penalty proceedings or before the ld. CIT(A) and strongly supported the orders of authorities below. 6. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In the penalty order, the Assessing Officer had noted that the assessee’s gross receipt in the year under consideration were to the tune of ₹.23,14,80,500/-. Therefore, the assessee was required to get his accounts audited under section 44AB of the Act and filed within the due date. Since the assessee has not filed the tax audit report under section 44AB of the Act before the due date, the Assessing Officer levied penalty of ₹.1,50,000/- under section 271B of the Act, which was confirmed by the ld. CIT(A)(NFAC). Before us, it was submitted that the assessment under section 143(3) of I.T.A. No.165/Chny/23 4 the Act has been completed on the basis of the audit report and return of income filed by the assessee and prayed for deleting the penalty levied under section 271B of the Act. 6.1 Similar issue on an identical fact was subject matter in appeal before this Tribunal in the case of Balaji Logistics v. ACIT in I.T.A. No. 2248/Chny/2019 dated 07.09.2022 for the assessment year 2015-16, wherein, the Tribunal has observed as under: “6. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. It is an admitted fact that although the assessee has filed Tax Audit Report in Form 3CB as required u/s.44AB of the Act, beyond due date specified u/s.139(1) of the Act, but such Tax Audit Report was made available to the AO before completion of assessment proceedings u/s.143(3) of the Act, on 22.11.2017. It is evident from the fact that the assessee has obtained Tax Audit Report from an Accountant on 28.03.2016 and furnished before the AO during the course of assessment proceedings. Therefore, we are of the considered view that when the Tax Audit Report was made available to the AO before completion of assessment proceedings, then for venial technical breach without any mala fide intention, penalty cannot be levied u/s.271B of the Act. Further, a similar issue has been considered by the co-ordinate Bench of the Tribunal in the case of M/s. T P D 101 Uthangarai Milk Producers Co-operative Society Ltd.(supra), where on identical set of facts, penalty levied u/s.271B of the Act, has been deleted. The relevant findings of the Tribunal are as under: “...7. We have heard both the parties and perused the materials available on record and gone through the orders of the authorities below. The assessee supposed to have been filed audit report as required u/s.44AB of the Act, on or before 31.10.2015. However, such audit report has been filed on 05.03.2016, which is before the date of completion of assessment proceedings u/s.143(3) of the Act. In other words, although the assessee has filed tax audit report beyond the stipulated period, but such tax audit report was made available to the AO before he completes assessment proceedings. The assessee has given reasons for delay in filing tax audit report. As per which, the audit of accounts of society done by the Dept. of Cooperative Audit, could not be completed on or before 31.10.2015 and said delay was not in the hands of the assessee. Therefore, there is a reasonable I.T.A. No.165/Chny/23 5 cause for not filing the tax audit report within prescribed time limit ad thus, penalty cannot be levied. We find merits in the submission of the assessee for the simple reason that non-filing of audit report within the due date is a venial technical breach without any mala fide intention on the part of the assessee. Because, completion of audit of books of accounts of the society is under the control of Dept. of Cooperative Audit and thus, unless the Dept. of Cooperative Audit completes audit, the assessee cannot file return of income along with tax audit report. Therefore, we are of the considered view that reasons given by the assessee for not filing tax audit report prescribed u/s.44AB of the Act, is neither intention nor any mala fide intention, but it is venial technical breach and for this reason, penalty u/s.271B of the Act, cannot be levied. This principle is supported by the decision of the Hon’ble jurisdictional High Court in the case of P.Senthil Kumar v. PCIT reported in 416 ITR 336, where an identical issue had been considered by the Court and held that for venial technical breach without any mala fide intention, penalty cannot be levied. The ITAT Cochin Bench in ITA No.411/Cochin/2018 vide order dated 05.02.2019 had held that once audit report has been made available before the AO, when the assessment proceedings were completed, then, there is no reason for levy of penalty. 8. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that reasons given by the assessee for not filing tax audit report within due date comes under reasonable cause as provided u/s.271B of the Act, and thus, the AO is erred in levying penalty u/s.271B of the Act. Hence, we direct the AO to delete penalty levied u/s.271B of Act.”.... 7. In this view of the matter and by following the decision of the co- ordinate Bench of the Tribunal in the case of M/s.T P D 101 Uthangarai Milk Producers Co-operative Society Ltd.(supra), we direct the AO to delete penalty levied u/s.271B of the Act. 8. In the result, the appeal filed by the assessee is allowed. 6.2 Respectfully following the above decision of the Coordinate Benches of the Tribunal in the case of Balaji Logistics v. ACIT (supra) for the assessment year 2015-16, we are of the considered opinion that it is not a fit case for the levy of penalty under section 271B of the Act and accordingly, the penalty levied stands deleted. I.T.A. No.165/Chny/23 6 7. In the result, the appeal filed by the assessee is allowed. Order pronounced on 21 st April, 2023 at Chennai. Sd/- Sd/- (MANOJ KUMAR AGGARWAL) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER Chennai, Dated, 21.04.2023 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ (अपील)/CIT(A), 4. आयकर आयुƅ/CIT, 5. िवभागीय Ůितिनिध/DR & 6. गाडŊ फाईल/GF.