PUMPKIN PICTURES PRIVATE LIMITED , MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, MUMBAI

ITA 2093/MUM/2022

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The case involves Pumpkin Pictures Private Limited, which appealed against the penalty imposed by the Deputy Commissioner of Income Tax, Central Circle-2, Thane, for failing to get its accounts audited as required under section 44AB of the Income Tax Act. The penalty was initially levied by the Assessing Officer following the non-filing of the tax audit report. The assessee argued that although the auditor completed the statutory audit as per the Companies Act, 1956, the tax audit report was not filed due to unforeseen reasons. The Commissioner of Income Tax (Appeals) upheld the penalty, leading to the appeal before the Tribunal. The Tribunal, considering the circumstances and the actions taken by the auditor, decided in favor of the assessee, highlighting the absence of any deliberate non-compliance.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125418 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-12-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 21-08-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause
• Section: 147; 148; 273B; 143(3); 250; 274; 139(1); 271B; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE OM PRAKASH KANT, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.2093/Mum./2022 (Assessment Year :2011-12) Pumpkin Pictures Private Limited B/1804, Interface Hights, behind Infinity Mall, Mindspace, Malad (W) Mumbai 400 064 PAN – AAFCP0581M ................ Appellant v/s Dy. Commissioner of Income Tax Central Circle-2, Thane ................Respondent Assesseeby : Shri Rajesh Bhosle, Adv. Revenue by : Shri Ujjwal Chavhan, Sr. AR Date of Hearing – 13/12/2022 Date of Order – 25/01/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned order dated 23/06/2022, passed under section 250 of the Income Tax Act (‘the Act’) by the learned Commissioner of Income Tax (Appeals)-11 Pune, [‘learned CIT(A)’], for the assessment year 2011-12, which in turn, arose from the penalty order dated 28/06/2019, passed by the Assessing Officer (‘AO’) under section 271B of the Act. 2. The only grievance of the assessee is against the levy of penalty under section 271B of the Act. Pumpkin Pictures Private Limited ITA No.2093/Mum./2022 Page | 2 3. The brief facts of the case as emanating from the record are: The assessee is engaged in the production of cinematographic films, educational programs, advertisement, production training institutes in India and abroad, setting up educational documentaries, motion pictures etc. On perusal of information available on the ITD system and analysing the Individual Transaction Statement from Non-Filers Monitoring System (‘NMS’) pertaining to the assessment year 2011-12, it was noted that despite receiving substantial contract receipts and professional and technical fees, the assessee has not filed its original return of income under section 139(1) of the Act. Accordingly, on the basis of the above information, proceedings under section 147 of the Act were initiated in the case of the assessee, and notice under section 148 of the Act was issued. The AO vide order dated 26/12/2018 passed under section 143(3) r/w section 147 of the Act assessed the total income of the assessee at Rs. 59,57,450. 4. Meanwhile, the penalty proceedings vide notice issued under section 271B r/w section 274 of the Act was initiated for the failure to get accounts audited as per the provisions of section 44AB of the Act. In reply, the assessee submitted that its auditor though had signed the statutory audited report, balance sheet, and profit and loss account as per the Companies Act,1956, and uploaded the same on the ROC Portal, however, due to certain unknown reasons, failed to prepare and file audit report as per the provisions of section 44AB of the Act. The AO vide penalty order dated 28/06/2019 passed under section 271B of the Act levied a penalty of Rs. 70,001 i.e. 0.5% of the gross receipts on the basis that the assessee has failed to get its books of accounts Pumpkin Pictures Private Limited ITA No.2093/Mum./2022 Page | 3 audited and failed to furnish the audit report before the specified date as required under section 44AB of the Act without any reasonable cause. 5. The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee against the penalty order on the basis that no documentary evidence has been filed by the assessee which could suggest that the auditor was authorised to prepare the tax audit report and to upload the same. Further, the learned CIT(A) held that no confirmation or affidavit has been filed in this regard from the auditor. The learned CIT(A) also held that the directors of the assessee company cannot take the plea that they were not aware about the requirement or process of filing the tax audit report. Being aggrieved, the assessee is in appeal before us. 6. During the hearing, the learned Authorised Representative (‘learned AR’) submitted that in the previous year, the assessee filed its return of income and audit report as required under section 44AB of the Act. However, in the year under consideration, the assessee though filed the audit report as required under the Companies Act, 1956 but failed to file the same as per the provisions of the Act. In this regard, the learned AR referred to the audit report prepared under the provisions of the Companies Act, 1956, which forms part of the paper book for the year ending 31/03/2011. The learned AR also submitted that because of the non-filing of the return of income and audited accounts, the assessee cannot set off the loss incurred during the year. 7. On the contrary, the learned Departmental Representative vehemently relied upon the orders passed by the lower authorities and submitted that Pumpkin Pictures Private Limited ITA No.2093/Mum./2022 Page | 4 there is nothing on record from the auditor that the audit report under section 44AB of the Act could not be filed due to a mistake on its part. 8. We have considered the rival submissions and perused the material available on record. As noted above, in the present case, it is undisputed that the assessee not only failed to file its return of income under section 139(1) of the Act but also failed to furnish the audit report as required under section 44AB of the Act. The AO on the basis of information available on ITD and NMS, initiated proceedings under section 147 of the Act and assessed the total income of the assessee at Rs. 59,57,450. Since the accounts were not audited as per the provision of section 44AB of the Act, penalty notice under section 271B r/w 274 of the Act was issued. It is the plea of the assessee that it had appointed an auditor for the purpose of filing the return of income. The auditor had signed the statutory audit report, balance sheet and profit and loss account as per the provisions of the Companies Act, 1956, and also uploaded the same on the ROC Portal. However, due to certain unknown reasons, the auditor failed to prepare and file the audit report as per the provisions of section 44AB of the Act. In the present case, it is no doubt true that no documentary evidence is available on record that the assessee had authorised the aforesaid auditor to prepare its tax audit report under section 44AB of the Act. Further, as noted by the learned CIT(A), there is no confirmation affidavit from the said auditor in this regard. However, at the same time, we cannot be oblivious to the undisputed fact that the auditor has signed the statutory audit report, balance sheet, and profit and loss account as per the Companies Act, 1956, which fact is evident from the copy of aforesaid documents forming part Pumpkin Pictures Private Limited ITA No.2093/Mum./2022 Page | 5 of the paper book from pages no. 11-34. From the perusal of the profit and loss account on page no. 14 of the paper book, we further find that the assessee incurred a net loss of Rs. 11,79,782, during the year under consideration, which in the absence of filing the return of income within the due date cannot be carried forward and set off. Thus, the non-filing of the return of income and audited accounts cannot in any way be said to be beneficial to the assessee. Therefore, the aforesaid facts prove that the assessee had reasonable cause in terms of section 273B for not furnishing the audited report as per section 44AB of the Act. Thus, the AO is directed to delete the penalty of Rs.70,001 levied under section 271B of the Act. As a result, the grounds raised by the assessee are allowed. 8. In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 25/01/2023 S OM PRAKASH KANT ACCOUNTANT MEMBER d/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 25/01/2023 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Mahesh R. Sonavane Assistant Registrar ITAT, Mumbai