Smt. Purnima Sharma, Gwalior V. ITO., Ward-2(2), Gwalior

ITA 321/AGR/2019

AI Insights

The case involves Smt. Purnima Sharma, who was engaged in the trading business of selling and purchasing potatoes. The Income Tax Department reopened her assessment for the year 2009-10 based on information about substantial cash deposits in her bank account. During reassessment, it was noted that her business turnover exceeded Rs. 40 lakhs, necessitating an audit under section 44AB of the Income Tax Act, 1961. The assessee failed to submit the audit report by the due date, leading to a penalty under section 271B. The assessee contested the penalty, arguing that the audit was completed before the due date, although the report was not submitted until after the due date due to the late filing of her return in response to a notice under section 148. The CIT(A) upheld the penalty, but the Tribunal found that the assessee's conduct did not warrant a penalty, referencing the Supreme Court's decision in Hindustan Steel Ltd. vs. State of Orissa, which states that penalties should not be levied if the assessee's conduct is not contumacious.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114075 (ITAT-AGRA)
• Duration Of Justice: 4 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-10-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 30-09-2019
• Other Referred Cases: Hindustan Steel Ltd. vs. State of Orissa
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause
• Section: 148; 139(1); 271B; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, ‘SMC’: AGRA (Through Virtual hearing) BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.321/AGR/2019 [Assessment Year: 2009-10] Smt. Purnima Sharma, 114, Sharad Vihar, City Centre, Gwalior (M.P.)-474011 Vs ITO, Ward-2(2), Aayakar Bhawan, City Center, Gwalior, Madhya Pradesh-474011 PAN-AULPS4341H Assessee Revenue Assessee by None Revenue by Sh. Shailendra Srivastava, Sr. DR Date of Hearing 12.10.2023 Date of Pronouncement 18.10.2023 ORDER PER SHAMIM YAHYA, AM, This appeal by the assessee is directed against the order of the Ld. CIT(A), Gwalior, dated 31.05.2019 for the Assessment Year 2009-10. 2. The grounds of appeal reads as under:- “On the facts and in the circumstances of the case the learned CIT Appeal(s) was not justify in confirming the penalty of Rs.1 Lac imposed u/s 271B. The penalty may kindly be deleted.” 3. Brief facts of the case are that, the assessee was engaged in the trading business of sale and purchase of POTATO during the year consideration. On the basis of information about cash deposit of more than 10 lakhs in Bank A/c, this case was reopened by issue of notice u/s 148 of the I.T. Act. During the reassessment proceeding, it was noticed by the AO that total sales shown by the assessee was Rs.7,22,56,800/- 2 ITA No.321/AGR/2019 as against purchase of Rs.7,02,75,625/- and assessee generated Gross Profit of Rs.19,81,175/-. Further, the assessee had shown Net Profit @0.32% of Rs.2,30,552/-. The assessee filed her return of income on 17.10.2017 declaring total income of Rs.1,85,420/-. During the assessment proceedings, the assessee was asked to produce all the books of accounts alongwith bills/vouchers pertaining to purchase & sales. However, in response the assessee could produce books of accounts only and failed to produce any bills/vouchers relating to purchase of potatoes for which explanation was furnished that because purchases were made from farmers, no bill/vouchers were maintained by the assessee because POTATO being agricultural produce. Since during the year under consideration total turnover/receipts of assessee exceeded Rs.40 lacs, therefore, as per the provisions of section 44AB of I.T. Act 1961 the assessee was required to get his books of account audited by an accountant as defined u/s 288 of I.T. Act, 1961, before the specified date and furnish the requisite report of such audit by that date. But the assessee failed to furnish the audit report before specified date. The AO initiated penalty proceedings u/s 271B for failure of assessee to get his books of accounts audited before the specified date and furnish the audit report before AO before the specified date. Therefore, as per the provision of section 271B of I.T. Act, 1961 penalty @0.5% of turnover Rs.7,22,56,800/- which was worked out to Rs.3,61,284/- or Rs.1,00,000/- whichever is less. Hence, the AO levied penalty of Rs.1,00,000/- u/s 271B of the Income Tax Act, 1961 being the least of the two. 3 ITA No.321/AGR/2019 4. Against the above order, the assessee appealed before the Ld. CIT(A). 5. The Ld. CIT(A) noted following submissions of the assessee:- “In defense the appellant has mainly contended that during the assessment proceedings, the ld AO imposed penalty of Rs.1 lakh u/s 271B for not getting audit done u/s 44AB before the specified date and also failure of the assessee in furnishing the audit report before the specified date. Ld AO submitted that audit u/s 44AB was duly conducted on 25.08.2009 by a Chartered Accountant. Due date of filing of return in this case was 30.09.2009 and well before that date the audit was got done by 25.08.2009 before the specified date. Further ld A0 accepted that only technical omission committed by the assessee lady which was that the audit report was not separately submitted before 30.09.2009. It may be noted that in this case the return for A.Y. 2009-10 was furnished on 17.10.2017 in response to notice u/s 148 as no return was filed u/s 139(1) by 30.09.2009. Accordingly the audit report u/s 44AB could also not be filed before 30.09.2009 because no return was filed. However, in the course of assessment proceedings, assessee filed the audit report dt 25.08.2009 before the AO which was obtained before the specified date. The AO on the basis of such audit report completed the assessment and the purpose of submission of audit report was thus substantially met. 6. However, the Ld. CIT(A) was not convinced and he confirmed the order of the AO by holding that the audit report have not been furnished before the due date. 7. Against the above order, the assessee is in appeal before us. 8. We have heard the ld. DR and perused the record. Nobody was present on behalf of the assessee despite notice issued. We find that assessment year involved in this case is 2009-10. Assessment was reopened by issue of notice u/s 148 on 30.03.2016. During the assessment proceedings, consequent thereto, the assessee did submit 4 ITA No.321/AGR/2019 audit report obtained from Chartered Accountant on 25.08.2009. However, the Revenue authorities insisted that it should have been filed before the due date i.e. 30.09.2009. In our considered opinion, it can be considered a reasonable cause that audit report was not furnished as no return was filed. However, the assessee has done the substantial compliance by the obtaining report within due date and submitting it during the course of assessment proceedings. Hence, in our considered opinion, the assessee should not be visited with the rigours of penalty in this case. Hon’ble Supreme Court in the case of Hon’ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa 83 ITR 26 (SC) has held that authority may not levy penalty if the assessee’s conduct is not found to be contumacious. In the present case, on the facts and circumstances of the case, we find that the assessee’s conduct was not contumacious, hence, we set-aside the orders of the authorities below and delete the penalty. 9. In the result, the appeal of the assessee stands allowed. Order pronounced in the open court on 18 th October, 2023. Sd/- Sd/- [ANUBHAV SHARMA] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; Dated: 18.10.2023. f{x~{tÜ f{x~{tÜf{x~{tÜ f{x~{tÜ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi