Arka Eduserve Pvt Ltd , Bangalore V. The Income Tax Officer War-1(1)(2) , Bangalore

ITA 718/BANG/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1551 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 07-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUGADEVI J
• Keywords: Bonafide belief; Reasonable cause; TDS; Set aside
• Section: 139(1); 271B; 44AB; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI B.R BASKARAN , ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.718/BANG/2018 ASSESSMENT YEAR : 2014-15 ARKA EDUSERVE PVT. LTD., NO.319, 17 TH CROSS, 25 TH MAIN, VI PHASE, J.P NAGAR, BENGALURU-560 078. PAN AAHCA 3289 P VS. THE INCOME-TAX OFFICER, WARD-1(1)(2), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SMT. SUMANLUNKAR C.A RESPONDENT BY : SMT. RENUGA DEVI, J.C.I.T (DR) DATE OF HEARING : 27.11.2019 DATE OF PRONOUNCEMENT : 13.12.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 15-05-2017 PASSED BY LD CIT(A)-12, BENGALURU CONFIR MING THE PENALTY LEVIED BY THE AO U/S 271B OF THE ACT FOR AS SESSMENT YEAR 2014-15 FOR NOT FURNISHING THE TAX AUDIT REPORT AS REQUIRED U/S 44AB OF THE ACT, I.E., WITHIN THE DUE DATE PRESCRIB ED U/S 139(1) OF THE ACT FOR FILING RETURN OF INCOME . 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2014-15 ON 30-03- 2015. EVEN THOUGH THE TAX AUDIT REPORT AS REQUIRED U/S 44AB OF THE ACT WAS OBTAINED 02-09-2014, THE ASSESSEE FURNISHED THE TAX AUDIT REPORT ITA NO.718 /BANG/2018 PAGE 2 OF 8 ALONG WITH RETURN OF INCOME ON 30-03-2015. AS PER THE PROVISIONS OF SEC.44AB OF THE ACT, THE TAX AUDIT REPORT SHOULD HAVE BEEN FURNISHED TO THE AO BEFORE THE DUE DATE FOR FILING RETURN OF INCOME PRESCRIBED U/S 139(1) OF THE ACT. IN THE INSTANT Y EAR, THE DUE DATE WAS 30.11.2014. IN VIEW OF THE ABOVE SAID FAILURE, THE AO INITIATED PENALTY PROCEEDINGS U/S 271B OF THE ACT. 3. THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT WAS UNDER THE IMPRESSION THAT THE TAX AUDIT REPORT COULD BE FILED ANY TIME BEFORE 31.3.2015 AND ACCORDINGLY SUBMITTED THAT THE SAME W AS FILED ALONG WITH RETURN OF INCOME. NOT SATISFIED WITH THE EXPL ANATIONS OF THE ASSESSEE, THE AO LEVIED A PENALTY OF RS.1.50 LAKHS U/S 271B OF THE ACT. 4. BEFORE LD CIT(A), THE ASSESSEE SUBMITTED ONE MORE EXPLANATION, I.E., IT WAS SUBMITTED THAT THE MAJOR SOURCE OF INCOME OF THE ASSESSEE WAS RENTAL INCOME AND THE TDS DEDUC TED BY THE TENANTS WERE NOT FULLY REFLECTED IN FORM NO.26AS, W HICH RESULTED IN DELAY IN FILING RETURN OF INCOME AS WELL AS TAX AUD IT REPORT. HOWEVER, THE ASSESSEE DID NOT SUBSTANTIATE THE ABOV E SAID EXPLANATION BEFORE LD CIT(A) WITH ANY MATERIAL. TH E LD CIT(A) FURTHER NOTICED THAT THE ASSESSEE HAD FILED TAX AUD IT REPORT WITHIN DUE DATES IN THE EARLIER YEARS. ACCORDINGLY THE LD CIT(A) HELD THAT THE EXPLANATIONS FURNISHED BY THE ASSESSEE DO NOT C ONSTITUTE REASONABLE CAUSE AND ACCORDINGLY CONFIRMED THE PENA LTY. ITA NO.718 /BANG/2018 PAGE 3 OF 8 5. WE HEARD RIVAL CONTENTIONS AND PERUSED THE R ECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE TAX AUD IT REPORT WAS FILED ALONG WITH THE RETURN OF INCOME, I.E., IT WAS AVAIL ABLE WITH THE ASSESSING OFFICER BEFORE THE COMPLETION OF ASSESSME NT. THOUGH THE LD CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS FURNISHED TAX AUDIT REPORTS WITHIN THE DUE DATE IN THE EARLIER YE ARS, IT WAS NOT EXAMINED AS TO WHETHER THEY WERE FURNISHED ALONG WI TH RETURN OF INCOME OR SEPARATELY. THERE IS ALSO NO DISPUTE WIT H REGARD TO THE FACT THAT THE ASSESSEE HAD OBTAINED TAX AUDIT REPOR T WITHIN THE DUE DATE PRESCRIBED U/S 44AB OF THE ACT. THE EXPLANATI ON OF THE ASSESSEE WAS THAT IT WAS UNDER THE IMPRESSION THAT THE TAX AUDIT REPORT COULD BE FILED BEFORE 31.3.2015 AND FURTHER THE RETURN OF INCOME COULD NOT BE FILED FOR WANT OF RECONCILIATIO N OF TDS AMOUNTS WITH FORM NO.26AS. IT APPEARS THAT THE ASSESSEE WA S UNDER THE IMPRESSION THAT THE RETURN OF INCOME COULD BE FILED ANYTIME BEFORE 31.3.2015 AND THE TAX AUDIT REPORT COULD ALSO BE FI LED ALONG WITH RETURN OF INCOME. ACCORDING TO LD A.R, THE ASSESSE E WAS UNDER SUCH BONAFIDE BELIEF AND ACCORDINGLY THE EXPLANATIO NS FURNISHED BY THE ASSESSEE WOULD CONSTITUTE REASONABLE CAUSE WITH IN THE MEANING OF SEC.273B OF THE ACT. 6. BE THAT AS IT MAY, WE NOTICE THAT THE COCHIN BE NCH OF TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF AT TINKARA ELECTRONICS VS. ITO (ITA NO.601/COCH/2018 DATED 01- 03-2019) AND THE PENALTY LEVIED U/S 271B OF THE ACT WAS DELETED WITH THE FOLLOWING OBSERVATIONS:- ITA NO.718 /BANG/2018 PAGE 4 OF 8 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS REQUIRED TO GET HIS BOOKS OF ACCOU NT AUDITED AS PER THE PROVISIONS OF SECTION 44AB OF THE ACT BEFORE 30/09/2012 FOR THE A.Y. 2012-13. THE ASSESSEE GOT THE BOOKS AU DITED ON 24/03/2014 AND THE SAME WAS FURNISHED BEFORE THE AS SESSING OFFICER ON 27/03/2014. THE ASSESSMENT ORDER WAS PAS SED BY THE ASSESSING OFFICER ON 26/03/2015. HOWEVER, THERE WAS DELAY IN FURNISHING THE AUDIT REPORT IN COMPLIANCE WITH SECTION 44AB OF THE ACT. THE CONTENTION OF THE LD. AR IS THAT THE R EASON FOR DELAY IN FURNISHING THE AUDIT REPORT BELATEDLY WAS DUE TO THE ILL HEALTH OF THE PARTNER SHRI NAUSHAD S. FROM 20.09.2012 TO 1 9.10.2012 COUPLED WITH MALFUNCTIONING OF THE COMPUTER AND LOS S OF ENTIRE DATA DUE TO HARDWARE DAMAGE. FOR THIS PURPOSE, THE LD. AR RELIED ON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF STAR AGENCIES VS. ITO (23 CCH 646) WHEREIN I.T.A. NO.601/COCH/2018 IT WAS HELD THAT EV EN THOUGH ASSESSEE COULD NOT GET THE ACCOUNTS AUDITED WITHIN TIME BUT HAVING FILED THE AUDIT REPORT ALONG WITH THE RETURN , NO PENALTY U/S. 271B WAS ATTRACTED. FURTHER, ILLNESS OF ONE OF THE PARTNERS CONSTITUTED REASONABLE CAUSE FOR THE DELAY. HE ALSO RELIED ON THE RECENT DECISION OF THIS TRIBUNAL IN THE CASE OF JOH NS BIWHEELERS VS. ACIT IN ITA NO.411/COCH/2018 DATED 05/02/2019 W HEREIN IT WAS HELD AS UNDER: '7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN THIS CASE, THE ASSESSEE WAS REQUIRED TO GET HIS BOOKS OF ACCOUNT AUDITED AND FILED ALONG WITH THE R ETURN OF INCOME U/S. 44AB WITHIN THE DUE DATE OF 30/09/20 12 FOR THE ASSESSMENT YEAR 2012-13.. HOWEVER, THE AUDIT RE PORT WAS FURNISHED ONLY ON 28/03/2014. THE CONTENTION OF THE LD. AR WAS THAT THE DELAY IN FILING THE RETURN OF I NCOME WAS DUE TO DAMAGE TO COMPUTER SYSTEM DUE TO VIRUS INFECTION WHICH IS A REASONABLE CAUSE AS PRESCRIBED U/S. 273 B OF THE I.T. ACT . THE LD. AR RELIED ON THE FOLLOWING JUDGMENTS IN SUPPORT OF HIS CONTENTIONS: ITA NO.718 /BANG/2018 PAGE 5 OF 8 I) CIT VS. MALAYALAM PLANTATIONS LTD . (1976) (103 ITR 835) (KER.) II) ACIT VS. AMAR CHAND RAJ KUMAR (2004) (89 ITD 96)(ITAT, CHANDIGARH) III) PREM PRAKASH SENAPATI VS. ITO (ITA NO .459&185/CTK/2017 DATED 17/04/2018) (ITAT, CUTTACK). 7.1 FROM THE MATERIAL AVAILABLE ON RECORD, WE ARE O F THE VIEW THAT THE ASSESSEE GOT HIS BOOKS OF ACCOUNTS AU DITED ON 28/03/2014 WHICH WAS MADE AVAILABLE TO THE ASSES SING OFFICER AND NO PREJUDICE HAS BEEN CAUSED TO THE REV ENUE. NOW THE SHORT QUESTION THAT ARISES IS WHETHER IN TH IS SCENARIO, PENALTY U/S. 271B OF THE ACT CAN BE LEVIE D OR NOT. IN OUR CONSIDERED OPINION, THE ASSESSEE HAD ONLY COMMITTED TECHNICAL VENIAL BREACH WHICH DOES NOT CR EATE ANY LOSS TO THE EXCHEQUER AS THE AUDIT REPORT WAS AVAILABLE TO THE ASSESSING OFFICER BEFORE THE COMPL ETION OF THE ASSESSMENT PROCEEDINGS. THE MADRAS HIGH COURT IN THE CASE OF CIT VS. A.N. ARUNACHALAM (208 ITR 481) IN THE CONTEXT OF FILING OF AUDIT REPORT FOR CLAIMING DEDUCTION U/S. 80J OF THE ACT, OBSERVED THAT ONCE AUDIT REPOR T HAS BEEN MADE AVAILABLE BEFORE THE LD. ASSESSING OFFICE R BEFORE THE COMPLETION OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE SHOULD BE GRANTED DEDUCTION U/S. 80J OF TH E ACT. WE OBSERVE THAT THIS JUDGMENT WAS RENDERED IN THE C ONTEXT OF ADJUDICATION OF QUANTUM OF DEDUCTION CLAIMED BY THE ASSESSEE. HENCE, THE SAID ANALOGY CAN VERY WELL BE DRAWN AND USED IN THE PENALTY PROCEEDINGS LIKE THAT OF TH E ASSESSEE. TO SUM UP, WE HOLD THAT THE ASSESSEE HAD COMMITTED ONLY TECHNICAL VENIAL BREACH FOR WHICH HE CANNOT BE PENALIZED. IN VIEW OF THE ABOVE, WE ARE I NCLINED TO DELETE THE PENALTY MADE BY THE ASSESSEE U/S. 271 B OF THE ACT. ITA NO.718 /BANG/2018 PAGE 6 OF 8 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 8.1 IN OUR OPINION, THE CASE OF THE ASSESSEE WILL S QUARELY FIT INTO THE RATIO LAID DOWN IN THE ABOVE CASES CITED SUPRA. THE ASSESSEE HAS COMITTED ONLY TECHNICAL VENIAL BREACH WHICH DOE S NOT CREATE ANY LOSS TO THE EXCHEQUER. THE AUDIT REPORT WAS FIL ED BEFORE THE ASSESSING OFFICER BEFORE THE COMPLETION OF THE ASSE SSMENT. THE ILL HEALTH OF THE PARTNER SHRI NAUSHAD S AND THE MA LFUNCTIONING OF THE COMPUTER DUE TO HARDWARE DAMAGE ARE REASONAB LE CAUSES FOR NOT FURNISHING THE AUDIT REPORT BEFORE THE ASSE SSING OFFICER WITHIN THE STIPULATED TIME. HENCE, WE ARE INCLINED TO HOLD THAT THIS IS NOT A FIT CASE FOR LEVYING PENALTY U/S. 271 B. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 7. IN THE INSTANT CASE, UNLIKE IN THE CASE CIT ED ABOVE, THE AUDIT REPORT WAS OBTAINED WITHIN THE DUE DATE PRESCRIBED U/S 44AB OF THE ACT. THE DELAY HAS OCCURRED DUE TO DELAY IN FILING RETURN OF INCOME. THE ASSESSEE HAS STATED THAT IT WAS UNDER BONAFIDE BELIEF THAT THE AUDIT REPORT COULD ALSO BE FILED BEFORE 31.3.2015. THERE IS ALSO NO DISPUTE WITH REGARD TO THE FACT THAT THE AUDIT REPO RT WAS AVAILABLE WITH THE ASSESSING OFFICER BEFORE HE COMPLETED THE ASSESSMENT. HENCE THE VIEW TAKEN BY THE COCHIN BENCH OF TRIBUNA L THAT THE DELAY IN FURNISHING AUDIT REPORT HAS RESULTED ONLY IN TECHNICAL VENIAL BREACH WHICH DOES NOT CAUSE ANY LOSS TO EXCHEQUER C OULD BE APPLIED HERE ALSO. ACCORDINGLY, FOLLOWING THE ABOV E SAID DECISION OF COCHIN BENCH OF TRIBUNAL, WE SET ASIDE THE ORDER PA SSED BY LD CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY LEVI ED U/S 271B OF THE ACT FOR THE YEAR UNDER CONSIDERATION. ITA NO.718 /BANG/2018 PAGE 7 OF 8 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DECEMBER, 2019. SD/ - (BEENA PILLAI) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 13 TH DECEMBER, 2019. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NO.718 /BANG/2018 PAGE 8 OF 8 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED