STAR DELTA TRANSFORMERS LTD,GOVINDPURA BHOPAL V. ACIT/DCIT 1(1), AAYKAR BHAWAN

ITA 124/IND/2025

AI Insights

The case involves MP Laghu Udyog Nigam Ltd., a corporation owned by the State Government of Madhya Pradesh, which appealed against the penalty imposed by the Assessing Officer (AO) under section 271B for not getting their accounts audited as required by section 44AB of the Income-tax Act, 1961. The penalty of Rs. 1,50,000 was contested on the grounds that the corporation was subject to a statutory audit under the Companies Act, 1956, conducted by the Comptroller and Auditor General of India (CAG), and the auditors were appointed late, which prevented timely compliance with section 44AB. The Income Tax Appellate Tribunal (ITAT) dismissed the appeal, agreeing with the lower authorities that the corporation failed to comply with the statutory requirements and that the delay in auditor appointment did not constitute a reasonable cause for non-compliance.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 822968 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 28-01-2025
• Other Referred Cases: Peroorkkada Service Co-operative Bank Ltd. Vs. Income-tax Officer, Ward-2(1), Trivandrum, U.P. Nalkoop Nigam Ltd. Vs. Deputy Commissioner of Income-tax
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORREVENUEAGAINSTCONDONATIONOFDELAY.WEFOLLOWTHELANDMARK; FORASSESSEESUBMITTEDTHATASPERPROVISIONSOFSECTIONAB; FORREVENUE; HOWEVER; SUBMITTEDTHATEVENIFTHEREWASADELAY; FORTHEAPPELLANTADV..JOJO; ASWELL; FORTHERESPONDENTS; FORTHEAPPELLANTHADDRAWNOURATTENTIONTOA; FORTHERESPONDENTSCONTENDEDTHAT; THEPENALTYPROCEEDINGSINTHIS; FORTHEASSESSEETOENGAGEA; FORASSESSEE; FORREVENUETOOAGREESTOTHISPROPOSITION.BUT; FORREVENUEISVERYCORRECTIN; FORREVENUEASCITEDABOVE; WEFINDTHATTHEREQUIREMENTANDIMPORTANCEOF; SHRIASHISHPORWAL; FURNISHINGFORMCAWITHOUTGETTINGTHE
• Assessee Lawyers: SHRIANILKHABYA; NOTCOMPLYINGWITHTHEMANDATORY
• Keywords: Reasonable cause; Question of law
• Section: 63; 273B

Judgement Text

"Page 1 of 14 आयकरअपीलीयअिधकरण, इंदौरɊायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE MS. SUCHITRA R. KAMBLE, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.193/Ind/2025 Assessment Year: 2013-14 MP Laghu Udyog Nigam Ltd., 23 Shoping Center, New Market, T.T. Nagar, Bhopal बनाम/ Vs. ACIT 5(1) Bhopal (Assessee/Appellant) (Revenue/Respondent) PAN: AABCM1366K Assessee by Shri Anil Khabya, AR Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 09.12.2025 Date of Pronouncement 23.12.2025 आदेश/ O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by order of first appeal dated 25.11.2024 passed by learned Commissioner of Income-tax-NFAC, Delhi [“CIT(A)”] which in turn arises out of penalty-order dated 28.03.2018 passed by learned DCIT-2(1), Bhopal [“AO”] u/s 271B of Income-tax Act, 1961 [“the Act”] for assessment- year [“AY”] 2013-14, the assessee has filed this appeal on following ground: “That the Ld. CIT(A) erred in law to uphold penalty levied by ACIT invoking section 271B.” Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 2 of 14 2. Small delay of 17 days in filing the instant appeal is condoned taking into account that (i) the appellant is a corporation owned by State Govt. of Madhya Pradesh; (ii) the assessee’s has made solemnised averments in affidavit explaining the reason of delay, and (iii) there is no objection of Ld. DR for revenue against condonation of delay. We follow the landmark judgement of Collector, Land Acquisition Vs Mst. Katiji and others 1987 AIR 1353, 1987 2 SCC 387 having settled the law long back that all such technical aspects must make a way for the cause of substantial justice. 3. The assessee in present case is aggrieved by imposition of penalty of Rs. 1,50,000/- by AO u/s 271B for failure to get accounts audited as required by section 44AB of the Act. 4. Ld. AR for assessee submitted that as per provisions of section 44AB of the Act, the assessee was required to get accounts audited and submit audit report by 31st October, 2013 but the assessee is a Corporation owned by State Govt. of Madhya Pradesh and subject to statutory audit under Companies Act, 1956 by the Comptroller and Auditor General of India [“CAG”]. He carried us to a letter No. CA.V/COY/MADHYA PRADESH, MPLAGH(1)/1576 dated 23.12.2023 issued by office of CAG by which the statutory auditors u/s 619(2) of the Companies Act, 1956 for the financial year(s) 2012-14 were appointed (Page No. 2 of Paper-Book) lately on 10.02.2014. He also carried us to the copy of Auditors’ Report and Audited Financial Statements ultimately issued by M/s Multi Associates, Chartered Accountants, Bhopal on 26.03.2015 (Page Nos. 3 to 6 of Paper-Book). Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 3 of 14 Accordingly, by referring to these documents, Ld. AR submitted that the appointment of statutory auditors by CAG and the release of Auditor’s Report took place lately on 23.12.2013/26.03.2015 and that is the reason that the assessee was not able to make compliance of section 44AB i.e. get accounts audited and submit audit-report u/s 44AB uptill 31.10.2013. Ld. AR submitted that there exists a reasonable cause for non-compliance by assessee, hence the assessee must be given benefit of section 273B according to which no penalty shall be imposed u/s 271B if there exists a reasonable cause. 5. Ld. DR for revenue, however, submitted that even if there was a delay in appointment of auditors by CAG, the assessee could at least make a “belated compliance” of section 44AB by submitting audit report belatedly to AO but even that was not done. He submitted that it is a case of outright non-compliance of section 44AB because the assessee has neither got accounts audited nor submitted any report mandated by section 44AB. He submitted that the audit prescribed u/s 44AB which is commonly referred to as “Tax Audit” is very different from “statutory audit” conducted under Companies Act, 1956. He submitted that the Income-tax Act, 1961 is also an act of Parliament and the compliance of section 44AB of Income-tax Act, 1961 cannot be dispensed with, although a belated compliance by assessee attributable to a reasonable cause can be accepted by department. He submitted that the “Tax Audit” has significant importance for Income-tax Department/AO as there are meticulous reporting by auditors about Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 4 of 14 compliances/non-compliances of various provisions of Income-tax Act, 1961 which have a bearing on computation of taxable income and tax liability of assessee. He submitted that by not getting accounts audited and not filing audit report u/s 44AB, the assessee has made a serious failure and the AO has rightly imposed penalty. He relied upon following decisions of Hon’ble High Courts in this regard: (i) Peroorkkada Service Co-operative Bank Ltd. Vs. Income-tax Officer, Ward-2(1), Trivandrum (2020) 114 taxmann.com 18 (Kerala): “C.K. Abdul Rehim, J. - The above Income-tax Appeal was filed challenging an order passed by the Income-tax Appellate Tribunal, Cochin Bench in LT.A. No.400/COCH/2018, dated 26.06.2019. The assessee is the appellant and the revenue is the respondent. 2. Issue pertains to sustainability of the penalty imposed against the appellant under section 271B of the Income-tax Act, 1961 (the Act', for short). The proceedings was initiated based on an allegation that the appellant had failed to furnish report of audited accounts as required under section 44AB with respect to the assessment year 2014-15. A show cause notice was issued preceding imposition of the penalty, requiring the assessee to show cause as to why penalty under section 271B should not be imposed. In the reply the appellant said that, as per the second proviso to section 44AB, if a person is required by or under any other law to get his accounts audited, getting the accounts audited under that law before the specified date and furnishing of a report of such audit, would be sufficient compliance of the requirement under that section and that no penalty can be imposed. But the Assessing Authority found that, the appellant had failed to furnish the report of audit in the prescribed Form, duly signed and verified by an Accountant as required under section 44AB or to furnish the report of audit conducted under any other law along with the further report by an Accountant in the Form prescribed, as required under the second proviso to section 44AB. Therefore it is held that the appellant is liable to be imposed with penalty under Section 271B and ordered to pay penalty of Rs. 1,50,000/- as provided under the said section. 3. The order imposing penalty was taken up in appeal before the Commissioner of Income-tax (Appeals). The first Appellate Authority had found that the appellant had failed in complying with the statutory requirement of furnishing the audited report in Form No.3CA as required under section 44AB, along with the further report of the Accountant as mandated. It was found that, Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 5 of 14 what was filed by the appellant is only a 'Certificate' issued by the Joint Director (Audit), Thiruvananthapuram, Co-operative Department, dated 03.07.2018, accompanied by the 'Audit Note' of the assessee Society. It was found that, filing of Form No.3CA along with a further report by an Accountant is the mandatory requirement and the mere getting of the accounts audited under any other law will not suffice compliance of the said requirement. In the absence of compliance of the provisions contained in the second proviso to section 44AB read with Rule 6G(1) of the Income Tax Rules, 1962, it cannot be said that there is proper compliance of the provision, is the findings. It was also found that the appellant had failed to prove that there existed no 'sufficient cause' for the failure or that there existed any reasonable cause for such failure. Therefore, the order of penalty was confirmed. 4. In the second appeal filed before the Tribunal, the appellant/assessee contended that the audit was completed under provisions of the Co-operative Societies Act, 1969. But the audit was completed at a later stage. The Society does not have any power to appoint an Auditor and to get its account audited within the time stipulated der the Income-tax Act. Therefore, the delay occurred in submitting the audited account was reasonable. It was pointed out that there was proper compliance of the first limb of the second proviso to section 44AB. According to the appellant, the failure was only with respect to furnishing of the further report by an Accountant, as required under the second limb of the second proviso. It was argued that the penalty under section 271B could be imposed only if there is a failure to get the accounts audited or if there is a failure to furnish the report of such audit. It was contended that the scope of section 271B cannot be extended, alleging non- compliance to furnish the further report by an Accountant. 5. The Tribunal found that that the assessee had furnished documents such as Annual report of the financial year 2013-14 depicting the audited financial statements. But the Audit Report in the prescribed Form was not produced before the Assessing Officer. It was held that, the non-production of the Audit Report in the prescribed format can be a reason for imposing penalty under section 271B. Therefore, the contentions were discarded and the orders of the authorities below were confirmed. It is aggrieved by the said order, the above appeal is filed by raising the following questions of law. 1. Whether the Assessing Officer is right in imposing penalty when audit report is filed as per the 2nd proviso to S.44AB of the Income-tax Act, 19617 2. Whether the Assessing Officer is right in insisting for a 'Further Report in Form No.3CA when the proviso very clearly speaks that 'where such person is required by or under any other law to get his accounts audited it shall be sufficient compliance with the provisions of this section? 3. Whether the Appellate Authorities are justified in confirming the penalty imposed by the assessing officer without applying mind while an Audit Report has been submitted as per the proviso to S44AB? Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 6 of 14 6. We heard learned counsel for the appellant Adv. Sri. C.A.Jojo, as well as learned standing counsel appearing for the respondents. Section 271B of the Act reads as follows: \"271B. Failure to get accounts audited If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or [furnish a report of such audit as required under section 44AB], the [Assessing] Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of (one hundred fifty thousand rupees], whichever is less.\" It is evident that, if there is any failure on the part of the assessee to get his accounts audited in respect of any previous year relevant to the assessment year or if the assessee fails to furnish a report of such audit as required under section 44AB, it is liable to be imposed with penalty under that section. Section 273B provides that, no penalty shall be imposed for any failure referred to in section 271B, if the assessee proves that there was reasonable cause for the said failure. 7. From the provisions enumerated as above, it is clear and evident that if an assessee is liable to furnish the audited report of his accounts, audited under any other law applicable to him, along with a further report by an Accountant in the prescribed form, within the date stipulated for the said purpose, it will attract penalty under section 271B, subject to provisions contained in section 273B, which is of showing sufficient reasons (reasonable cause). In the case at hand, the appellant had furnished audited financial statement with respect to the year concerned along with a Certificate issued by the Joint Director (Audit) of the Co-operative Department dated 3.7.2018. He has not furnished the report of audit in the prescribed form, Form 3CA, as required under the second proviso (as it stood then) to section 44AB read with the requirements under Rule 6G(1) of the Income-tax Rules. 8. Contention of the appellant herein is that the submission of audited accounts and statement along with the Certificate of the Auditor appointed under the Co-operative Societies Act, as mandated under section 63 of the Co- operative Societies Act, would amount to sufficient compliance of the requirements under the second proviso to section 44AB. His further contention is that the further report by an Accountant, insisted upon in the second proviso, is not a mandatory requirement, because the provision in the Constitution of India itself insists upon for a mandatory audit of the accounts of a Co- operative Society under the Department of the Government concerned. We take note of the fact that, it is a mandatory requirement under section 44AB that the appellant should get its account audited by an Accountant and to furnish before the specified date, the report of such audit in the prescribed form duly signed and verified by such Accountant and by setting forth such particulars Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 7 of 14 as may be prescribed. Form CA is the particular form prescribed for the said purpose. 9. Since the appellant is a person required under the Co-operative Societies Act to get its account audited under that Act, it would be sufficient compliance under the second proviso to section 44AB, if the appellant gets the account of its business audited under the Co-operative Societies Act before the specified date and furnishes that report of audit, along with further report by an Accountant in the form prescribed, before the Assessing Authority under the Income-tax Act, before the date stipulated for the said purpose. It is to be noted that, the further report required by an Accountant need to be furnished in Form 3CD. Evidently the appellant had not furnished the report of the audit under Co-operative Societies Act in the form prescribed, which is Form 3CA On the other hand, his contention is that the accounts were audited by the Co- operative Department and the Joint Director had issued a Certificate to that effect. Probable contention raised by the appellant is that since the appellant is a person required by the Co-operative Societies Act to get its accounts audited under that Act, the audit report need not be filed in Form 3CA. Even assuming (without admitting) that the furnishing of a report of the audit conducted by the competent Auditor stipulated under the Co-operative Societies Act would suffice compliance of the first limb of the second proviso, it is evident that the further report by an Accountant, as mandated to be furnished in Form 3CD, was not furnished by the appellant. Moreover, the factual finding arrived by the Tribunal is to the effect that the appellant had furnished only the Annual Report depicting the audited financial statement along with copy of the receipts and distribution statements. It is also evident that the appellant had furnished a Certificate issued by the Joint Director (Audit) of the Co-operative Department. When the second proviso carves out an exemption from the general provisions of section 44AB, the stipulations therein need to be strictly adhered and the mere fact that the audit of the assessee was conducted under the provisions of the Co-operative Societies Act, would not be sufficient for such compliance. Furnishing of the report of audit in the prescribed form accompanied with a further report by an Accountant in the prescribed form, is a mandatory requirement for proper compliance. Since the appellant had failed to show any reasonable cause', coming within the purview of section 273B, the imposition of penalty under section 2718 cannot be interfered with. 10. Lastly, learned counsel for the appellant had drawn our attention to a Circular issued by the Central Board of Direct Taxes, Circular No.03/2009, dated 21.5.2009. Based on which it is contended that, the audited report need not be attached along with the returns or furnished separately at any time before or after the due date, but it need only to be retained by the assessee and produced if it is called for by the Income-tax Authority during any proceedings under the Act. The Circular says that no penalty under section 271B shall be initiated or levied for not furnishing the tax audit report before the due date. Therefore the imposition of penalty under section 271B cannot be sustained, is the contention. We are not persuaded to accept the above contention in view of the mandatory provisions contained in section 44AB, which insists on furnishing of the audit report in the prescribed form before the due date stipulated, along with a further report of an Accountant. When the Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 8 of 14 specific provision contained in the statute is unambiguous in this respect, we cannot hold otherwise based on any circular of the Department. Hence the above contention cannot be accepted. Further, learned Standing Counsel appearing for the respondents contended that, the penalty proceedings in this case was initiated on the allegation that the appellant had failed to obtain a proper audit report within the date stipulated in the relevant provision. 11. For the reasons mentioned as above, we are of the opinion that, no substantial question of law arises for consideration in challenge against the impugned order of the Tribunal. Accordingly, the above appeal fails und the same is hereby dismissed. 12. All pending interlocutory applications are closed.” (ii) U.P. Nalkoop Nigam Ltd. Vs. Deputy Commissioner of Income-tax (1999) 71 ITD 395 (Allahabad): “6. We have considered the rival submissions, facts and circumstances of the case, legal provisions as well as various decisions relied upon by the parties and after thoughtful consideration of the same are of the opinion that there is no force in any of the assessee’s submissions because of the following reasons. XXX 17. Coming to the assessee’s next plea relating to the reasonable cause, we are unable to accept the same because the assessee has not been able to refer to any provisions of law — in spite of repeated queries from the Bench; which may show that the assessee was forbidden or debarred or prohibited from appointing a private auditor. On the contrary, when in actual it had appointed a private auditor but only for the purpose of securing a Form 3CA and not for getting the accounts audited, we are surprised as to how an audit report in Form 3CA was given by the private auditor without audited accounts. Why the assessee did so is best known to it as it has not spelt out any circumstances for engaging the private auditor for a limited purpose. On one hand the assessee is taking the plea that it was difficult for the assessee to engage a private auditor but, on the other hand, has secured Form 3CA from a private C.A. 18. Since the assessee has failed to bring any evidence in support of its claim that it was barred from appointing a private auditor, we are unable to accept the assessee’s plea that failure on the part of the Govt. to appoint statutory/Govt. auditors may be taken as reasonable and sufficient cause for not complying with the provisions of section 44AB. Contrarily, the assessee’s action itself for having appointed a private auditor leads to the inevitable conclusion that the assessee was playing a hide-and-seek game and was blowing hot and cold at the same time which has no sanction of the law. The assessee’s plea is, therefore, not tenable and we hold that assessee was free Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 9 of 14 to engage a private auditor for meeting its obligation relating to complying to the provisions of Income-tax Act and having failed to do so, it is the assessee and the assessee only who can be said to be responsible and not the State Govt. The assessee’s plea of reasonable cause is, therefore, rejected. 19. The assessee’s next plea that it was not obligatory for it to furnish the audited balance sheets as there is no provision under section 44AB and rule 6G. We have only to say that it may not be necessary but the penalty has not been imposed for the failure to furnish the audited accounts. The penalty has been imposed on the ground that the assessee’s accounts were not audited before the specified date either under the Companies Act or under the Income- tax Act, as provided under section 44AB and since the assessee has neither contradicted nor has produced any material to counter the findings, it stands established that accounts of the assessee was not audited under any law before the specified date and the penalty imposed on this ground cannot be said to be unjustified. The assessee’s failure to furnish the audited accounts may not be relevant for imposing the penalty under section 271B but it leads to presume that the assessee’s accounts were not audited within the statutory period. Had it been not so, the assessee could have easily submitted the audited accounts. By not furnishing the audited accounts and furnishing Form 3CA which is not based on audited accounts, the assessee cannot claim that failure to furnish audited accounts is not relevant for bringing home the offence of non-compliance to provision of section 44AB. The assessee’s plea, therefore, is of no relevance. 20. Coming to the assessee’s next plea relating to the existence of mens rea, first of all we are of the opinion that the doctrine relating to the mens rea is applicable where the guilty state of mind is necessary for bringing home the default and not where either the law is clear or the default/offence is clear. Even otherwise, the assessee’s own action by way of appointing a private auditor only for securing a Form 3CA without audited accounts and not getting the accounts audited, itself speaks of the assessee’s mind. Had the assessee no guilty mind, then what prevented it from getting the accounts audited by the private auditor? The assessee’s action for appointing a private auditor only to procure Form 3CA and that too based on unaudited accounts clearly confirms that the assessee was well aware of its obligation under the Income- tax Law and it was intentionally and knowingly that the assessee preferred to befool the Revenue department by furnishing Form 3CA without getting the accounts audited. Had the assessee no knowledge or not aware of its obligation, then it should not have appointed the private auditor at all. As far as the case laws relied upon by the assessee are concerned, we are of the opinion that in the peculiar facts and circumstances, of the present case, those decisions do not advance the assessee’s case and are not applicable. XXX 22. As regards to the Board’s circular, we are of the opinion that the Circular No. 274 was applicable only in those cases where the assessee had Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 10 of 14 got his accounts audited and had procured the report of audit before the prescribed date but failed to file the same along with the return, which could have been proved if the audited accounts were accompanying the return. If the return was not accompanied by the audited accounts and was based on the unaudited accounts, then there was no question of omission to enclose the audit report—meaning thereby, that the circular was only to help the assessees in whose case there was omission only for furnishing the audit report and not failure to get the accounts itself audited. In assessee’s case, since the return was not accompanied by the audited accounts, rather was on estimate basis, the question of omission for furnishing the audit report could not have been entertained by the Assessing Officer and the return could not be considered as defective. Consequently, the circular relied upon by the assessee is also of no use to it. Even otherwise, it is now settled that a circular which is contrary to the main provisions of law is neither binding on the income-tax authorities nor can be taken note of by the Tribunal or the Courts and since, as stated above, there was no such provision which may entail a return based on estimate and not accompanied by the Audit Report as defective, the circular cannot make such a return as defective. We, therefore, are of the opinion that there was no necessity of issuing a notice under section 139(9) of the Act. 23. Without prejudice to the above, even if for the sake of argument, we assume that there was such a requirement, then also the failure on the part of the Assessing Officer to issue a notice under section 139(9) has caused no prejudice to the assessee because the assessee, admittedly, had neither got the accounts audited nor had procured a tax audit report before the specified date and, therefore, what at the best the assessee could do after issuance of a notice under section 139(9) was to bring a delayed audited accounts and belated audit report which was otherwise also not relevant for absolving the assessee from the default of non-compliance with the provisions of section 44AB. In view of foregoing discussion, the assessee’s plea is not tenable. XXX 27. Similarly, the plea that since the assessment could be completed without audit report, there is no justification in levying the penalty, cannot be accepted because the purpose of introducing the provisions of section 44AB was not only the completion of assessment as canvassed by the assessee but was for saving the time of the assessee and if the assessee fails to extend the cooperation which it was required under the statute, it cannot take the plea that since the assessment has been completed without audit report, the levy of penalty is not justified or it cannot be penalised by way of penalty under section 271B. If such an interpretation of the provisions of the Act and the Board’s circular is accepted, then it will lead to absurd result because a person who has got his accounts audited, procured the audit report and filed the same but belatedly will get penalised whereas a person who has not cared to comply with any of the three requirements will go scot free. Such an interpretation is not tenable and cannot be accepted in view of the Tribunal’s decision in the case of Fluid Air (India) Ltd. v. Dy. CIT [1997] 63 ITD Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 11 of 14 182 (Mum.) wherein the Hon’ble Bench, to which Judicial Member was the party, has held that if on the basis of equitable construction of a provision if the construction results in equity and justice rather than injustice and absurdity, then such construction should be preferred to the strict literal construction. This proposition also finds support from a decision of the Hon’ble Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597/ 7 Taxman 13 as well as in the case of Commissioner Of Income Tax, Bangalore v. J.H Gotla, Yadagiri. [1985] 156 ITR 323/23 Taxman 14J where on the following cases the Hon’ble Court has held as under : \"If a strict and literal construction of the statute leads to an absurd result, i.e., a result not intended to be subserved by the object of the legislation ascertained from the scheme of the legislation, then, if another construction is possible apart from the strict literal construction, then that construction should be preferred to the strict literal construction. Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the Legislature, the Court might modify the language used by the Legislature, so as to achieve the intention of the Legislature and produce a rational result. By the Court: Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction.\" Similarly, the Hon’ble Supreme Court in the case of K.P. Varghese (supra) at pages 605-606 has held as under :— \". . . It is now a well settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result, which could never have been intended by the Legislature, the court may modify the language used by the Legislature or even ‘do some violence’ to it, so as to achieve the obvious intention of the Legislature and produce a rational construction: Vide Luke v. IRC [1963] AC 557; [1964] 54 ITR 692. The Court may also in such a case read into the statutory provision a condition which, though not expressed, is implicit as constituting the basic assumption underlying the statutory provision. . . .\" 28. In view of the above facts and circumstances and the decisions of Hon’ble Supreme Court as well as of the Tribunal, we are unable to agree with the interpretation derived by the assessee’s counsel which, in our opinion, leads to injustice and absurdity. Assessee’s plea is dismissed. Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 12 of 14 29. In the result, we uphold the levy of penalty and dismiss the assessee’s appeal.” 6. In re-joinder and in reply to a query raised by bench as to why the assessee did not get accounts audited and file audit report u/s 44AB to Income-tax Department even belatedly before completion of assessment by AO through assessment-order dated 28.03.2018, the Ld. AR for assessee only narrated that the AO did not ask for such report. The Ld. AR, however, went on arguing that we have to see only the reason of non-compliance existing as on the date of 31.10.2013 (i.e. the last date prescribed in law for getting accounts audited and filing of audit report) and not beyond thereafter. 7. We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. The sole controversy in present case relates to the penalty imposed by AO and upheld by CIT(A) u/s 271B. Admittedly, the assessee was under compulsion to get accounts audited and file audit report to Income-tax Department by 31st October, 2013 in terms of mandatory provision of section 44AB but the assessee has failed to do the same. The assessee claims that due to delay in appointment of auditors by CAG for conducting statutory audit under the provisions of Companies Act, 1956, which took placed vide letter dated 23.12.2013 of CAG, the assessee could not make compliance of section 44AB by 31.10.2013. However, we find that even if there was delay in appointment of statutory auditors by Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 13 of 14 CAG, the assessee could at best get the accounts audited and file report of audit u/s 44AB belatedly to Income-tax Department and explain the circumstance of delay to AO and the AO would have considered the same in terms of section 273B. Ld. DR for revenue too agrees to this proposition. But, in present case, the assessee has not done anything to comply with the provision of section 44AB. The Ld. DR for revenue is very correct in submitting that it is a case of “outright” or “blanket” non-compliance of section 44AB of the Act. When the bench raised a specific query to Ld. AR as to why the assessee did not get accounts audited and file report u/s 44AB belatedly to AO before completion of assessment, Ld. AR replied that the AO did not ask for same. Here also, an attempt is being made to blame the AO rather than accepting assessee’s own default. In conclusion, there is a default committed by assessee by not complying with the mandatory requirement of section 44AB. In the light of judicial rulings relied by Ld. DR for revenue as cited above, we find that the requirement and importance of Tax Audit u/s 44AB of the Act is extremely high and the same cannot be waived or dispensed with on the ground that there was a delay in appointment of statutory auditors by CAG. Therefore, in our considered view, the AO has rightly imposed and the CIT(A) has rightly upheld the penalty imposed by AO. We do not find any reason to interfere with the orders of lower-authorities. Accordingly, this appeal is dismissed being devoid of any merit. 8. Resultantly, this appeal is dismissed. Printed from counselvise.com M.P. Laghu Udyog Nigam ITA No. 193/Ind/2025 – AY 2013-14 Page 14 of 14 Order pronounced by putting up on notice board as per Rule 34 of ITAT Rules, 1963 on 23/12/2025 Sd/- Sd/- (SUCHITRA R. KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 23/12/2025 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore Printed from counselvise.com "