VIVIMED LABS LIMITED,HYDERABAD V. DCIT., CENTRAL CIRCLE 3(4), HYDERABAD

ITA 601/HYD/2025

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The case involves Vivimed Labs Limited, which appealed against the penalty levied by the A.O. for not submitting the tax audit report within the due date as required under Section 44AB of the Income Tax Act, 1961. The A.O. had levied a penalty of Rs. 1,50,000 under Section 271B due to the late submission of the audit report. The CIT(A) upheld the penalty, leading to the appeal before the Tribunal. The Tribunal found contradictions in the dates related to the filing of the audit report and the return of income, necessitating a re-examination of the facts by the A.O.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783600 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2018-2019
• Appeal Filed On: 03-04-2025
• Other Referred Cases: Chavakkad Service Cooperative Bank Ltd. Vs. ITO, Vee Ess Hardwares Vs. Assistant Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Reasonable cause; Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad “B” Bench, Hyderabad श्री विजय पाल राि, माननीय उपाध्यक्ष एिं श्री मंजूनाथ जी, माननीय लेखा सदस्य SHRI VIJAY PAL RAO, HON’BLE VICE PRESIDENT AND SHRI MANJUNATHA G, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.601/Hyd/2025 (निर्धारण वर्ा/ Assessment Year: 2018-19) Vivimed Labs Limited, Bidar, Karnataka. C/o. P. Murali & Co., Chartered Accountants, 6-3-655/2/3, Somajiguda, Hyderabad. PAN : AAACV6060A Vs. The Deputy Commissioner of Income Tax, Central Circle 3(4), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri P. Murali Mohan Rao, C.A. राजस्व का प्रतततितित्व/ Department Represented by : Shri Dr. Sachin Kumar, Sr.A.R. सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 04.11.2025 घोर्णध की तधरीख/ Date of Pronouncement : 07.11.2025 O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals) – Hyderabad – 11, dated 04.03.2025 relating to the assessment year 2018-19. Printed from counselvise.com 2 ITA No.601/Hyd/2025 Vivimed Labs Limited 2. The brief facts of the case are that the assessee company, Vivimed Labs Ltd., is engaged in the business of manufacturing of specialties and medicines, filed its return of income for the assessment year 2018-19 on 31-03-2019, admitting total income of Rs. 17,04,19,502/- under normal provisions of the Income Tax Act, 1961, and book profit of Rs. 8,85,19,711/- under MAT provisions. The case was selected for scrutiny, and the assessment was completed under Section 143(3) read with Section 144C(13) dated 30-07-2022, by determining the income at Rs. 20,50,33,895/-. During the course of assessment proceedings, the A.O. observed that, the assessee has received gross receipts of Rs. 263.32 crores/-, which attracts tax audit under Section 44AB of the Income Tax Act, 1961. However, the assessee company has failed to submit the tax audit report within the due date. Therefore, a notice under Section 274 read with Section 271B of the Income Tax Act dated 26-08-2022 was served upon the assessee and asked to explain why the penalty shall not be levied for failure to file audit report as required under the law. In response to the show cause notice, the assessee company has filed a reply requesting to keep the penalty proceedings under Section Printed from counselvise.com 3 ITA No.601/Hyd/2025 Vivimed Labs Limited 274 read with Section 271B of the Income Tax Act, 1961 under abeyance till the disposal of the order by the relevant A.O., as the ITAT has set aside the matter to the file of A.O. for fresh verification. 3. The A.O., after considering the relevant submissions of the assessee, observed that, the explanation offered by the assessee is not acceptable, as the penalty under Section 274 read with Section 271B of the Income Tax Act is leviable, if any person fails to get his accounts audited in respect of the previous year relevant to the assessment year or fails to furnish a report of such audit as required under Section 44AB of the Act. Since, the assessee has failed to file the audit report on or before the due date, the A.O. has levied a penalty of Rs. 1,50,000/- under Section 271B of the Income Tax Act. 4. Aggrieved by the penalty order passed by the A.O., the assessee preferred an appeal before the Ld. CIT(A). 5. Before the Ld. CIT(A), the assessee has challenged the penalty levied by the A.O. on two grounds, including non- recording of satisfaction by the A.O. in the assessment Printed from counselvise.com 4 ITA No.601/Hyd/2025 Vivimed Labs Limited proceedings, and also on the ground of reasonable cause. The Ld. CIT(A), after considering the submissions of the assessee and also taking note of relevant facts, rejected the explanation furnished by the assessee and sustained the penalty levied by the A.O. under Section 271B of the Income Tax Act, 1961 on the ground that, the assessee has failed to adhere to the provisions of Section 44AB of the Income Tax Act. 6. Aggrieved by the order of the Ld. CIT(A), the assessee is now, in appeal before the Tribunal. 7. The Learned Counsel for the assessee Shri P. Murali Mohan Rao, C.A. submitted that, the Ld. CIT(A) erred in sustaining the penalty levied by the A.O. without appreciating the fact that, the A.O. has not arrived at satisfaction in the assessment order that the assessee has not obtained the audit report within the time allowed under the Act, and in the absence of any such satisfaction, the penalty levied under Section 271B of the Act, cannot be sustained. The learned counsel for the assessee, further referring to the decision of the Hon’ble High Court of Kerala in the case of Chavakkad Service Cooperative Bank Ltd., Vs. ITO [2025] Printed from counselvise.com 5 ITA No.601/Hyd/2025 Vivimed Labs Limited 302 taxmann.com 305, submitted that, where there is a reasonable cause for the assessee for not filing the audit report within the prescribed time and further, such audit report was made available to the A.O. before he completes the assessment, then there is no question of levy of penalty under Section 271B of the Income Tax Act, 1961. Therefore, he submitted that, the penalty levied by the A.O. should be deleted. 8. The learned Senior A.R. for the Revenue, Dr. Sachin Kumar, on the other hand, supporting the order of the Ld. CIT(A), submitted that, there is no dispute with regard to the fact that the assessee has failed to file the audit report as required under Section 44AB of the Income Tax Act, 1961 on or before the due date provided under the Act, which is evident from the relevant audit report claimed to have been submitted by the assessee on 30.11.2018 which is beyond the due date provided under the Act. The A.O., after considering the relevant facts, has rightly levied penalty for non-submission of audit report, and thus, the order of the Ld. CIT(A) should be upheld. In this regard, the Ld. Senior A.R. for the Revenue relied upon the decision of the Hon’ble High Court of Kerala in the case of Vee Ess Hardwares Vs. Printed from counselvise.com 6 ITA No.601/Hyd/2025 Vivimed Labs Limited Assistant Commissioner of Income Tax, W.P.(C) No. 37927 of 2024. 9. We have heard both parties, perused the material available on record, and had gone through the orders of the authorities below. Insofar as the arguments of the learned counsel for the assessee on the issue of satisfaction of the A.O. in the assessment proceedings, we find that, the A.O., during the course of assessment proceedings, observed that, the assessee has gross receipts of Rs. 263.32 crores, which is above the threshold limit fixed for getting audit of accounts under Section 44AB of the Act, which attracts the provisions of Section 271B of the Act. The above findings of the A.O. clearly satisfy the condition of regarding satisfaction before initiation of penalty proceedings under Section 271B of the Act, Income Tax Act, 1961. Therefore, we reject the arguments taken by the Learned Counsel for the assessee. 10. Having said so, let us come back to the explanation of the assessee for not filing the audit report on or before the due date provided under the Act. Admittedly, the assessee claims to have Printed from counselvise.com 7 ITA No.601/Hyd/2025 Vivimed Labs Limited filed the audit report on 30.11.2018 and claimed that, the due date for furnishing the audit report for A.Y. 2018-19 was extended up to 30.11.2018. The assessee has furnished its return of income for A.Y. 2018-19 on 31.03.2019. The A.O. completed the assessment for the assessment year under consideration under Section 143(3) of the Act on 30.07. 2022. In other words, the audit report as required to be furnished under Section 44AB of the Act, has been furnished, before the A.O. completed the assessment under Section 143(3) of the Income Tax Act. If the audit report required to be furnished under Section 44AB of the Act is made available to the A.O. at the time of assessment proceedings, and further, if the assessee explains the reasons for not furnishing the relevant audit report within the due date provided under the Act, in our considered view, if the explanation of the assessee is bona fide and reasonable, then the A.O. ought to have not levied the penalty under Section 271B of the Income Tax Act, 1961. In the present case, although the assessee claims to have furnished the audit report on 30.11.2018, and in fact, the date of audit report as per Form No. 3CA and 3CD was also 30.11. 2018, but fact remains that when the assessee had furnished the return of Printed from counselvise.com 8 ITA No.601/Hyd/2025 Vivimed Labs Limited income on 31-03-2019, then how it had furnished the audit report on 30-11-2018 was not explained. Further, it was the case of the A.O. that the assessee has not furnished the relevant audit report during the course of assessment proceedings. Since there are contradictions in the facts in respect of filing of audit report, in our considered view, the matter needs re-examination from the end of the A.O. Therefore, we set aside the order passed by the Ld. CIT(A) and restore the issue back to the file of the A.O. The A.O. is directed to verify the claim of the assessee with regard to the due date of filing of Return of Income for the relevant assessment year, the actual date of filing of Return of Income, and the actual date of filing of audit report under Section 44AB of the Income Tax Act. In case, the assessee is able to prove that the audit report was filed on 30-11-2018 or along with the Return of Income filed on 31-03- 2019, then in our considered view, once the audit report was made available to the A.O., at the time of assessment then there is no question of levying penalty under Section 271B of the Income Tax Act. The A.O. is directed to verify the facts and decide the issue accordingly. Printed from counselvise.com 9 ITA No.601/Hyd/2025 Vivimed Labs Limited 11. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 7th November, 2025. Sd/- श्री विजय पाल राि (VIJAY PAL RAO) उपाध्यक्ष /VICE PRESIDENT Sd/- (मंजूिधथ जी) (MANJUNATHA G.) लेखा सदस्य/ACCOUNTANT MEMBER Hyderabad, dated 07.11.2025. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Vivimed Labs Limited, C/o. P. Murali & Co, Chartered Accountants, 6-3-655/2/3, Somajiguda, Hyderabad – 500082, Telangana. 2. रधजस्व/ The Revenue : The Deputy Commissioner of Income Tax, Central Circle 3(4), Hyderabad. 3. The Principal Commissioner of Income Tax (Central), Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad Printed from counselvise.com "