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M/s Ankur Udbodak Samiti Versus The Income Tax Officer, Ward 6 (1) , Jaipur

2016 (8) TMI 772 - ITAT JAIPUR

Penalty u/s 271B - violation of provisions of section 44AB - whether there is a reasonable cause for the delay on the part of the appellant to submit the audit report before the due date of filing the return of income? - assessee being a society set up under the Societies Act, 1958 - Held that:- The assessee’s belief that being a society running educational institutes is not carrying on business is a reasonable belief which is fortified by subsequent grant of registration under section 12A by th .....

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in not levying the impunged penalty. - Further, for the reason that there was a delay in submission of audit report where section 44AB is attracted, the AO has not given any adverse finding that it affected the proper computation of income in terms of provisions of the Act or any claim to any deduction by the assessee under any provisions of the Act. In such event, the breach remains a technical breach of the procedural requirement as the intent behind the introduction of section 44AB have .....

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iled by the assessee against the order of Ld. CIT(A)-II, Jaipur dated 06.08.2013 wherein the assessee has taken following grounds of appeal: Under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the penalty of ₹ 53,651/- u/s 271B of the IT Act, 1961 imposed by the ld. Assessing Officer. 2. Briefly the facts of the case are that the assessee society was set up under the Societies Act, 1958 and during the year under consideration, the assessee was operating two .....

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he AO also initiated penalty u/s 271B for failure to get the accounts audited and filed audit report in Form No. 3CD. Subsequently, penalty of ₹ 53,651/- was levied by the AO vide its order dated 30.03.2010 holding that the assessee has not got its books of account audited. 2.1 Being aggrieved, the assessee carried the matter before the ld. CIT(A) who has confirmed the levy of penalty and his findings are reproduced as under: I have considered the facts of the case, penalty order and appel .....

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till the due date of filing the return, admittedly the appellant is clearly liable for penalty u/s 271B. Appellant did not submit any explanation for delayed submission of tax audit report and therefore the appellant did not justify the delay by any reason. The submission that income was exempt does not justify the delayed submission of tax audit report. The judicial decisions relied upon are only relating to different facts not applicable to the appellant s case. Considering this, appellant di .....

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der a bonafide belief that the imparting of education was not a business activity and the provisions of section 44AB were not applicable. However the assessee didn t the benefit of an expert advice and as such it failed to apply in time for getting the aforesaid exemption u/s 12AA/10(23)()C). However, the accounts of the assessee were audited as the assessee happened to be a society and a copy of the audit report was enclosed alongwith the return of income filed on 30.03.2006. 2.3 The ld AR furt .....

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quoted below: Auditor s report, balance sheet and income & expenditure account has been annexed to the return of income. Form No. 10B has also been annexed to the income tax return . 2.4 The ld AR further submitted that the assessing Officer initiated penalty on the ground that accounts were not audited. The exact language used by the ld. AO in assessment order is quoted below: Penalty u/s 271B is also being initiated for failure to get accounts audited and file audit report in form no. 3CD .....

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The ld. CIT(A) has confirmed the penalty on different ground i.e. the audit report as filed late. It is submitted that ld. CIT(A) was not justified in confirming the penalty on a different ground than on the ground on which penalty was levied. The submission of the assessee is that the penalty was wrongly initiated and unlawfully imposed. The ld. CIT(A) also erred in confirming the same. The same deserved to be quashed. 2.5 The ld AR further submitted that it was under a bonafide belief that it .....

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due to ignorance of law and being under bonafide belief that technical requirements were not made in time for getting the exemption available under law. Thus the assessee has been punished by the ld. AO only for technical breach otherwise in substance the assessee was not required to file even return of income. Filing of audit report was only a technical requirement. The ld. CIT(A) has disregarded the submissions of the assesssee in a mechanical manner and has confirmed the levy of penalty. The .....

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n the ground that no audit report was submitted as per provisions of section 44AB. The grounds on which penalty has been imposed are without any foundation in as much as the assessee had submitted audit report alongwith the return of income as discussed above. In view of this it is prayed that the penalty imposed may kindly be deleted. The facts that in subsequent year the assessee was granted registration u/s 12A speaks volumes about the bonafides of the assessee. Otherwise also on a whole the .....

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be relevant to refer to the provisions of section 44AB of the Act, given that the AO has levied penalty u/s 271B for violation of the said provision. The relevant provisions of section 44AB are reproduced as under: Section 44AB -Every person (a)carrying on business shall, if his total sales, turnover of gross receipts, as the case may be , in business exceed or exceeds one crore rupees in any previous year - Provided further that in a case where such person is required by or under any other law .....

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ive conditions: • such person gets the accounts of such business or profession audited under such law before the specified date and • furnishes by that date the report of the audit as required under such other law and • a further report (by an accountant) in the form prescribed under this section (Form 3CD). In the instant case, the books of accounts have been audited and the auditor s have issued an audit report dated 22.06.2005 which is well before the specified date as prescrib .....

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ively and the assessee has failed to furnish the audit report within the stipulated time frame, the penalty has rightly been initiated by the AO. 2.10 The only limited issue that remains is whether there is a reasonable cause for the delay on the part of the appellant to submit the audit report before the due date of filing the return of income. The ld. AR submitted that the assessee was under the bonafide belief that running of educational institutes and imparting of the education was not a bus .....

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report in Form No. 10B along with the return of income which again proves the bonafidee of the assessee. 2.11 It is also noted that the penalty u/s 271B is in respect of assessee carrying on business or profession and who are required to get their accounts audited and furnish auditor s report alongwith tax audit report in Form 3CD. However, for the corresponding provision of section 12A(1)(b) in the context of education institution which require submission of report in Form 10B, there is no cor .....

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