TMI Blog2018 (1) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... e in not getting the accounts audited and filing the same before the AO in time. Therefore, in such peculiar circumstances, the penalty is liable to be held as invalid and the same is cancelled. Thus, the penalty imposed by the AO and confirmed by the CIT-A is cancelled. The ground raised by the assessee in this regard is allowed. Penalty u/s. 271F - not filing the return of income in time required u/s. 139(1) as well as at the end of relevant A.Y - whether the delay caused in filing the return of income is reasonable or not? - Held that:- We note that the delay in filing the return of income was explained by the assessee before the authorities, which have not been considered by them in their right perspective in terms of section 273B of the Act. The said section explains no penalty shall be imposable on the person or the assessee proves that there was reasonable cause for any failure in terms of section 271F of the Act. We note that the said burden in terms of section 273B was discharged by the assessee by adducing reasonable cause for the said failure. Therefore, in our opinion by reading the section 271F and 273B of the Act conjointly no penalty is invited in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponse to which, the assessee had filed its return on 22-03-2011 disclosing total income of Rs. Nil. Notices u/s. 143(2) and 142(1) of the Act were issued. In response to which, the AR of the assessee appeared and produced books of account and other relevant documents in support of the return as filed. The AO assessed the total loss ₹ 5,05,850/- and allowed carried forward vide his order dt. 27-12-2011 passed u/s. 143(3) of the Act. 5. Thereafter, the AO initiated penalty proceeding u/s. 271B of the Act for not getting its accounts audited, for not furnishing the same in prescribed pro-forma and for not filing the same along with Return of Income under the Act. During the said proceedings u/s. 271B of the Act the assessee submitted that the Tax Audit Report was not filed as per CBDT, Circular No. 9/2006 dt. 10-10-2006 and requested the AO to drop the said penalty proceedings. The AO was of the opinion that the said Circular is not applicable to the present facts of the case and it is only applicable to those cases which filed the return of income within stipulated time to the concerned income-tax office. The AO rejecting the above submissions of the assessee imposed penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or years or 0 sum of [one hundred fifty thousand rupees}, whichever is less. 5.2. It may be seen that there is 'no ambiguity and the onus to get the accounts audited and furnish the report of the audit, as required vide Section 44AB of the IT. Act, to the A.O. However, if any person fails to comply then the A.O. may direct that such person shall pay by way of penalty, a sum as provided in the Act.' In the instant case, the assessee was to get its accounts, for F.Y.2009-10 before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth for such particulars as may be prescribed. For the relevant A.Y. 2010-11, the 'specified date' was 15.10.2010. In such situation the A.O. initiated penalty proceeding. 5.3. The attention of the Ld. A/R, during the course of instant appeal proceeding, was drawn to the observation of the A.O. which is duly mentioned in the relevant penalty order u/s.271B dt.29.06.2012. The A.O. observes that, lithe request of the Director cannot be accepted because, those assessees in whose case the return has been filed within due date, are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er (a), (b) (c) of section 44AB of the Act as the accounts of the assessee have been audited as per provisions of Companies Act, 1956 and therefore, the (a), (b) ( c) of section 44AB of the I.T Act, 1961 does not attract in imposing the penalty, as it was protected by 2nd proviso of section 44AB of the Act. Before us the assessee filed a detailed statement of filing the audit tax audit and argued that for the A.Y 2009-10 , the specified date to furnish tax audit was on 30-09-09, which was completed on 15-03-2011 and there was a delay of 18 months. The AO determined the loss and allowed carry forward the same in scrutiny proceedings. In support of the contention, he relied on the following case laws/decisions on imposition of penalty u/s. 271B of the Act: In the case of Kamlesh R.Agarwal (HUF) (2006) 99 ITD 27(Ahd) Held: In this case the assessee took 4-5 months in getting accounts audited, which was reasonable and the AO was not justified in levying the penalty u/s. 271B of the Act. In the case of E.C.C Project Pvt. Ltd (2015) 374 ITR 44(All) Held: In this case the AO found that the audit report u/s. 44AB of the Act was not obtained in time and levied pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the F.Y 2007-08 relevant to A.Y 2008-09 and the audit was completed on 02-09-2008 i.e within time. We note that for the A.Y under consideration the assessee required to file the tax audit report by 30-09-2009. However, due to such disputes and delay, the same was filed by the assessee on 15-03- 2011 by a new auditor, M/s. B.S. Murthy Associates, who was appointed on 20-12-2010. Therefore, it clearly shows that due to disputes between the assessee with its earlier auditor and resignation thereof, the same (audited accounts) was filed before the AO belatedly. On perusal of the said statement filed by the assessee before us, we find that there was delay in getting the accounts audited only in the A.Ys 2009-10 10-11 and there was no delay in immediate earlier previous year and subsequent years i.e. 2010-11 to 2016-17. Thus, the said delay in filing the tax audit was not intentional. There was reasonable cause in not getting the accounts audited and filing the same before the AO in time. Therefore, in such peculiar circumstances, the penalty is liable to be held as invalid and the same is cancelled. Thus, the penalty imposed by the AO and confirmed by the CIT-A is cancelled. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. 15. The CIT-A considering the submissions of the assessee confirmed the action of the AO in levying the said penalty by observing as under:- 5. Decision: The relevant issue, in respect of the penalty u/s.271F, has been discussed with the Ld,A/R of the appellant and the submission, in this regard, vide letter no.JNB/68/1S-16 dt.26,08.15 is also referred. 5.2 The provisions of the I.T. Act, in respect of penalty u/s,271F, is very clear as the dates for the filing of return has been duly fixed and know to the appellant. However, the appellant had not filed return of income in time. Since, the assessee had not filed its return of income before due date or even till the end of the relevant A.Y., the A,O 'had no alternative but to initiate penalty proceeding u/s.271F and examine the facts. The A,O. had duly issued notice on 27.12.2011 of hearing but there was no compliance. It is also seen than there was neither any intimation/application for adjournment from the assessee nor any clarification in respect of late filing of return, The records show that another notice of hearing, in respect of penalty proceeding u/s 271F, on 20.04,2012 but again ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g total income of Rs. Nil. The AO determined the loss at ₹ 5,05,853/- against the claim of loss of ₹ 8,53,487/- vide his said order u/s. 143(3) of the Act. The argument of the ld.AR was that the assessee running its business in losses and there was no liability to pay tax and as such there was no loss to the revenue. It is also observed from the record, that the assessee filed above said return of income only in response to the notice issued u/s. 148 of the Act. The ld.AR also submitted before us as discussed in the aforementioned paras that the delay in complying the statutory requirements was caused to due to disputes with the earlier auditor and pleaded before us that it was reasonable cause for the said failure. We also note that the said delay caused only in the A.Ys 2009-10 10-11. No doubt the sub-section (1) of section 139 of the Act provides a time limit to file the return of income for every person and the proviso also to said sub-section provides time limit to file return of income at the end of relevant A.Y i.e.31-03-2010 for the year under consideration. Therefore, the question remains before us for our consideration whether the delay caused in filing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the AO and accordingly, the CIT-A confirmed the action of the AO in imposing the same as under:- The A.R. has submitted that, the assessee entrusted appearance/attendance in hearing before the AO to his authorized representative by power of Attorney. The assessee was under the impression that the hearings were being appropriately attended. It is pertinent to mention that the onus to ensure compliance is on the assessee and assessee's claim that AR is responsible is not correct. The AR also argued that the notice conveying of hearing penalty did not contain exactly for which default u/s.271(1)(b), the penalty is being proposed to be levied. But the Ld. AR, has not submitted as to why there was no compliance. The relevant records show that penalty proceedings u/s.271(1)(b) was duly initiated on 29.12.2011 for non-compliance of notices u/s.142(1) of the IT, Act, 1961. The case was again fixed for hearing on 11.04.2012 but there was no compliance on the part of the assessee. It is pertinent to mention that assessee never intimated the Assessing Officer about the reason for non- compliance. The assessee never sought adjournment of the hearing so that the AO would have kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO in not complying with the notice. We find that the facts and circumstances in the case of Delhi Tribunal are similar with that of present case and the same is reproduced herein below: 5. We have heard the rival submissions and perused the material on record. We find that the instant appeal is squarely covered by the decision of the Co-ordinate Bench of ITAT Delhi in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan trust vs ACIT 5 DTR 429 (Delhi Tribunal) wherein the Coordinate Bench in paras 2.4 and 2.5 has held as under:- I.T.A. No. 738/Del/2014 Assessment Year 2010-11 2.4 Coming to the issue of recording of satisfaction, it may be mentioned that mere initiation of penalty does not amount to satisfaction as held by Hon'ble Delhi High Court in the case of CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321 : (2000) 246 ITR 568 (Del). In absence of recording of the satisfaction in the assessment order, mere initiation of penalty will not confer jurisdiction on the AO to levy the penalty. 2.5 We also find that finally the order was passed under s. 143(3) and not under s. 144 of the Act. This means that subsequent compliance in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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