Anil Popatrao Boraste,, Nashik vs Assessee

Anil Popatrao Boraste, Income Tax Officer, 6, Sharda Co-op. Society, Ward - 1(1), Nashik Vs. Gangapur Road, Nashik-05 (Appellant) (Respondent) PAN No. ABMPB1385N

Revenue By: Shri B.C. Malakar Assessee By: Shri Pramod Shingte

Date of hearing : 09-04-2015 Date of pronouncement : 29-04-2015

ORDER

PER VIKAS AWASTHY, JM:-

The appeal has been filed by the assessee against the order of

Commissioner of Income Tax (Appeals)-I, Nashik dated 06-09-2013 for

the assessment year 2009-10 upholding the levy of penalty u/s. 271B of

the Income Tax Act, 1961 (hereinafter referred to as "the Act").

2. The brief facts of the case are : The assessee is an individual and is

an electrical contractor. The assessee is also having agriculture income

and income from interest. The assessee filed its return of income for the

assessment year 2009-10 on 16-01-2010, declaring total income of

Rs.5,40,860/- and agricultural income of Rs.72,500/-. The case of the

assessee was selected for scrutiny and notice u/s. 143(2) was issued to

the assessee on 18-08-2010. During the assessment year under

consideration, the assessee declared turnover of Rs.2,29,31,682/-. 2 ITA No. 1851/PN/2013, A.Y. 2009-10

Since, the gross turnover of the assessee was more than Rs.40 lakhs, the

accounts of assessee were subject to audit under the provisions of

Section 44AB of the Act. The assessee received the Audit Report on 02-

01-2010. The Assessing Officer while passing the assessment order

observed that, the assessee should have got his accounts audited before

the specified date i.e. 31-10-2009 whereas the Audit Report filed by the

assessee is signed by the Auditor on 02-01-2010. The assessee has

violated the provisions of Section 44AB of the Act. The Assessing Officer

initiated penalty proceedings u/s. 271B. However, the return of income

filed by the assessee was accepted without making any addition or

disallowance.

The Assessing Officer vide order dated 29-06-2012 levied penalty

of Rs.1,14,658/- for non-filing of Audit Report within the due date.

Aggrieved by the order levying penalty u/s. 271B, the assessee preferred

an appeal before the Commissioner of Income Tax (Appeals). The

Commissioner of Income Tax (Appeals) vide impugned order rejected the

reasons given by the assessee for delayed filing of Audit Report and

dismissed the appeal of the assessee. The assessee has now come in

second appeal before the Tribunal impugning the findings of the First

Appellate Authority.

3. Shri Pramod Shingte appearing on behalf of the assessee

submitted that there was delay in filing of the Audit Report as the

accounts of the immediate preceding financial year were not finalized.

Until and unless the accounts of the preceding years are finalized, the

balances cannot be carried forward to the subsequent year and in the

absence of opening balances, the accounts for the relevant period could

not be drawn. The Learned Authorized Representative (AR) further

contended that the assessment year under consideration is the first year 3 ITA No. 1851/PN/2013, A.Y. 2009-10

where the turnover of the assessee exceeded Rs.40 lakhs and thus, the

accounts of the assessee were subject to audit u/s. 44AB for the first

time. The Ld. AR further contended that the return of income filed by

the assessee for the assessment year under consideration was accepted

without making any addition in scrutiny assessment. The Ld. AR further

pointed out that one of the contributory factor causing delay in filing of

the Audit Report was change of Auditors. Initially, the assessee

appointed one Chartered Accountant firm to conduct audit u/s. 44AB of

the Act, but due to delay in finalization of accounts, the said Auditors

accepted other assignments. By the time assessee approached the

Auditors, the statutory limit of maximum audits that can be undertaken

by a Chartered Accountant firm was over. Hence, the assessee had to

approach another Chartered Accountant to get his accounts audited and

obtain Audit Report in the prescribed form. The Ld. AR submitted that

the delay in filing of Audit Report was due to bonafide reasons and

beyond the control of assessee. The Ld. AR in order to support his

contentions placed reliance on the following decisions:

i. ACIT Vs. Kamlesh R. Agarwal (HUF), 99 ITD 27 (AHD.) (TM).

ii. ITO Vs. Arun Kumar Bhuwalka, 40 ITD 373 (CAL.).

iii. Vamana Appanna & Sons Vs. ACIT, 58 TTJ (Hyd.) 696.

iv. Indian Handloom Textiles Vs. ITO, 68 ITD 560

4. On the other hand Shri B.C. Malakar representing the Department

vehemently supported the impugned order and prayed for dismissing the

appeal of the assessee. The Ld. DR contended that filing of the Audit

Report after the date specified u/s. 44AB attracts penalty u/s. 271B.

The Audit Report filed by the assessee is dated 02-01-2010 which is

much after the due date i.e. 31-10-2009. Further, there is no material 4 ITA No. 1851/PN/2013, A.Y. 2009-10

on record to suggest that the delay was caused due to change of the

Auditors.

5. We have heard the submissions made by the representatives of

both the sides and have perused the orders of the authorities below. We

have also examined the decisions on which the Ld. AR has placed

reliance. It is an undisputed fact that the assessee has filed his return

of income for the impugned assessment year along with the Audit Report

after the due date as specified u/s. 44AB of the Act. It is also not

disputed that on the basis of the Audit Report assessment u/s. 143(3)

was done. No addition or disallowance was made in the return of income

filed by the assessee. The assessee has given reasons for the delay in

filing of the Audit Report beyond the due date. The reasons cited by the

assessee for delay in filing of the Audit Report are :

• The accounts of the previous financial year were not finalized.

Until and unless the accounts of the preceding year are finalized

the balances could not be carried forward to the subsequent year.

• The financial year relevant to the assessment year under

consideration was the first year when the turnover of the assessee

exceeded Rs.40 lakhs and the accounts of the assessee were

required to be audited in compliance of provisions of Section

44AB. In the absence of opening balances accounts could not

have been prepared and audited.

• The assessee approached the Chartered Accountant for audit of

accounts, since there was delay in finalization of accounts the

Chartered Accountant accepted some other assignment. The

statutory limit of maximum number of audits that a firm of

Chartered Accountants could undertake was exhausted. The 5 ITA No. 1851/PN/2013, A.Y. 2009-10

assessee was constrained to approach another firm of Chartered

Accountants which consumed lot of time.

6. A bare perusal of Section 273B would show that no penalty u/s.

271B shall be imposed, if the assessee is able to prove reasonable cause

for the failure to comply with the provisions of the relevant section.

7. The Revenue has not disputed the delay in finalization of accounts

of the immediate preceding year. Due to non-finalization of accounts of

immediate preceding year, there was delay in preparing accounts and

obtaining tax Audit Report in the impugned assessment year. In the

case of Vamana Appanna & Sons Vs. ACIT (supra) the delay in finalizing

of accounts and obtaining of Audit Report for the immediate preceding

year is held to be a sufficient cause for the delay in obtaining tax Audit

Report in subsequent assessment year. The penalty levied u/s. 271B

was accordingly deleted. Similar view has been taken in the case of ACIT

Vs. Kamlesh R. Agarwal (HUF) (supra) for deleting the penalty u/s. 271B

of the Act.

8. We further observe that the Ld. AR who had represented the

assessee before the CIT(A) has admitted the fact that, the assessee had

first approached them to carry out audit u/s. 44AB of the Act. The

assessee was constrained to approach some other auditors, as they had

already exhausted the statutory limit of maximum audits. The relevant

extract of the submissions are reproduce here-in-below:

We may add here that initially our firm was appointed by him to carry out the audit u/s. 44AB of the Act. But later due to delay in getting his final accounts, we accepted other assignment and when he cam eo us for auditing his accounts, our statutory limit of maximum audits that can be undertaken by a C.A. was over and hence we could not conduct the audit of his accounts though initially 6 ITA No. 1851/PN/2013, A.Y. 2009-10

we accepted the same. Therefore the appellant has to approach another Chartered Accountant, which also consumed lot of time. In such circumstances and on totality of the facts of the case, there was reasonable cause within the meaning of section 271B of the Act.

9. In view of the facts of the case, we are of the opinion that the

assessee has been able to show bonafide cause for delay in filing the

Audit Report. The assessee has discharged his onus to prove reasonable

cause u/s. 273B of the Act. Therefore, no penalty u/s. 271B is leviable

on the assessee.

10. In the result, the impugned order is set-aside and the appeal of the

assesse is allowed.

Order pronounced on Wednesday, the 29th day of April, 2015

at Pune

Sd/- Sd/-

(R.K. PANDA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Pune, Dated: 29th April, 2015 RK/PS

Copy to

1 Assessee 2 Department 3 The CIT(A)-I, Nashik 4 The CIT-I, Nashik 5 The DR, ITAT, "B" Bench, Pune. 6 Guard file.

//True Copy// By Order

Assistant Registrar, Income Tax Appellate Tribunal, Pune