We note that the assessee has filed form no. 3CD and 3CB and the same has not been disputed therefore the tax audit report was on record and hence the penalty should not be levied. However the Assessing Officer disputed that instead of form no.3CB audit report should be in form no. 3CA. We note that the difference in form no. 3CA and form no. 3CB is that in form no. 3CA, the auditors are not required to give separate audit report. But in form no. 3CB, since that deals with the case of an assessee whose accounts have not been audited, mandates of comprehensive audit report. Therefore, when an assessee had furnished the tax audit report in form no. 3CB then it cannot be said that it has not complied with the provisions of section 44AB merely because the report is not in form no. 3CA. Thus, we are of the view that in the assessee’s case, form no. 3CB audit report with form no. 3CD is a sufficient compliance and hence penalty should not be levied. Therefore, we delete the penalty of Rs. 1,50,000/-.
FULL TEXT OF THE ITAT JUDGEMENT
The captioned appeal filed by the assessee , pertaining to Assessment Year 2013-14, is directed against an order passed by the Commissioner of Income Tax(Appeals)-6, Kolkata which in turn arises out of penalty order passed by the Assessing Officer u/s.271B of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 22.06.2016.
2. However, in this appeal the assessee has raised multiple grounds of appeal but at the time of hearing, the solitary grievance of the assessee has been confined to the issue that the Assessing Officer was erred in levying penalty u/s 271B of the Act on account of not filing the tax audit report.
3. Brief facts qua the issue are that in the instant case the original assessment u/s 143(3) was completed on 21.03.2016 determining total income of Rs. 26,07,98,030/-. In course of assessment proceedings it was noted by the A.O. that during the year the assessee failed to carry out statutory Audit and did not file the Tax Audit report in prescribed forms. As per the AST module the assessee filed only report in form 3CB and 3CD but not 3CA, therefore, penalty proceedings u/s 271B was initiated by A.O. In response, the assessee filed petition dated 05.2016. The A.O. examined the assessee’s submissions and noted that the assessee admitted that it had only submitted audit report in form 3CB and 3CD; therefore AO was in the opinion that the assessee failed to carry out statutory Audit and failed to file the Audit report in prescribed forms. Therefore Assessing Officer imposed penalty u/s 271B of the Act to the tune of Rs. 1,50,000/- for not furnishing statutory audit report in proper form.
4. Aggrieved by the penalty order passed by the Assessing Officer the assessee carried the matter in appeal before the Ld. CIT(A) who has confirmed the penalty u/s 271B observing the following:
“4. Ground nos. 1,2 and 3 are taken up together by the appellant since all these ground pertained to penalty so imposed by A. O. u/s 271B. The A. O. had imposed the penalty since the assessee had not filed its Tax Audit Report in Form 3CA along Form 3CD and indeed it had filed Form 3CB only. The requirement of filing report of Audit of the accounts u/s 44AB has to be considered as per Rules 6G which read as under:
6G: 1. The report of Audit of the accounts of a person required to be furnished u/s 44AB shall
a) In the case of a person who carries on business or profession and who has required by or any other law to get his audit in Form 4CA.
b) In the case of a person who carries on business or profession but not being person referred in clause (a) being in Form 36B.
c) The members are requires to be furnished u/s 44AB shall in Form 3CD. The appellant on its part has merely submitted that its accounts were audited for the period 1.1.2012 to 31.03.2013 and not for the period 01.04.2012 to 31.03.2013 and hence the requirement of furnishing Form 3CA was not application. The explanation so submitted by the appellant before the A. O. as well as before me has no relevance vis-а-vis sec. 44AB with Rule 6G since the turnover of the appellant for the year ended 31.03.2013 pertaining to A.Y. 2013-14 is Rs. 141.13 crore and its accounts have been audited under the Companies Act and clearly the provision of Rule 6G(1)(a) were applicable and which the appellant did not comply with. Hence, the A. O. has rightly imposed the penalty u/s 271B. Even otherwise, no bonafide reasons were also furnished before the A. O. for non-filing of the Audit Report in Form 3CA and hence A. O. ’s action in such respect is upheld and hence all the grounds of the appellant are dismissed.”
Aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us.
5. The ld. Counsel for the assessee reiterated the submissions made before the authorities below whereas the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity .
6. We have heard both the parties and perused the material available on record. We note that section 44AB of the Act requires every person carrying on a business (subject to other conditions) in a previous year, to get his accounts of such previous year audited by an accountant and furnish such audit report by the prescribed due date. As per Rule 6G of the Income-tax Rules, 1962 (‘the Rules’), read with section 44AB of the Act- In case of a person who carries on business or profession who is required by or under any other law to get his accounts audited for such previous year, the audit report should be in Form 3CA accompanied with form no. 3CD. In case of a person who carries on business or profession, but not being a person referred to above, Form 3CD shall be accompanied with Form It is clear from a combined reading of section 44AB of the Act and Rule 6G of the Rules that Form 3CA would be required to be filed for a previous year only when accounts for such previous year have been audited under any other law. We note that during the year ended 31 March 2013, the assessee had prepared financials for a period of 15 months (i.e., from January 2012 to March 2013). The said accounts for fifteen months (refer – Page 1 to Page 25 of paper book) were audited under the provisions of Companies Act, 1956. As such, it is evident from the above that the financial accounts of the assessee were audited under the Companies Act, 1956 for the period January 2012 to March 2013 and not for the previous year April 2012 to March 2013. Accordingly, the Assessee has filed the tax audit report in Form 3CB along with Form 3CD on 27 September 2013 (refer – Page 42 to Page 51 of paper book). In connection with the above, the assessee placed reliance on Circular no. 561 dated 22nd May, 1990, issued by the Central Board of Direct Taxes (refer- Page 154 of paper book). The important extracts of the circular is given below:
“4. The Board have considered the matter and are of opinion that as the income of the previous year is chargeable to tax and, for the purpose of Income Tax Act, the previous year is the financial year, the tax auditor would have to carry out the audit under section 44AB in respect of the period covered by the previous year, i.e., the relevant financial year. The proviso to the aforesaid section 44AB, therefore covers only the cases where the accounts are audited under any other law in respect of the financial year. Where the accounting year is different from the financial year, the proviso to section 44AB will not apply. Consequently, the tax auditors would have to carry out the tax audit in respect of the period covered by the relevant financial year and submit his report in Form 3CB as required in rule 6G(1)(b) of the Income-Tax Rules.”
Therefore, in the assessee’s case under consideration the accounting period i.e. 01.01.2012 to 31.03.2013, that is 15 months is different from financial year 01.04.2012 to 3 1.03.2013.
7. In addition to this, our views are fortified by the judgement of the Co-ordinate Bench of ITAT Delhi Bench on identical facts in the case of SPA Lifecycle vs ACIT  46 taxguru.in 347 (Del-Trib.) wherein it has held as follows:
“11. Admittedly, in the present case, these ingredients are not fulfilled and, therefore, operation of second proviso is ruled out. Now the second question arises as to whether in such a situation assessee is required to wait till completion of statutory audit under the relevant provision of the Act or it has to furnish the tax audit report as contemplated u/s 44AB. The answer to this is obvious and assessee cannot take the plea of not getting its account audited beyond the specified date and, therefore, is required to furnish the tax audit report as per the provisions of sec. 44AB. In such a situation the assessee is left with no other alternative but to furnish the report in form 3CB along with form 3CD to make substantial compliance with the provisions of section 44AB. If we accept the interpretation placed on 2nd proviso to section 44AB by ld. CIT(DR) then it would result in furnishing the TAR only after the statutory audit is completed under other provision of the relevant Act. In our humble opinion, this is not the object of incorporation of 2nd provision to section 44AB. It is well settled law that proviso cannot expand or limit the construction of principle provision. It is cardinal principle of interpretation that the language of a proviso is to be construed in relation to the subject matter covered by the section to which the proviso is appended. The proviso uses the phrase ‘….it shall be sufficient compliance..’. These are enabling words and they only imply a discretion. All the conditions for exercise of discretion should have been fulfilled before 2nd proviso could be invoked. The object of legislature is to avoid duplicacy of audit – first under other law and then under Income Tax Act. There is no dispute that assessee had obtained report in form 3CB along with form 3CD on 30th September, 2009 and the relevant details were furnished in the return of income filed on line. Therefore, the assessee had made substantial compliance with the provisions of section 44AB. It is further noticeable that report in form 3CB requires the auditor to examine the balance sheet and profit and loss account and certify that the same are in agreement with the books of account maintained by the assessee, whereas form 3CA only requires the audit report along with audited financial statement to be annexed with the report. Thus, primarily the only difference in form 3CA and form 3CB is that in form 3CA the Auditors are not required to give separate audit report. But in form 3CB, since that deals with the case of an assessee whose accounts have not been audited, mandates a comprehensive audit report. Thus, when an assessee had furnished the tax audit report in form 3CB then it cannot be said that it has not complied with the provisions of sec. 44AB merely because the report is not in form 3CA which was not possible for assessee to furnish. It is well settled law that law does not require an assessee to do impossible. It is further noticeable that form 3CB, form 3CA are not mutually exclusive but form 3CA is only supplemental to form 3CB.”
8. We note that the assessee has filed form no. 3CD and 3CB and the same has not been disputed therefore the tax audit report was on record and hence the penalty should not be levied. However the Assessing Officer disputed that instead of form no.3CB audit report should be in form no. 3CA. We note that the difference in form no. 3CA and form no. 3CB is that in form no. 3CA, the auditors are not required to give separate audit report. But in form no. 3CB, since that deals with the case of an assessee whose accounts have not been audited, mandates of comprehensive audit report. Therefore, when an assessee had furnished the tax audit report in form no. 3CB then it cannot be said that it has not complied with the provisions of section 44AB merely because the report is not in form no. 3CA. Thus, we are of the view that in the assessee’s case, form no. 3CB audit report with form no. 3CD is a sufficient compliance and hence penalty should not be levied. Therefore, we delete the penalty of Rs. 1,50,000/-.
9. In the result, the appeal of the assessee is allowed.