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Penalty for delay in filing Audit Report due to Dispute with Auditor is invalid: ITAT

Due to disputes between the assessee with its earlier auditor and resignation thereof, the same (audited accounts) was filed before AO belatedly.

M/s. Care Concern Hospital Pvt. Ltd Vs. ACIT (ITAT Kolkata)

AO imposed the penalty u/s. 271B of the Act for not submitting the audited accounts of the assessee by an accountant before the specified date required as per sub-section (a), (b) & ( c) of section 44AB of the Act by 3009-2009. We find that the AO imposed penalty of Rs. 42,887/- i.e. 1/2% of gross receipts of Rs. 85,77,353/- found during the survey for the A.Y under consideration.

The AO opined in his order that the sub-section (a),(b) & (c) of section 44AB of the Act is that every person carrying on business with total sales, turnover or gross receipts exceeding Rs. 40 lakhs, needs to be accounts audited and furnished the same before the specified date. On perusal of the paper book pages 1-13, we find that earlier the auditor, M/s. P. Ghosh & Associates resigned from the Office of statutory auditor of assessee on 09-12-2010.

Thereafter, the assessee appointed a new auditor, M/s. B.S. Murthy & Associates on 22-12-2010. From pages 5,7, 10,11 & 12, clearly shows that the assessee had disputes with earlier auditor, M/s. P.Ghosh & Associates and lodged a complaint to Institute of Chartered Accountants of India. Thereafter, the assessee withdrew the same. It establishes that due to such disputes with earlier auditor, there was delay in auditing the books of account required u/s. 44AB of the Act for the A.Y under consideration. On perusal of statement of date of audit/tax audit as filed by the assessee before us, we find that the assessee started its business from 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.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

All the above appeals filed by the respective assessee are against the separate orders date 04-01-2016 and 05-01-2016 of the CIT-A, 21, Kolkata for the A.Y’s: 2009-10 & 2010-11 respectively, wherein he confirmed the penalties of Rs.42,887/-,Rs. 10,000/- Rs. 10,000/-, Rs. 64,338/-, Rs. 5,000/- & Rs. 5,000/- levied by the AO u/s. 271B/271(1)(b) & 271F of the Act.

2. Since the facts in the issue(s) involved in all the appeals are common, except variance in amount imposed in penalty and provisions of law. Both the parties agreed to take up the appeals together, therefore, we proceed to hear the same and disposed of the same by this consolidated order for the sake of convenience.

3. First, we shall take up the appeal- ITA No. 331/Kol/2016 A.Y 2009-10 by M/s. Care Concern Hospital P.Ltd relating to confirmation of penalty of Rs. 42,887/- by the CIT-A imposed by the AO u/s. 271B of the Act.

ITA No. 331/Kol/2016 A.Y 2009-10 by M/s. Care Concern Hospital P.Ltd

4. Brief facts of the case are that a special survey u/s. 133A of the Act was conducted at the business premises of the assessee on 27-01-2011 & 28-01-2011. During the survey proceedings receipt of Rs. 79,63,087/- was found for the A.Y under consideration. Therefore, notice u/s. 148 Of the Act was issued on 15-02-2011. In response 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 Rs. 5,05,850/- and allowed carried forward vide his order date 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 date 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 of Rs. 42,887/- i.e. 1/2% of the gross sales of Rs. 85,77,353/-.

6. Aggrieved by such order of the AO, the assessee preferred appeal before the CIT-A. Before him the assessee contended that due to disputes with its auditor, financial hardship, administrative difficulties relating to bank loan and further due to resignation of said auditor on 09-12-2010 the assessee failed to get the accounts audited, the assessee appointed new auditor on 20-12-2010 and the said auditor started its audit thereafter. The audit of preceding financial year ending on 31-03-09 was delayed due to above said reasons and finally completed on 15-03-2011. The tax audit as required u/s. 44AB of the Act could not be completed before 15-03-2011. The delay in obtaining the audit report u/s. 44AB of the I.T Act are attributable to these reasons which beyond the control of assessee, unintentional and reasons stated above are bonafide. Before the CIT-A the assessee further submitted that the TAR was filed before the AO and the AO made his assessment u/s. 143(3) of the Act on 27-12-2011. The assessee also submitted that the purpose and intent of furnishing of tax audit report has been achieved and complied with, the levy of penalty for technical and venial breach of law is not justified either on legal or factual grounds and prayed to cancel the said penalty imposed by the AO u/s. 271B of the Act.

7. The CIT-A considering the above submissions of assessee and CBDT Circular No. 9 of 2006 date 10-10-06 as relied on by the assessee for non imposition of penalty, confirmed the action of the AO in imposing the same by stating as under:-

5. Decision :

The issue, related to the imposition of penalty u/s.271B of the I.T. Act, has been discussed with the Ld. A/R of the appellant and the submission, in this regard, vide letter no.JNB/115/15-16 dt.15.12.15 is referred.

The provision of Section 271B of the I.T. Act is reproduced below:

“If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or {furnish a report of such audit as required under section 44AB}, the [Assessing} Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or 0 sum of [one hundred fifty thousand rupees}, whichever is less. n

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 date 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 not required to submit any audit report to the office, only the relevant columns of such e-filed return are to be filled up on the basis of such report. But if the return is not filed within due date, provision of section 44AB comes into play. In that situation, tax audit report should be furnished to the office on or before the due date.”

The attention of the Ld. A/R has also been drawn to para 6(ii) of the Circular No. 9/2006 date l0.10.2006, wherein relevant clarifications are given. The said para is reproduced below:

6(i) “The report of audit under section 44AB is not 10 be attached with the return. It should not be furnished separately also before or after the due date, However, on assessee should get the report of audit from an accountant under said section before the due date of the furnishing of the return and should fill out the relevant columns of these forms on the basis of such report. The assessee should retain the report with himself. It may be furnished in original during the assessment proceedings. No penalty under section 2 71B shall be initiated or levied for not furnishing the tax audit report on or before the due date. However, if the audit report has not been obtained before the due date, provisions of section 271 B shall be attracted.

5.4. It is seen that the A/R of the assessee Shri Arup Bandyopadhyay had submitted, during the course of assessment proceeding, on 02.05.2012 that, “the audit report was not submitted in the office as per CBD, Circular No. 9/2006 and the Director of the company has requested to drop the penalty proceedings u/s.271B.” The A/R of the appellant filed a submission date 1S.12.2015 wherein reference has been made to the dispute with Auditor, financial and administrative difficulties but Assessing Officer was never informed about any reason other than Circular No.9 of 2010. But the said circular is not applicable in the instant case. In view of this, the penalty u s.271B of the Act is confirmed.”

8. Before us the ld.AR of the assessee has reiterated his same submissions made before the CIT-A and argued there was a delay of 18 months in getting the accounts audited due to dispute with the previous auditor. He also submits that the AO fastened the responsibility of getting the accounts audited by the assessee in pursuance of (a), (b) & (c) of section 44AB of the Act, but the assessee does not fall under (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)TM

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 penalty, which was upheld by the CIT-A. The Tribunal cancelled the penalty.

9. In view of above, he argued that the penalty imposed by the AO u/s. 271B and confirmed by the CIT-A is liable to be cancelled and urged to allow the grounds of appeal raised by the assessee in this regard.

10. On the other hand, the ld.DR submits that the assessee failed to give explanation before the AO and the contention of having disputes with previous auditor came up before the CIT-A for the first time and it was not before the AO. He also argued that the said statement as filed by the assessee was not before the AO. In support of his contention, he referred to page 4 at para no- 5.4 of the order of the CIT-A, supported the finding of the AO. He urged to confirm the impugned penalty imposed by the AO and confirmed by the CIT-A.

11. Heard rival submissions and perused the material on record. We find that the AO imposed the penalty u/s. 271B of the Act for not submitting the audited accounts of the assessee by an accountant before the specified date required as per sub-section (a), (b) & ( c) of section 44AB of the Act by 3009-2009. We find that the AO imposed penalty of Rs. 42,887/- i.e. 1/2% of gross receipts of Rs. 85,77,353/- found during the survey for the A.Y under consideration. The AO opined in his order that the sub-section (a),(b) & (c) of section 44AB of the Act is that every person carrying on business with total sales, turnover or gross receipts exceeding Rs. 40 lakhs, needs to be accounts audited and furnished the same before the specified date. On perusal of the paper book pages 1-13, we find that earlier the auditor, M/s. P. Ghosh & Associates resigned from the Office of statutory auditor of assessee on 09-12-2010. Thereafter, the assessee appointed a new auditor, M/s. B.S. Murthy & Associates on 22-12-2010. From pages 5,7, 10,11 & 12, clearly shows that the assessee had disputes with earlier auditor, M/s. P.Ghosh & Associates and lodged a complaint to Institute of Chartered Accountants of India. Thereafter, the assessee withdrew the same. It establishes that due to such disputes with earlier auditor, there was delay in auditing the books of account required u/s. 44AB of the Act for the A.Y under consideration. On perusal of statement of date of audit/tax audit as filed by the assessee before us, we find that the assessee started its business from 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 15-032011 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 ground raised by the assessee in this regard is allowed. Therefore, the appeal of assessee ITA No. 331/Kol/2016 for the A.Y 2009-10 is allowed.

ITA No. 334/Kol/2016 A.Y 2010-11 by M/s. Care Concern Hospital P.Ltd

12. We find that the AO in this case on similar set of facts and circumstances imposed penalty of Rs. 42,887/- u/s. 271B of the Act. The assessee made submissions as advanced in A.Y 2009-10 before the CIT-A and the CIT-A confirmed the penalty on the same set of facts. A view was taken on similar issue in aforementioned paras in ITA No. 331/Kol/2016 for the A.Y 2009-10 by dismissing the order of the CIT-A. Therefore, we adopt the same view in ITA No. 334/Kol/2016 for the A.Y 2010-11 by the same assessee. Therefore, the penalty imposed of Rs. 42,887/- by the AO and confirmed by the CIT-A is cancelled. The ground raised by the assessee in this regard is allowed. Thus, the appeal of assessee ITA No. 334/Kol/2016 for the A.Y 2010-11 is allowed.

ITA No. 335/Kol/2016 A.Y 2009-10 by M/s. Care Concern Hospital P.Ltd

13. The AO initiated the proceedings u/s. 271F of the Act for not filing the return of income in time required u/s. 139(1) as well as at the end of relevant A.Y as per proviso to sub-section (1) of section 139 of the Act. For non-compliance of notice issued and for not filing the return of income in time, the AO imposed penalty of Rs. 5,000/- u/s. 271F of the Act.

14. Before the CIT-A, the assessee contended that having disputes with the earlier auditor and taking decision in the Extra ordinary General Meeting the assessee appointed a new auditor on 20-12-2010. Due to noncooperation of earlier auditor, the assessee could not file the return of income within time specified u/s. 139(1) of the Act. The said delay as alleged by the AO was beyond the control of the assessee. The assessee further contended that the AO did not issue notice either in section 139 or 142 of the Act requiring the assessee to file return of income within due date. The AO by assuming his jurisdiction u/s. 148/147 of the Act initiated the penalty proceedings u/s. 271F of the Act. In response to which, the assessee filed its return within due date fixed as per notice issued u/s. 148 and contended that there was no delay in filing the return of income and as such the assessee did not have any liability to furnish the return of income u/s. 139(1) 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 date 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 there was neither any request for adjournment nor any explanation was submitted. In such situation the A.O. had no alternative but to impose penalty for the late filing of return.

5.3. The Ld. A/R of the appellant argued that ‘the assessee had some difference of opinion with the auditors and due to that reason, the auditors did not carry out the audit nor submitting any report for quite some time. He also argued that the delay in the filing of return was due to reasonable cause which is beyond the control of Management. The A/R also argued that The assessee had loss in its business for several years and as such did not have any liability to furnish return of income u/s,139(1), based on which the A.O. imposed penalty’.

5.4. Both the arguments are vague and misleading as ‘during the year of loss in business for several years’ cannot be made a ground for not filing the return of income. Similarly difference of opinion with auditor is not an acceptable ground, Besides, the assessee never accepted with the notice u/s,271F which was duly issued by the A.O. and serve on the assessee.

5.6. In view of the above the penalty imposed u/s,271F, by the A.O, is confirmed.”

The ld.AR of the assessee reiterated his submissions as made before the CIT-A. He further submits that the assessee was financially distressed because of huge loss, recalling of bank loan and inability to arrange working capital. These hardships and events were unintentional, bonafide and beyond the control of management. For non furnishing the tax return within time is a defect of technical and venial breach of law and does not call for levy of penalty. The AO did not afford opportunity to substantiate the claim of the assessee and the CIT-A did not appreciate the defects and hardships and difficulties of the assessee in right perspective and mechanically confirmed the penalty imposed by the AO.

17. The ld.DR submits that the assessee did not appear before the AO to put forth his arguments and objections in levying the penalty. The assessee altogether has taken a new plea before the CIT-A, which is not tenable. In support of his contentions, relied on the order of the AO and the CIT-A.

18. Heard rival submissions and perused the material available on record. It is observed from the assessment order date 27-12-11, the assessee filed its return of income by declaring total income of Rs. Nil. The AO determined the loss at Rs. 5,05,853/- against the claim of loss of Rs. 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 return of income is reasonable or not. 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. Thereby, in such peculiar circumstances, we cancel the penalty of Rs.5,000/- as imposed by the AO and confirmed by the CIT-A. The ground raised by the assessee in this regard is allowed. Thus, the appeal of assessee in ITA No. 335/Kol/2016 for the A.Y 2009-10 is allowed.

ITA No. 336/Kol/2016 A.Y 2010-11 – by M/s. Care Concern Hospital P.Ltd.

19. We find that the AO in this case on similar set of facts and circumstances imposed penalty of Rs. 5,000/- u/s. 271F of the Act. The assessee made same submissions as advanced in A.Y 2009-10 before the CIT-A and the CIT-A confirmed the penalty on the same set of facts. A view was taken on similar issue in aforementioned paras in ITA No. 335/Kol/2016 for the A.Y 2009-10 by dismissing the order of the CIT-A. Therefore, we adopt the same view in ITA No. 336/Kol/2016 for the A.Y 2010-11 by the same assessee. Therefore, the penalty imposed Rs.5,000/- by the AO and confirmed by the CIT-A is cancelled. The ground raised by the assessee in this regard is allowed. Thus, the appeal of assessee ITA No. 336/Kol/2016 for the A.Y 2010-11 is allowed.

ITA No. 332/Kol/2016 for the A.Y: 2010-11 by Titas Bandopadhyay

20. The AO initiated the proceedings u/s. 271(1)(b) of the Act for non submissions of specific documents and evidences sought u/s. 142(1) of the Act. The AO imposed penalty of Rs. 10,000/- for non-compliance of notice issued u/s. 142(1) of the Act.

21. Before the CIT-A the assessee contended that the AO failed to make out specific charge showing default in the notice issued u/s. 271(1)(b) of the Act. The CIT-A observed that the assessee could not submit any reason for non compliance of the said notice before 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 known and fixed the hearing as per the convenience of the assessee. In view of assessee’s non-compliance, the AO had no other alternative but to impose penalty u/s.271(1)(b) of the 1. T. Act and the same is considered to be correctly imposed.”

22. The ld.AR submits that the assessee complied with the notice issued u/s. 142(1) of the Act and there was no allegation of non compliance in the assessment order. He referred to assessment order and argued that the assessee produced books of account and other relevant documents in support of the return. The AO examined the same thoroughly and passed his order u/s. 143(3)/147 of the Act. The ld.AR also submits that having completed the assessment u/s. 143(3) of the Act, which clearly shows that there was full compliance on behalf of the assessee regarding requirements as sought by the AO in the said proceedings. The AR placed his reliance on the decision of ITAT, New Delhi in the case of Globus Infocom Ltd and referred to para 3 of the said order and argued that the Delhi Tribunal by placing reliance in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan trust Vs. ACIT reported in (2008) 5 DTR (Del) 429, held that imposition of penalty u/s. 271(1)(b) of the Act was patently wrong in view of the fact that the impugned assessment order was passed u/s. 143(3) of the Act. The ld. AR prayed to allow the ground of appeal in this regard and cancel the penalty imposed by the AO u/s. 271(1)(b) of the Act.

23. The ld.DR submits that there were two instances where the assessee did not comply the notice issued u/s. 142(1) of the Act and referred to para 1 of the penalty order. The ld.DR also submits that the assessee failed to give valid reasons for non compliance of the notice issued u/s. 142(1) of the Act. The ld. DR argued that it is a fit case for imposing the penalty and the AO rightly imposed the same, which was confirmed by the CIT-A and it is justified.

24. Heard rival submissions and perused the material on record. We find that the assessment order date 29-12-2011 passed u/s. 147/143(3), wherein we noticed that there was no allegation of non compliance was made by the AO. It is observed that the assessee through his AR complied with the notice and books and other relevant documents were filed, which were examined by the AO. We find that the ld.AR has rightly pointed out that there was no allegation by the 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 Honorable 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 assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the AO. Therefore, in such circumstances, there could have been no reason to come to the conclusion that the default was willful.”

6. As the facts of this case are identical, we hold that the imposition of penalty u/s 271(1)(b) of the Act was patently wrong, specially in view of the fact that the impugned assessment order has been passed u/s 143(3). While setting aside the impugned order, we direct the Assessing Officer to delete the penalty.”

25. In view of above, we cancel the impugned penalty imposed by the AO and confirmed by the CIT-A. Thus, the ground of appeal of the assessee are allowed. The appeal ITA No. 332/Kol/2016 for the A.Y 2010-11 is allowed.

ITA No. 333/Kol/2016 A.Y 2010-11 by Arup Bandyopadhyay

26. We find that the AO in this case on similar set of facts and circumstances imposed penalty of Rs. 10,000/- u/s. 271(1)(b) of the Act and the CIT-A confirmed the penalty on the same set of facts. A view was taken in favor of the assessee on similar issue by us in aforementioned paras in ITA No. 332/Kol/2016 for the A.Y 20010-11 by dismissing the order of the CIT-A. Therefore, we adopt the same view in ITA No. 333/Kol/2016 for the A.Y 2010-11 by the assessee, Sri Arup Bandyopadhyay. Therefore, the penalty imposed Rs. 10,000/- by the AO and confirmed by the CIT-A is cancelled. The ground raised by the assessee in this regard is allowed. Therefore, the appeal of assessee ITA No. 333/Kol/2016 for the A.Y 2010-11 is allowed.

27. In the result, the appeals in ITA No. 331/Kol/2016 for A.Y 2009-10, 334/Kol/2016 for A.Y 2010-11, ITA No. 335/Kol/2016 for A.Y 2009-10, ITA No. 336/Kol/2016 for A.Y 2010-11 by M/s. Care Concern Hospital P.Ltd, and, ITA Nos. 332 & 333/Kol/2016 for A.Y 2010-11 by S/Shri Titas Bandopadhyay & Arup Bandyopadhyay respectively are allowed.

Order pronounced in the open Court on 12-01-2018

Categories: Income Tax
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