In the recent Income Tax Appellate Tribunal (ITAT) ruling, Amit Kumar Chatterjee vs Income Tax Officer (ITO), the court ruled that penalties could not be imposed if the assessee provides reasonable cause for delays in filing books of accounts, under Section 273B of the Income Tax Act, 1961.
The appeal pertained to the Assessment Year 2016-17, where the assessee filed his return late by one day, leading to a penalty imposition. Mr. Chatterjee argued that the delay occurred due to the illness of his auditor and technical issues with the income tax portal.
In a significant move, the ITAT considered these factors as a ‘reasonable cause,’ stating that, due to these circumstances, the assessee was prevented from filing the audit report in time. Consequently, it overturned the penalty of Rs. 1,50,000/- imposed by the lower authority under section 271B of the Act.
The ITAT’s decision in Amit Kumar Chatterjee vs ITO sets an important precedent, indicating that unavoidable circumstances that delay audit report submissions can be viewed as ‘reasonable causes’ under Section 273B.
FULL TEXT OF THE CESTAT KOLKATA ORDER
This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2016-17 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-NFAC, Delhi [in short ld. “CIT(A)”] dated 31.03.2021 arising out of the assessment order framed u/s 143(3) of the Act dated 18.12.2018.
2. Registry has informed that the appeal filed by the assessee is time barred by 670 days. Condonation application has been filed by the assessee stating as follows:
“I, Amit Kumar Chatterjee, son of Amar Chatterjee, by religion Hindu, residing at Vill: Gobindapur, Banerjeepara, PO: Panitras, SD Uluberia, Howrah-712303, do hereby solemnly affirm and state as follows: –
1. That 1 am assessed to Income Tax under PAN: ALBPC7485M.
2. That an appeal against order u/s 27IB passed by the A.O. on 25.04.2019 was filed on 15.05.2019 before the National Faceless Appeal Centre.
3. That the said appeal was dismissed by the National Faceless Appeal Centre by passing an adverse order u/s 250 on 31.03.2021.
4. That Sri Pinaki Dhar, Advocate, was entrusted for the instant appeal matter and that I was under the bona fide belief that proper compliances/communications were being made from time to time by Sri Pinaki Dhar, Advocate.
5. That on or around 14.03.2023, when my accessed Income Tax Portal in order to find the status of the appeal matter, it came to my knowledge that above appellate order has already been passed on 31.03.2021 by NFAC.
6. That, thereafter, I approached the said Advocate to enquire about the reason for non-filing of appeal at the relevant time before the Hon’ble ITAT, Kolkata and it came to the knowledge that due to ongoing Covid-19 pandemic during the relevant time, appeal could not be got prepared/preferred in time and afterward i.e., afterwards by passage of time Sri Pinaki Dhar forgot to file the appeal.
7. That then I approached Sri Anil Kochar, Advocate, to take necessary steps in the matter and handed over all the relevant papers to him on 15.03.2023.
8. That the facts so narrated in Para 1 to 7 are true to the best of my knowledge and belief.”
2.1. From perusal of the above affidavit we notice that most part of the delay is on account of COVID restrictions and some delay was on account of the Counsel Sh. Pinaki Dhar who forgot to file the appeal. Considering the condonation application and the reasons stated therein, we are satisfied that the assessee was prevented for reasonable cause from filing the instant appeal within statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication on merits.
3. The assessee has raised the following grounds of appeal:
“1. For that the orders passed by the lower authorities are arbitrary, erroneous, without proper reasons, invalid and bad-in-law, to the extent to which they are prejudicial to the interests of the appellant.
2. For that the Ld. CIT (A), NFAC erred in confirming the action of the A.O. in levying penalty of Rs. 1,50,000/- u/s 271B of the Act on alleged grounds.
3. For that the appellant having got his accounts audited on 22.09.2016 the Ld. CIT (A), NFAC erred in confirming the action of the A.O. in holding that the appellant failed to get the accounts audited within time.
4. For that the Audit Report having been uploaded by the appellant on 18.10.2016 as against the extended due date being 17.10.2016 the Ld. CIT (A), NFAC erred in confirming the levy of penalty on alleged grounds.
5. For that the Ld. CIT (A), NFAC ought to have cancelled the penalty imposed u/s 271B of the Act specially when there is delay of only one day in uploading the TAR.
6. For that the Ld. CIT (A), NFAC ought to have appreciated the fact that the delay in submission of TAR which occurred is due to illness of the Auditor and the appellant was prevented by sufficient and reasonable cause in respect of delayed submission of TAR.
7. For that there is delay in submission of appeal by the appellant by the Hon’ble Income Tax Appellate Tribunal which was due to certain facts and circumstances which are partly embodied in the declaration and it is the prayer of the appellant that delay may kindly be condoned for which the appellant shall be highly obliged
8. For that the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds.”
4. Though the assessee has raised eight grounds of appeal but the sole grievance is that ld. CIT(A) erred in confirming the penalty levied u/s 271B of the Act at Rs. 1,50,000/- for not getting the books of accounts audited.
5. We have heard rival contentions and perused the records placed before us.
6. We notice that the assessee is an individual and filed the return of income on 26.01.2018 declaring total income of Rs. 4,43,190/-. The books of accounts of the assessee comes under the purview of audit u/s 44AB of the Act and the assessee was required to submit the report before filing the return of income. The assessee uploaded the audit report u/s 44AB of the Act on 18.10.2016. The normal due date i.e. 30.09.2016 provided u/s 139(1) of the Act was extended to 17.10.2016 by the CBDT vide notification no. No. 225/195/2016-ITA-II dated 09.09.2016. So, effectively there is a delay of one day. Ld. AO levied penalty u/s 271B of the Act for failure to get the books of accounts audited since the assessee did not file an audit report before the due date of filing of return of income. Ld. CIT(A) has also confirmed the view of ld. AO given that the reason was mentioned that the said delay was due to certain illness of the auditor.
7. We, observe that books of accounts and financial statements are duly audited, audit report u/s 44AB of the Act along with relevant Forms i.e. Form 3CB & 3CD and other annexures and audited financial statement have been uploaded on the portal of Income Tax Department on 18.10.2016. Certainly there is a delay of one day but taking into consideration that sometimes due to technical problem reports are not uploaded as there is a heavy load on the income tax portal and further, considering the case of the assessee where it is stated that the auditor of the assessee was ill which resulted in said delay, we, in the larger interest of justice and also considering the provisions of Section 273B of the Act which provides that the penalty not to be imposed in a case if the assessee proves that there was a reasonable cause for the said delay, delete the impugned penalty u/s 271B of the Act levied at Rs. 1,50,000/-. Thus, the finding of ld. CIT(A) is reversed, penalty u/s 271B of the Act is deleted and grounds of appeal raised by the assessee are allowed.
8. In the result, the appeal filed by the assessee is allowed as per terms indicated herein above.
Kolkata, the 14th June, 2023