Case Law Details
Lata Keshao Thaokar Vs ITO (ITAT Mumbai)
ITAT Mumbai held that assessee furnished the return of income and audit report only after issuance of notice under section 148 of the Income Tax Act. Accordingly, penalty under section 271B of the Income Tax Act not leviable as failure was due to ignorance and misguidance.
Facts- ROI for the A.Y.2011-12 was filed on 10.03.2014 declaring total income at ₹.3340/-.
The income declared by the assessee as per return of income was accepted and assessment u/s 143(3) r.w.s 147 was completed. However, AO observed from the audit report and financial statement that the auditor has signed the audit report only on 24.01.2014 and AO observed that the case of the assessee falls u/s.44AB and should have filed the return u/s 139(1) of the Act. Accordingly, the assessee was asked to explain the reasons for delay vide notice u/s 142(1) of the Act.
AO observed that the assessee has violated the provisions of section 44AB and imposed maximum penalty leviable u/s 271B of the Act. Aggrieved, assessee preferred an appeal before NFAC, Delhi and they have sustained the penalty as assessee failed to establish reasonable cause and hence dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- We observe from the record that the assessee due to ignorance and misguidance, she failed to file the return of income. Only upon issue of notice the assessee filed the return of income after obtaining tax audit report dated 24.01.2014. It is clear from the record that the assessee has filed the return of income only upon receipt of notice u/s. 147 of the Act.
The assessee respectfully filed the return of income along with the audit report only on 24.01.2014. When they accept the return of income with the belated filing of audit report to complete the assessment, it is amount to fulfilling the reasonable cause in this case. Further, there is no difference between the return of income and assessed income, it clearly establishes that the no ulterior motive in not filing the belated audit report in this case. It is only ignorance and misguidance. The penalty is levied when there is failure to get accounts audited, in this case, the assessee has complied with the provisions of section 44AB by getting her accounts audited, even though it was carried out only upon issue of notice u/s. 148 of the Act. Therefore, we are inclined to accept the submissions of the assessee that the assessee has established the reasonable cause in this case and accordingly, we direct the Assessing Officer to delete the penalty levied u/s 271B of the Act.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 23.07.2021 for the Assessment Year 2011-12.
2. Brief facts of the case are, the return of income for the A.Y.2011-12 was filed on 10.03.2014 declaring total income at ₹.3340/-. Information was received under NMS that during this assessment year, the assessee had entered into purchase/sale of commodities through National/Multi Commodity Exchange to the extent of ₹.90,34,03,800/-. Subsequently, the provisions of section 147 of the Income Tax Act, 1961 (in short Act) were invoked and notices u/s 148 were issued and served on the assessee. In response, the assessee has filed return of income for the year under consideration on 19.11.2018 declaring total income ₹.Nil. Statutory notices u/s 142(1) and 143(2) were issued and served on the assessee. In response, the assessee submitted details as called for on time to time.
3. The income declared by the assessee as per return of income was accepted and assessment u/s 143(3) r.w.s 147 was completed. However, the Assessing Officer observed from the audit report and financial statement that the auditor has signed the audit report only on 24.01.2014 and Assessing Officer observed that the case of the assessee falls u/s.44AB and should have filed the return u/s 139(1) of the Act. Accordingly, the assessee was asked to explain the reasons for delay vide notice u/s 142(1) of the Act. In response, the assessee filed letter dated 21.12.2018 as under: –
“The Assessee, Mrs. Lata Keshao Thaokar is currently a housewife. She used to work in Private Sector Company, 15 years ago. After retirement she had interest and dividends as her major source of income. Since this amount was below basic taxable limits she had never filed her return of income, nor claimed refund of Tax Deducted at source. As the rates of interest on fixed deposits and other investments avenues went down, she had thought of making income from other sources. In the meantime, she was suggested to trade, transact in shares, securities and commodities, wherein she could make some money by using her savings. In such factual scenario, Mrs. Lata K Thaokar ventured into/entered into stock/commodity market. Actually since she had very little knowledge of this field and absolute no technical support, she had incurred huge losses and lost her funds. Over the years since she had made losses, not only in transactions but also upon the capital, she was under the impression that she had nothing to report upon or submit, also she had no other source of income, hence Mrs. Lata Thaokar never filed her return of income. It was then; the income tax department had issued notice for non filing of return of income, and reporting of commodity transactions, that she approached Professional Chartered Accountants Firm for guidance and compliance. Thereupon after understanding the legality, of the transactions and necessity of the compliance, Mrs. Lata K Thaokar got her accounts audited and filed her return of income. Mrs. Lata K Thaokar has been regularly filing her return of income thereafter till date.
The lapse in filing the return of income in time for AY.2011-12 may be considered genuinely due to lack of information, legal knowledge and may be condoned, pardoned considering the inadvertence and absence of malafide intentions involved. Also Mrs. Lata K Thaokar has lost heavily due to commodity transactions, evading her investment and now her capital. Taxing, penalizing her in such state may put her into extreme financial difficulty. Considering the fact that Mrs. Lata K. Thaokar has no income, has not earned anything during the last 5 years, her financial situation, she may be pardoned. It is requested to consider her request and she may be kindly obliged.
The details may be perused by the Learned Assessing officer for review and attention. We request your good selves to accept the same on records and revert if any additional information is required in this “
4. After considering the submissions, Assessing Officer observed that the assessee has violated the provisions of section 44AB and imposed maximum penalty leviable u/s 271B of the Act.
5. Aggrieved, assessee preferred an appeal before NFAC, Delhi and they have sustained the penalty as assessee failed to establish reasonable cause and hence dismissed the appeal.
6. Aggrieved assessee is in appeal before us raising following grounds in its appeal: –
“1. The appellant request your honour to condone the delay in filing an appeal before the Income Tax Appellate Tribunal. The delay was due to reasonable cause.
2. On facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the penalty levied u/s.271B of the act of Rs.1,50,000.
3. On facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the penalty levied u/s.271B of the act of Rs.1,50,000 though the appellant had sufficient and reasonable cause for non-filing of audit report in time.
4. On facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the penalty levied u/s.271B of the act of Rs.1,50,000 since the assessment of the appellant was accepted at Nil Income and there was no cause which could have arisen on account of non-filing of audit report in time.
5. The Appellant craves leave to add, amend, substitute and/ or alter the aforesaid Grounds of Appeal, as may be advised. ”
7. Considered the rival submissions and material placed on record. We observe from the record that the assessee due to ignorance and misguidance, she failed to file the return of income. Only upon issue of notice the assessee filed the return of income after obtaining tax audit report dated 24.01.2014. It is clear from the record that the assessee has filed the return of income only upon receipt of notice u/s. 147 of the Act. This fact is acknowledged by the Assessing Officer and Ld.CIT(A) in their respective orders. We are not in a position to accept the observations of the tax authorities that the assessee has not established the reasonable cause particularly when they themselves acknowledge that the return of income was not filed by the assessee and issued the notice u/s 148 of the Act forcing assessee to file the return of income and completing the reassessment as per the return of income filed by the assessee. The assessee respectfully filed the return of income along with the audit report only on 24.01.2014. When they accept the return of income with the belated filing of audit report to complete the assessment, it is amount to fulfilling the reasonable cause in this case. Further, there is no difference between the return of income and assessed income, it clearly establishes that the no ulterior motive in not filing the belated audit report in this case. It is only ignorance and misguidance. The penalty is levied when there is failure to get accounts audited, in this case, the assessee has complied with the provisions of section 44AB by getting her accounts audited, even though it was carried out only upon issue of notice u/s. 148 of the Act. Therefore, we are inclined to accept the submissions of the assessee that the assessee has established the reasonable cause in this case and accordingly, we direct the Assessing Officer to delete the penalty levied u/s 271B of the Act.
8. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 30th January, 2023
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