Case Law Details
Jila Sahakari Kendriya Bank Maryadit Vs ITO (ITAT Raipur)
Pithily stated, the assessee filed return of income on 29.03.2010 declaring loss of Rs. 8,92,526/-. Subsequently to that the case was selected for scrutiny under CASS. The assessee derives income from banking activity basically in the type of giving out loans to the farmers. After examining the various aspect and documents, the return income shown by the assessee accepted by the AO vide assessment order dated 31.12.2011. On 16.06. 2014 the ld. AO issued a notice u/s. 271B stating that since assessee have failed in complying with the provision of section 44AB read with 271B assessee is liable for penalty u/s. 271B of the Act and therefore, asked to to show cause as to why the penalty under section 271B of the should not be levied.
The only issue which the ld. AR has assailed is the levy of penalty by the assessing officer and confirmed by the ld. CIT(A). The ld. AR stated that there is no finding of alleged default or no whisper in the assessment order passed on 31.12.2011. There is no notice issued after the completion of the assessment for the alleged default but suddenly on 16.06.2014 (APB-page 3) the assessing officer has issued a notice asking the assessee as to show cause as to why the penalty order should not be passed under section 271B of the Act. This notice is also vague and specific default is specified by the ld. AO. The ld. AR also submitted that since the assessment is completed as per return of income there is no revenue loss and even the audit report have been submitted before the assessing officer which is of dated 24.12.2014 and has rectified the mistake if any and has placed on record that report.
On perusal of the records and arguments of the both the parties it is not disputed by both the parties that there is no finding in the assessment order for levy of penalty for the alleged default u/s. 271B of the Act and it is also not disputed that after passing of the order on 31.12.2011, the alleged notice is only issued on 16.06.2014 after two and half year time which is very abnormal time to fasten the liability on account alleged default after the assessment is completed. In between there is not notice and even the assessment order is silent on the levy of the alleged penalty. The argument of the ld. AR has thus, forced and is also supported by the judicial decisions relied upon and as extracted here in above. In the light of the above discussion the levy of penalty by the assessing officer after passage 30 months after the completion of the assessment, we are of the opinion that the penalty proceedings are barred by limitation and consequently penalties levied under section 271B cannot be sustained and thus we delete the said penalty levied under section 271B of the Act amounting to Rs. 1,00,000/-.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
This appeal is filed by the assessee aggrieved from the order of the Commissioner of Income Tax (Appeal), Bilaspur [ Here in after referred as Ld. CIT(A) ] for the assessment year 2009-10 dated 18.08.2017 which in turn arises from the order passed by the A.O under Section 271B of the Income-tax Act, 1961 (in short ‘the Act’) dated 31.12.2014.
2. The hearing of the appeal was concluded through audio-visual medium on account of Government guidelines on account of prevalent situation of Covid-19 Pandemic, both the parties have placed their written as well as oral arguments during this online hearing process.
3. Before us the assessee has raised following grounds in this appeal;
Ground No.I
That the penalty order passed by the Learned Income Tax Officer (“the AO”) is highly illegal, bad in law, unsustainable and not in accordance with the provisions of law.
Ground No. II
On the facts and in the circumstances of the case as well as in law, the Learned Commissioner of Income Tax (Appeals), Bilaspur [hereinafter referred to as “the Ld. CIT(A)”] has erred in confirming the Order of the AO imposing a Penalty of Rs. 1,00,000/- under section 271B of the Act which is highly illegal, unjustified, harsh unwarranted, not proper on facts and not in accordance with the provisions of law. The Ld. CIT(A) failed to appreciate that the accounts of the appellant society were required to be mandatorily audited by the Registrar of Co-operative Society and only after that the same could be subjected to tax audit under section 44AB o f the Act hence, there existed a reasonable cause for delayed conduct o f tax audit.
Hence, it is prayed that the penalty of Rs. 1,00,000/- imposed under the provisions of section 271B of the Act may please be deleted.
Ground No. III
That the appellant craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal. ”
4. Pithily stated, the assessee filed return of income on 29.03.2010 declaring loss of Rs. 8,92,526/-. Subsequently to that the case was selected for scrutiny under CASS. The assessee derives income from banking activity basically in the type of giving out loans to the farmers. After examining the various aspect and documents, the return income shown by the assessee accepted by the AO vide assessment order dated 31.12.2011. On 16.06. 2014 the ld. AO issued a notice u/s. 271B stating that since assessee have failed in complying with the provision of section 44AB read with 271B assessee is liable for penalty u/s. 271B of the Act and therefore, asked to to show cause as to why the penalty under section 271B of the should not be levied.
5. In response the assessee submitted their reply to the assessing officer in response to the notices issued and the main contentions raised by the assessee is extracted here in below for the sake of brevity of the facts;
“It is submitted that the assessee being a cooperative society that under the bye-laws, rules and regulations of the society, the accounts of the assessee are required to be compulsorily audited by persons deputed by the Registrar of Co-operative Societies although as per Income Tax Act 1961 Tax audit report required to be obtained from chartered accountant before due date o f filing return of Income i.e on or before 30.09.2009 but the Government auditors not under the control of assessee, completed the audit & issued certificate on 09.02.2010 well after the due date, therefore, the assessee could play no role in getting the accounts audited in time. Thus, the auditor was carrying on audit work within the frame of statutory rule and for his act and conduct the assessee cannot be punished due to delay on the part o f auditors. Hence, in view of the above narrated facts and circumstances that assessee society is running at huge loss Rs 53816379 as on 31.03.2009 & neither the assessment nor such report reveals any loss of revenue it is most humbly submitted that the fault in not getting its books audited us 44AB o f IT Act within time limit is not attributable to the assessee, also heavy losses are incurred by the society owing to such reasons, audit require u/s 44AB not filed by the assessee society within time limit prescribed under the provisions of the IT Act. Thus, they were prevented by reasonable cause as aforesaid. We request you to kindly drop the penalty proceedings u/s 271B. “. In addition he has relied upon certain case laws.
6. The ld. AO vide para 5 of the penalty order observed that
5. I have gone through the submission of the assessee but do not find it in order. Even if Government audit was done only on 09.02.2010, the audit u/s 44AB could have easily been got done after that date. But that was not done and ultimately after giving this penalty notice and even after taking much more time, audit u/s 44AB was got conducted only on 24.12.2014. Thus, it can be said that there was no reasonable cause as per the requirement o f section 273B of the Income Tax Act, 1961, which prevented assessee to get its books of accounts audited. Accordingly, benefit of section 273B of the I.T Act, 1961 could not be available to the assessee in this case since despite adequate and reasonable opportunities given, the assessee could not come up with any satisfactory explanation whatsoever. In other words the assessee had failed, in reply to penalty show cause notices, to adduce any submission or evidence that it had taken any step/action at its end to the appointment o f any statutory auditors. Be that as it may, the assessee could have engaged any auditor u/s 288(2), so as to be able to furnish the statutorily required audit report, without avoidably waiting for appointment of statutory auditors, to escape the rigours of section 271B. Also, relied upon case laws are not applicable in this case as there is no reasonable cause/delay but delay of more than 4 years 10 months from Government audit, which cannot be said to be reasonable.
6. In the facts & circumstances and after perusing the relevant records, I am of the considered opinion to hold that the assessee has failed to get his books of accounts audited in respect of A.Y 2009-10 as required under section 44AB of the Income Tax Act, 1961 and therefore, is liable for penalty u/s 271B o f the I.T act, 1961. The penalty leviable in this case is 0.5% of the turnover or Rs 1,00,000/-, whichever is less. Turnover/receipts for the year under consideration is Rs 37.66 cr and so considering the facts and circumstances of the case, I impose a penalty of Rs 1,00,000/- (Rupees one lakh only) under Section 271B of the Act. The assessee is directed to pay the penalty of Rs. 1,00,000/- in addition to the tax payable by him.”
7. Aggrieved from the order of the ld. AO the assessee filed an appeal before the ld. CIT(A) who has sustained the levy of penalty on the following findings:
“Decision-
During appellate proceeding the ld. AR reiterated the arguments on the basis of written submission filed before the A.O. and the same was considered. It is a fact that assessee has incurred a loss and the ld. AO has accepted the loss as filed by the assessee. The return was filed on 29-03-2010 i.e. belated return u/s 139(4). The assessee as such is not liable to file return of income because its income does not exceed maximum non-chargeable limit. Section 139(3) of I.T. Act mandates the filing of return of income. The perusal o f section 44AB of I.T. Act speaks about the liability of the assessee to get the account audited. In this case the turnover exceeds the limit laid down by section 44AB of IT. Act. Since the turnover is exceeding the threshold limit assessee was liable to get the accounts audited as required by the Act which he has not done. The arguments of the ld.AR that it is a cooperative society, and the Department of Cooperative Societies appoints its own auditor to audit the accounts, hence in absence of official audit the assessee could not gets accounts audited till 09-02-2010. For audit the Income-tax had provided that the auditor should be as per section 288 of I.T. Act. Thus I do not find any role of official auditor to have any play in the audit and assessee was required to mandatorily get accounts audited by the Chartered Accountant. Thus the failure to get the accounts audited has been found by the Department. Hence I do not find any infirmity in the levy of penalty by the A.O. Penalty imposed by the A.O is hereby confirmed and the ground of appeal is dismissed. ”
8. We have heard the ld. authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
9. The only issue which the ld. AR has assailed is the levy of penalty by the assessing officer and confirmed by the ld. CIT(A). The ld. AR stated that there is no finding of alleged default or no whisper in the assessment order passed on 31.12.2011. There is no notice issued after the completion of the assessment for the alleged default but suddenly on 16.06.2014 (APB-page 3) the assessing officer has issued a notice asking the assessee as to show cause as to why the penalty order should not be passed under section 271B of the Act. This notice is also vague and specific default is specified by the ld. AO. The ld. AR also submitted that since the assessment is completed as per return of income there is no revenue loss and even the audit report have been submitted before the assessing officer which is of dated 24.12.2014 and has rectified the mistake if any and has placed on record that report.
10. In addition to the above arguments on facts the ld. AR relying on the decision of Hon’ble High Court of Allahabad in the case of CIT Vs. E.C.C Project (P.) Ltd. in ITA No. 62 of 2000 dated July 25, 2014 argued that the notice issued by the AO for levy of penalty is invalid. The relevant relied upon finding in this case is extracted as under:-
“11. In view of above, well settled legal position, we are of the view that in the instant case, no penalty is levyable under section 271B of the Act when AO failed to record its satisfaction in the assessment order pertaining to it. There is no whisper in the assessment order regarding the levy of the penalty. When it so then we find no reason to interfere with the impugned order. The same is hereby sustained alongwith the reasons mentioned therein. ”
11. In addition to the above written submission the ld. AR of the assessee heavily relied upon the decision of the Tribunal in the case of Amit Sabharwal, Ghaziabad vs. ITO Ward-1(5), Ghaziabad in ITA No. 886/Del/2018 dated 14th May, 2019 is extracted as under:-
“10. I have heard the rival arguments made by both the sides and perused the orders of the authorities below. I have also considered the various decisions cited before me. I find the Assessing Officer completed the origina l assessment u/s 143(3) on 29th December, 2011 determining the total income of the assessee at Rs.30,13,680/-. At that time, as appears from para 2 onwards, the Assessing Officer has mentioned in the assessment order that the gross receipt is at Rs.2,29,72,281/- whereas as per the assessee the gross receipts were Rs.2,08,31,714/-. However, the Assessing Officer has not initiated penalty proceedings u/s 271B of the Act either during the course o f initial assessment proceedings or thereafter. Only when the matter was set aside by the Tribunal to the file of the Assessing Officer that the Assessing Officer initiated the penalty proceedings u/s 271B of the IT Act by issue o f notice on 24th August, 2016. Thus, the penalty notice was issued after more than 4 1/2 years from the end of the original assessment. As per the provisions of section 275(1)(c), no order imposing a penalty under this Chapter shall be passed in any case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. As per the various decisions relied on by the ld. counsel for the assessee, penalty is not leviable where the penalty proceedings were not initiated long after the completion of the assessment and the assessment order was silent about the levy of penalty u/s 271B of the Act. Since the Assessing Officer in the instant case has initiated the penalty proceedings after a period of more than 4 1/2 years from the date of original assessment order and there was no such mention of the initiation of penalty proceedings u/s 271B of the Act and the fact of higher gross receipt was very much available to the Assessing Officer which has been mentioned in the body of the original assessment order, therefore, the penalty proceeding initiated by the Assessing Officer in the instant case in my opinion is barred by limitation. The decision relied on by the ld. DR will not help the Revenue since the same relates to initiation o f penalty proceedings u/s 271B in the course of assessment proceedings. The decision does not speak of levy of penalty after inordinate delay. In view o f the above discussion, I am of the considered opinion that the penalty proceedings initiated after a long gap of more than 4 1/2 years from the date of original assessment order is not sustainable in law being barred by limitation. Therefore, the order of the CIT(A) is set aside and the grounds raised by the assessee are allowed. ”
12. The ld. AR also relied upon the decision of the Tribunal in the case of Sibonarayan Patro & Bors. vs. ITO in ITA No. 255 to 257 (CTK) of 1994 dated Feb 16, 1996 is extracted as under:-
“On a reading of the provisions of section 275(c) along with the notes on clauses, we are of opinion that the amended clause (c) is not different from the unamended clause (c) of section 275(1) of the Act and the Legislature only intended to reduce the period of limitation which was hitherto two years from the end of the financial year. Thus, to our mind, the same interpretation which was placed on the unamended clause (1) of section 275 applies to the provisions of amended w.e.f 1-4-1989. We may further observe that even accepting for a moment that there is no time limit prescribed under the Act for initiating penalty proceedings under section 271B/275 of the Act, as rightly submitted by the ld. Counsel for the assessee, by taking the spirit of the provisions of section 275 fixing the time limit for initiation of penalty proceedings under section 271(1)(a) and 271(1)(b), etc., in the case of the assessee, penalty proceedings have to be initiated by the Assessing Officer within a reasonable period of time and any proceeding initiated after an abnormal delay, is liable to be created as in-valid in law. Admittedly, the assessments were completed in 1989 and penalty proceedings were initiated after about 43 months after the date of completion of the assessment and about 50 months from the date of obtaining the audit report. The subsequent incumbent Assessing Officer has initiating the penalty proceedings. To our mind, taking the limitation period prescribed in section 275 for initiation o f penalty proceedings under the other sections of this Chapter and also by respectfully following the judgement of the jurisdictional High Court in the case reported in Bata Aliaa Batakrushna Behara’s case (supra) maximum o f two years from the end of the assessment year in which the assessment are completed, can be said to be a reasonable time within which the Assessing Officer could have initiated the penalty proceedings. As in the present case, the penalty proceedings have been initiated about 43 months after the completion of the assessment, we are of the opinion that the penalty proceedings are barred by limitation and consequently penalties levied under section 271B cannot be sustained. ”
13. Per contra the Ld. DR supported the orders of the lower tax authority and the conviction of Ld. CIT(A) and also stated that it is mere technical error on the part of the AO in not mentioning the default in the assessment order. The finding of the AO is not required for the default for which the penalty is levied in the assessment order and the same may be seen accordingly and has heavily relied upon the findings of the lower authorities and stated that there is no time limit to issue such notice.
14. On perusal of the records and arguments of the both the parties it is not disputed by both the parties that there is no finding in the assessment order for levy of penalty for the alleged default u/s. 271B of the Act and it is also not disputed that after passing of the order on 31.12.2011, the alleged notice is only issued on 16.06.2014 after two and half year time which is very abnormal time to fasten the liability on account alleged default after the assessment is completed. In between there is not notice and even the assessment order is silent on the levy of the alleged penalty. The argument of the ld. AR has thus, forced and is also supported by the judicial decisions relied upon and as extracted here in above. In the light of the above discussion the levy of penalty by the assessing officer after passage 30 months after the completion of the assessment, we are of the opinion that the penalty proceedings are barred by limitation and consequently penalties levied under section 271B cannot be sustained and thus we delete the said penalty levied under section 271B of the Act amounting to Rs. 1,00,000/-.
15. In the result, the appeal of the assessee is allowed.
Order pronounced in open court on 2nd June, 2022.
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