Case Law Details
Mudassir Rashid Ahmed Bakhla Makker & Co. Vs ITO (ITAT Mumbai)
The issue under consideration is whether penalty u/s 271B can be avoided if non-furnishing of Tax Audit Report is due to Bonafide reasons?
Brief facts are, in the course of assessment proceedings the Assessing Officer noticed that, though, the assessee is required to get his accounts audited under section 44AB of the Act and furnish the audit report electronically before the due date of return of income as per section 139(1) of the Act. However, the assessee has failed to do so. Therefore, he initiated proceeding for imposition of penalty under section 271B of the Act for non–furnishing the audit report.
ITAT have considered rival submissions and perused the material on record. As could be seen from the facts on record, by virtue of notifications issued by the CBDT in May and June 2013, for the first time the Board made it mandatory for online filing of tax audit report under section 44AB of the Act within the due date of filing of return of income. However, since the rule was implemented for the first time and the assessees were facing difficulty in filing the tax audit report electronically, the Board again clarified that assessees may file such tax audit report manually. In the facts of the present case, undisputedly, the assessee has obtained the tax audit report on 10th September 2013, i.e., much before the due date of filing of return of income. However, as stated by the assessee, due to lack of clarity and misinterpretation of the Circular issued by the Board, the assessee did not filed tax audit report before the due date of return of income. In our view, the aforesaid explanation furnished by the assessee appears to be plausible, therefore, benefit of doubt can be given to the assessee. A reading of section 273B of the Act makes it clear that imposition of penalty under section 271B of the Act is neither mandatory nor automatic. If the assessee satisfactorily explains the failure in complying with the statutory provisions, no penalty is to be imposed. In the present case, we are of the view that the failure on the part of the assessee in filing the tax audit report within the due date is due to bona fide reasons. Therefore, ITAT are inclined to delete the penalty imposed of Rs 1,50,000 under section 271B of the Act. Grounds raised by the assessee are allowed.
FULL TEXT OF THE ITAT JUDGEMENT
The captioned appeal has been filed by the assessee challenging the order dated 28th March 2018, passed by the learned Commissioner of Income Tax (Appeals)–58, Mumbai, confirming penalty of Rs. 1,50,000 imposed under section 271B of the Income Tax Act, 1961 (for short “the Act”).
2. Brief facts are, in the course of assessment proceedings the Assessing Officer noticed that, though, the assessee is required to get his accounts audited under section 44AB of the Act and furnish the audit report electronically before the due date of return of income as per section 139(1) of the Act. However, the assessee has failed to do so. Therefore, he initiated proceeding for imposition of penalty under section 271B of the Act for non–furnishing the audit report. After issuing a show cause notice and examining the explanation of the assessee, the Assessing Officer ultimately passed an order on 11th February 2015, imposing penalty of ` 1,50,000, under section 271B of the Act. Though, the assessee challenged the imposition of penalty before the first appellate authority, however, the penalty imposed was upheld. The learned Authorised Representative submitted, in the assessment year under consideration, for the first time, the CBDT has issued notification bearing no.36, dated 23rd May 2013, and notification no.44, dated 19th June 2013, requiring filing of tax audit report online. She submitted, due to late issuance of such notifications and unawareness, many assessees could not file the tax audit report electronically. Considering the difficulties faced by the assessees, the Board issued further clarification stating that in case of difficulty in filing the audit report electronically, such report may also be furnished manually before the jurisdictional Assessing Officer. She submitted, though, the assessee has obtained the audit report signed by the auditors on 10th September 2013, much before the due date of filing of return of income, however, keeping in view the expression “may” used in the clarification, the assessee thought that manual filing of tax audit report is not mandatory and accordingly submitted such report during the assessment proceedings. Thus, she submitted, the lapse on the part of the assessee, if any, being not deliberate and due to bonafide reasons, no penalty should be imposed under section 271B of the Act.
3. Strongly supporting the imposition of penalty, learned Departmental Representative submitted, even accepting the claim of the assessee that filing tax audit report online has come for the first time and the assessees were facing difficulty filing them online, still the assessee should have filed the tax audit report manually within the due date. She submitted, in the course of penalty proceedings the assessee has also accepted the default and has merely stated that non–filing of the tax audit report was due to inadvertence. Thus, she submitted, there is a clear default on the part of the assessee in complying with the provisions of section 44AB of the Act. Therefore, penalty imposed is justified.
4. We have considered rival submissions and perused the material on record. As could be seen from the facts on record, by virtue of notifications issued by the CBDT in May and June 2013, for the first time the Board made it mandatory for online filing of tax audit report under section 44AB of the Act within the due date of filing of return of income. However, since the rule was implemented for the first time and the assessees were facing difficulty in filing the tax audit report electronically, the Board again clarified that assessees may file such tax audit report manually. In the facts of the present case, undisputedly, the assessee has obtained the tax audit report on 10thSeptember 2013, i.e., much before the due date of filing of return of income. However, as stated by the assessee, due to lack of clarity and misinterpretation of the Circular issued by the Board, the assessee did not filed tax audit report before the due date of return of income. In our view, the aforesaid explanation furnished by the assessee appears to be plausible, therefore, benefit of doubt can be given to the assessee. A reading of section 273B of the Act makes it clear that imposition of penalty under section 271B of the Act is neither mandatory nor automatic. If the assessee satisfactorily explains the failure in complying with the statutory provisions, no penalty is to be imposed. In the present case, we are of the view that the failure on the part of the assessee in filing the tax audit report within the due date is due to bona fide reasons. Therefore, we are inclined to delete the penalty imposed of Rs. 1,50,000 under section 271B of the Act. Grounds raised by the assessee are allowed.
5. In the result, appeal is allowed.
Order pronounced in the open Court on 13.03.2020
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