Penalty 271B-Statutory auditor not tax auditors delay. Delay in completing statutory audit by Cooperative auditor was sufficient cause not imposing penalty

Penalty 271B-Statutory auditor not tax auditors delay.

Delay in completing statutory audit by Cooperative auditor was sufficient cause not imposing penalty as the assessee filed the tax audit report immediately after getting /and obtaining the same from  Chartered accountant. This was held by ITAT in a recent judgment.

ABCAUS Case Law Citation:
942 2016 (06) ITAT
AY: 2009-10
Date of Judgment: June, 2016

Brief Facts of the Case:
The assessee was a Cooperative Society. The Tax Audit report u/s 44AB of the Income Tax Act, 1961 was filed by it along with its return of income for the year under consideration on 30.03.2010 as against the specified date of 30.09.2009. The Assessing Officer, therefore, initiated penalty proceedings under section 271B.

The assessee society explained that the Senior Auditor appointed by the Cooperative Department to conduct statutory audit could complete their audit only on 29-01-2010. The society thereafter appointed Tax Auditor, who in turn submitted his audit report on 27-03-2010, which was filed on 30-03-2010 along with the return of income for the year under consideration. It was contended that the failure to furnish the Tax Audit Report before the specified date of 30-09-2009, therefore, was for sufficient cause and penalty proceedings initiated u/s. 271B be dropped.

However, the assessee officer was of the view that the assessee-society could have appointed the Tax Auditor and could have got the tax audit done independently much before the specified date 30-09-2009 and the delay in statutory audit under the Cooperative Act had no relevance with its failure to obtain and furnish the tax audit report by the specified date. He, therefore, rejected the explanation of the assessee and imposed the penalty u/s 271B.

The penalty was challenged by the assessee society before the CIT(A). The CIT(A), however, did not find merit in the contentions of the assessee society and upheld the penalty. Aggrieved by the order of the CIT(A), the assessee  preferred this appeal before the Tribunal.

Contentions of the Revenue:
The Revenue submitted that during the course of hearing the assessee was asked to produce all correspondence made by it with the Co-operative department to ensure that the audit is one with the specified date. However, the the assessee was unable to provide any correspondence or other evidence to show that any effort was made by the assessee to ensure that the audit was done by the specified date. Further, while the audit by co-operative department was done on 29-01-2010, the tax audit report in Form no. 3CB & 3CD was obtained from a Chartered Accountant on 27-07-2010, after about two months delay.

Important Excerpts from ITAT Judgment:

As rightly pointed out by the ld. AR, that this Tribunal decided the same issue in favour of the assessee by holding that the delay caused in obtaining and filing the audit report was beyond the control of assessee. The relevant portion para 4 of said order dated 03-06-2016 in the case of supra is reproduced herein below for the sake of clarity:-

4. We have heard both the sides and also perused the relevant material available on record. As submitted on behalf of the assessee before the authorities below as well as before us, its failure to obtain and furnish the tax audit report by the specified date of 30.09.2009 as per the requirement of section 44AB was due to delay in completion of statutory audit by the auditors appointed by the Cooperative Department. Since the statutory auditor under the Cooperative Act was to be appointed by the Cooperative Department and such appointment as well as conduct and completion of audit by the statutory auditor was beyond the control of the assessee, we find merit in the contention of the Id. counsel of the assessee that the delay in completion of statutory audit, which caused the failure of the assessee to obtain and furnish the tax audit report under section 4AB, was due to the reasons beyond the control of the assessee and the same constituted the sufficient cause for its failure to comply with the requirement of section 44AB. Moreover, the tax audit report obtaining belatedly was filed by the assessee along with its return of income for the year under consideration on 05.01.2010 and the same, therefore, was available to the Assessing Officer while making the assessment of the assessee for the year under consideration. The default on the part of the assessee in obtaining and furnishing the tax audit report by the specified date thus was technical or venial in nature. Having regard to all these facts and circumstances of the case, we are of the view that it is not a fit case to impose penalty under section 271B and cancelling the penalty so imposed by the Assessing Officer and confirmed by the ld. CIT(Appeals), we allow this appeal of the assessee.”

In the present case also the assessee could not obtain and file the tax audit report as required u/s. 44AB of the Act due to delay in completion of statutory audit by the auditors appointed by the Cooperative Department. The assessee filed the tax audit report immediately after getting /and obtaining the same from M/s. Ghosal & Ghosal in Form No.3CA on 30-03-2010. We find that the issue on hand is similar to that latest order dated 03-06-2016 by the Tribunal …………. Following the same, we are of the view that it is not a fit case to impose the penalty of Rs.52,920/- u/s. 271B of the Act.