Gemorium vs. ITO (ITAT Jaipur)

DATE: September 14, 2016 (Date of pronouncement)
DATE: September 21, 2016 (Date of publication)
AY: 2008-09
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S. 271B: Penalty for delay in furnishing tax audit report should not be imposed if there is no mala fide reason for the delay. Dispute with auditor is a reasonable cause u/s 273B for the delay in furnishing the tax audit report

The assessee firm filed the return of income for the assessment year 2008-09 on 23-05-2009 through e-filing and copy of ITR-V was filed on 26-05-2009. The assessment u/s 143(3) of the Act was completed on 27-12-2010 and penalty proceedings u/s 271B of the Act were initiated as the assessee firm could not get the accounts audited within time limit prescribed u/s 44AB of the Act. The due date of filing of return of income for the assessment year 2008-09 was 30-09-2008. However, the assessee firm got the accounts audited on 1-05-2009 and filed the return of income on 23-05-2009 which resulted delay of almost 08 months. On appeal by the assessee HELD deleting the penalty:

It is the first instance of delay in getting the accounts audited pertaining to assessment year 2008-09. The assessee submitted that the bone of contention of the issue was on account of audit fees of the auditor which resulted delay in completion of the audit and the same was completed by 01-05-2009 and thereafter the assessee filed the return on 26-05-2009. It is noted from the records that the assessee was not provided opportunity by the lower authorities to cross examine the statements given by Shri R.A. Sharma, Auditor of the firm and the assessee was deprived of countering Shri R.A. Sharma, Auditor. It appears from the discussions held hereinabove that the delay made by the assessee firm in filing the return of income is for the first time i.e. in A.Y. 2008-09 which was on account of dispute of audit fee between the assessee and the auditor. Hence, it appears that the dispute with the statutory auditor is a reasonable cause within the meaning of Section 273B as held in the case of Kripa Industries (I) Ltd. vs. JCIT by ITAT Pune Bench (2002) 76 TTJ 502 (Pune) that there is no mala fide reason for not obtaining the accounts audited in time and penalty u/s 271B should not be imposed. Taking into consideration the decision of ITAT Pune Bench in the case of Kripa Industries (I) Ltd. vs. JCIT (supra) and other case laws relied, we feel that the CIT(A) is not justified in imposing the penalty u/s 271B.

Cases referred:

(i) Azadi Bachao Andolan vs. Union of India (2001) 252 ITR 471 (Del.)
(ii) Indian Handloom Textiles vs. ITO (1999) 68 ITD 560 (Kol. Tribunal)
(iii) Aleli & Co. (P) Ltd. vs. DCIT, 7 SOT 639 (Mum)
(iv) Kripa Industries (I) Ltd. (2002) 76 TTJ 502 (Pune)
(v) Ashoka Dairy (2005) 149 Taxman 732 (P&H)
(vi) A.K. Kraipak vs. Union of India AIR 1970 SC-150
(vii) Shree Ram Durga Prasad and Fateh Chand vs. Settlement Commissioner 1989-SC-1038
(viii) Andaman Timber Industries (Civil Apeal No. 4228 of 2006)

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