2013 (6) TMI 357 - AT - Income Tax

Penalty u/s 271B - delay in filing return - non furnishing of tax audit report before the specified date - Held that - Interpretation given by CIT(A) is correct because if return is filed late then requirement for non filing the audit report cannot be read into such E-filing. In such situation the assessee should have furnished tax audit report with the AO before the due date of filing the return in view of Section 44AB which clearly provides that the assessee has to get his accounts audited and such audit report is required to be furnished by the specified date i.e. due date for furnishing of return by a particular assessee. Therefore, in a case where return is filed within time then it can be pleaded that since no documents are required to be attached with the return, therefore, tax audit report should be deemed to have been furnished. This plea cannot be made when the return has not been filed within due date. Penalty confirmed - in favour of revenue. Addition made u/s 40(a)(ia) - non deduction of TDS - TDS was deducted in the subsequent Financial Year and was deposited on 31.3.2009 - Held that - This issue is now decided against the assessee by the decision of CIT V. Sikandar Khan 2013 (5) TMI 457 - GUJARAT HIGH COURT in which the decision of Special Bench in case of ACIT V. Merilyn Shipping & Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) has been overruled and held that the provisions of section 40(a)(ia) is applicable even where amount remains payable or has been paid during the year. Against assessee. PF deduction - Held that - As during the assessment proceedings it was noticed by the AO that the assessee has shown payment received from Abhir Infrastructure Pvt Ltd. at Rs. 1,38,32,139/- & from the copy of account which was filed by the assessee it shows Rs. 1,52,29,385/-. Thus difference of Rs. 13,97,246/- was added to the income of the assessee as the assessee has shown lesser receipts. Since the total amount receivable from Abhir infrastructure Pvt Ltd. has been considered by the AO, therefore, there is no justification for a separate addition amounting to Rs. 1,12,274/- and accordingly deleted this addition because the mat stands covered by the above addition. In favour of assessee.

Issues Involved:
1. Confirmation of levy of penalty under Section 271B of the Income Tax Act.
2. Disallowance of freight expenses under Section 40(a)(ia) of the Income Tax Act.
3. Addition on account of Provident Fund deduction.

Issue-wise Detailed Analysis:

1. Confirmation of Levy of Penalty under Section 271B:

The primary issue in ITA No. 1215/Chd/2011 pertains to the confirmation of a penalty amounting to Rs. 75,773/- under Section 271B of the Income Tax Act. The assessee had a turnover of Rs. 1,51,54,606/- and was required to get its accounts audited under Section 44AB of the Act and furnish the tax audit report. The assessee failed to furnish the tax audit report before the specified date, leading to the issuance of a show cause notice for the levy of penalty under Section 271B. The assessee contended that as per CBDT clarification, the tax audit report was not required to be attached with the return if filed within the stipulated period. However, the return was filed late, and the Assessing Officer levied a penalty of Rs. 75,773/-.

The CIT(A) upheld the penalty, stating that the CBDT clarification applies only if the return is filed on or before the due date. The CIT(A) emphasized that the clarification by CBDT is to simplify the procedure for filing the return of income and does not substitute the substantive law/statute. The assessee's failure to furnish the audit report before the specified date led to non-compliance with Section 44AB, justifying the penalty. The Tribunal concurred with the CIT(A)'s interpretation, confirming that the requirement to furnish the tax audit report is independent and must be complied with, especially when the return is filed late. The appeal was dismissed as no reasonable cause was demonstrated by the assessee.

2. Disallowance of Freight Expenses under Section 40(a)(ia):

In ITA No. 1216/Chd/2011, the assessee raised multiple grounds, including the disallowance of Rs. 1,02,20,877/- out of freight expenses under Section 40(a)(ia) of the Income Tax Act. During assessment proceedings, the AO observed that the assessee was required to deduct TDS on payments made to various contractors but failed to do so within the stipulated time. The TDS was deducted in the subsequent financial year and deposited on 31.3.2009. Consequently, the AO made an addition under Section 40(a)(ia) for non-compliance with TDS provisions.

The CIT(A) confirmed the addition, rejecting the assessee's argument that Section 40(a)(ia) does not apply if the expenditure is paid during the year. The Tribunal noted that the Special Bench decision in ACIT V. Merilyn Shipping & Transport, which limited the applicability of Section 40(a)(ia) to amounts payable at the end of the year, was overruled by the Gujarat High Court in CIT V. Sikandar Khan. The Tribunal, following the High Court's decision, upheld the applicability of Section 40(a)(ia) to both payable and paid amounts, thus deciding the issue against the assessee.

3. Addition on Account of Provident Fund Deduction:

The third issue involved the addition of Rs. 1,12,274/- on account of Provident Fund (PF) deduction. The AO noted that the assessee claimed this amount as PF deduction but failed to provide evidence of its deposit. The assessee argued that the PF was deducted by Abir Infrastructure Pvt. Ltd. and deposited by them, but no supporting details were furnished. The CIT(A) confirmed the addition due to the lack of evidence.

Before the Tribunal, the assessee contended that an addition of Rs. 13,97,246/- had already been made on account of receivables from Abir Infrastructure Pvt. Ltd., which included the disputed PF amount. The Tribunal found merit in this argument, noting that since the total amount receivable from Abir Infrastructure Pvt. Ltd. was already considered by the AO, a separate addition of Rs. 1,12,274/- was unjustified. Consequently, the Tribunal deleted the addition.

Conclusion:

In conclusion, the Tribunal dismissed ITA No. 1215/Chd/2011, confirming the penalty under Section 271B. In ITA No. 1216/Chd/2011, the Tribunal partly allowed the appeal, upholding the disallowance under Section 40(a)(ia) but deleting the addition related to the Provident Fund deduction. The judgments were pronounced on 11.6.2013.

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