2019 (5) TMI 1110 - AT - Income Tax

Penalty u/s 271B - tax audited report u/s 44AB upto 30th Sep., 2012 - assessee case is based upon the criminal proceedings and health issues which resulted into non-getting audit of the books of account - HELD THAT - The criminal proceedings were mounted in January, 2012 and the bail was granted in May, 2012 therefore even if the medical reasons of one of the director is accepted, it cannot be accepted that the other director was free enough to run business but was not capable to get the accounts audited. It was further observed that neither the date of sealing of factory by the Bank nor any document in its support has been provided and therefore in consideration of the facts mentioned above, the default of not getting the accounts audited does not appear to be for genuine reasons and for the reasons beyond the control of the appellant. On the contrary, the accounts were not audited with a specific motive to scuttle the criminal proceedings. Even on specific query as to whether the income in Income tax Return and audit report is same or not, neither reply nor audit Report furnished. The assessee has taken the stand of criminal proceedings and illness of one of the directors in order to avoid the penal consequences of Section 271B of the Act which we have already held no nexus with non-compliance of legal obligation. It is thus clear the assessee has not been able to give any sufficient and reasonable cause for not getting the accounts whatsoever maintained by it audited u/s 44AB and therefore failed to discharge the onus. In the overall consideration and analyzation and keeping in view the spirit of stringent provisions, we are of the considered view that the authorities below rightly invoked the provisions of section of 271-B of the act and imposed the penalty - Decided against assessee.

Issues Involved:
1. Imposition of penalty under Section 271B of the Income Tax Act, 1961 for not getting books audited under Section 44AB.
2. Determination of whether there was a reasonable cause for the delay in auditing the books of accounts.

Issue-Wise Detailed Analysis:

1. Imposition of Penalty Under Section 271B:
The primary issue in these appeals is the imposition of a penalty under Section 271B of the Income Tax Act, 1961, for the failure of the assessee to get its accounts audited as required under Section 44AB. The assessee was obligated to get its accounts audited by 30th September 2012, as the gross receipts exceeded the threshold limit. The Assessing Officer initiated penalty proceedings and imposed a penalty of ?1,50,000, being 0.50% of the gross receipts, due to the failure of the assessee to meet this requirement.

2. Reasonable Cause for Delay:
The assessee argued that the delay in auditing the books was due to circumstances beyond their control, including criminal proceedings and the illness of one of the directors. Specifically, an FIR was lodged against the company on 11.01.2012 for criminal breach of trust and embezzlement, which led to the arrest of one director and the other director avoiding arrest. The assessee claimed that these circumstances caused significant disruption, leading to the delay in auditing the accounts.

The Assessing Officer, however, found that the reasons provided by the assessee were not sufficient to justify the delay. The officer noted that the FIR was related to the failure to supply rice to the Food Corporation of India and not due to non-payment of interest on a term loan as claimed by the assessee. Additionally, there was no evidence to show that the factory premises were locked or that the relevant documents were inaccessible. The officer also highlighted that the business continued to operate, as evidenced by the substantial turnover during the period in question.

The CIT(A) upheld the penalty, agreeing with the Assessing Officer's findings. The CIT(A) noted that the statutory audit was completed in March 2014, long after the due date, and that the business was running normally during this period. The CIT(A) also pointed out that the criminal proceedings and the illness of one director did not prevent the other director from running the business and getting the accounts audited.

Tribunal's Decision:
The Tribunal reviewed the relevant provisions of law, including Sections 44AB and 271B, and noted that the assessee was legally required to get its accounts audited by the specified date. The Tribunal emphasized that the onus was on the assessee to prove that there was a reasonable cause for the delay. The Tribunal found that the reasons provided by the assessee, such as the criminal proceedings and the illness of one director, did not constitute a reasonable cause for the delay. The Tribunal noted that the business continued to operate, and the accounts department and the other director were available to ensure compliance with the legal obligations.

The Tribunal concluded that the assessee had failed to establish a reasonable cause for not getting the accounts audited on time and upheld the penalty imposed by the authorities below. The appeals were dismissed, affirming the imposition of the penalty under Section 271B.

Conclusion:
The Tribunal dismissed the appeals, holding that the assessee did not provide sufficient and reasonable cause for the delay in auditing the accounts. The penalty under Section 271B was upheld, as the assessee failed to comply with the legal obligation to get the accounts audited by the specified date. The Tribunal found no impropriety, illegality, or perversity in the orders of the authorities below.

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