2020 (1) TMI 624 - HC - Income Tax

Penalty u/s 271B - assessee submitted the audited financial statements but failed to furnish report of audited accounts (audit report) as required u/s 44AB - HELD THAT - the appellant had furnished only the Annual Report depicting the audited financial statement along with copy of the receipts and distribution statements. It is also evident that the appellant had furnished a Certificate issued by the Joint Director (Audit) of the Co-operative Department. - He has not furnished the report of audit in the prescribed form Form 3CA as required under the second proviso (as it stood then) to Section 44AB read with the requirements under Rule 6G(1) of the Income Tax Rules. When the second proviso carves out an exemption from the general provisions of Section 44AB the stipulations therein need to be strictly adhered and the mere fact that the audit of the assessee was conducted under the provisions of the Co-operative Societies Act would not be sufficient for such compliance. Furnishing of the report of audit in the prescribed form accompanied with a further report by an Accountant in the prescribed form is a mandatory requirement for proper compliance. Since the appellant had failed to show any reasonable cause coming within the purview of Section 273B the imposition of penalty under Section 271B cannot be interfered with. Reliance on the circular of CBDT - it is contended that the audited report need not be attached along with the returns or furnished separately at any time before or after the due date; but it need only to be retained by the assessee and produced if it is called for by the Income Tax Authority during any proceedings under the Act. The Circular says that no penalty under Section 271B shall be initiated or levied for not furnishing the tax audit report before the due date. Therefore the imposition of penalty under Section 271B cannot be sustained is the contention. - We are not persuaded to accept the above contention in view of the mandatory provisions contained in Section 44AB which insists on furnishing of the audit report in the prescribed form before the due date stipulated along with a further report of an Accountant. When the specific provision contained in the statute is unambiguous in this respect we cannot hold otherwise based on any circular of the Department. Hence the above contention cannot be accepted. Further learned Standing Counsel appearing for the respondents contended that the penalty proceedings in this case was initiated on the allegation that the appellant had failed to obtain a proper audit report within the date stipulated in the relevant provision. - Decided against assessee.

Summary

Issues:
1. Sustainability of penalty imposed under Section 271B of the Income Tax Act, 1961.
2. Compliance with statutory requirements of furnishing audited report in Form No.3CA as per Section 44AB.
3. Justification of penalty imposition by the Assessing Officer and Appellate Authorities.

Issue 1: Sustainability of penalty under Section 271B:
The judgment revolves around the challenge to an order passed by the Income Tax Appellate Tribunal regarding the imposition of a penalty under Section 271B of the Income Tax Act, 1961. The appellant failed to furnish the report of audited accounts as required under Section 44AB for the assessment year 2014-15. The Assessing Authority found non-compliance with the prescribed form and verification requirements, leading to the imposition of a penalty of ?1,50,000.

Issue 2: Compliance with statutory requirements under Section 44AB:
The Commissioner of Income Tax (Appeals) affirmed the penalty, emphasizing the mandatory nature of filing Form No.3CA along with a further report by an Accountant as required under Section 44AB. The appellant's argument that the audit was completed under the Co-operative Societies Act and the delay in submission was reasonable was dismissed. The Tribunal upheld the penalty, citing the non-production of the Audit Report in the prescribed format as a reason for imposition.

Issue 3: Justification of penalty imposition by Authorities:
The appellant contended that the submission of audited accounts under the Co-operative Societies Act sufficed compliance with the second proviso to Section 44AB and that the further report by an Accountant was not mandatory. However, the Tribunal held that the appellant failed to furnish the report of audit in the prescribed form, Form 3CA, as required. The judgment emphasized strict adherence to the stipulations of the second proviso to Section 44AB for proper compliance and rejected contentions based on circulars or lack of reasonable cause for the failure.

In conclusion, the High Court dismissed the appeal, stating that no substantial question of law arose for consideration against the Tribunal's order. The judgment highlighted the importance of strict compliance with statutory requirements under the Income Tax Act, particularly regarding the submission of audited reports in the prescribed format and the implications of non-compliance leading to penalty imposition under Section 271B.