2023 (1) TMI 573 - AT - Income Tax

Levy of penalty u/s. 271B - Non compliance requirement in respect of special audit u/s. 142(2A) - AO noted during the course of search, various incriminating documents/information were seized / impounded - HELD THAT - The issue in these present appeals before us was elaborately dealt in another set of appeals in the case of Ashesh Agrawal 2022 (12) TMI 1223 - ITAT LUCKNOW though in respect of penalty imposed u/s. 271(1)(b) of the Act. The reasonable cause as stated u/s. 273B considered in those stated appeals relating to penalty imposed u/s. 271(1)(b) exists and applies in the present set of appeals also. As this case of Ashesh Agrawal was also part of the same group of Rich Udyog Net Worth Ltd., the observations and findings given by us in the case of Ashesh Agrawal (supra) applies mutatis mutandis in the present set of appeals before us wherein held relevant ledgers for all the years under consideration were impounded by the Ld. AO in the course of assessment itself which has prevented the assessee in making compliance to the requirements of the special auditors for getting the special audit u/s. 142A of the Act completed. Law does not compel one to do that which one cannot possibly perform. Where the law creates a duty or charge and the party is disabled to perform it, without any default in him and has no remedy over it, there the law will, in general, excuse him. Therefore, when it appears that the performance of the formalities prescribed by a statute has been rendered impossible by circumstances over which the person interested had no control, the circumstances will be taken as a valid excuse. Assessment proceedings furnished by the Ld. Counsel, it is evidently demonstrated that there exists a reasonable cause within the meaning of section 273B of the Act which prevented the assessee in meeting the compliance requirement in respect of special audit u/s. 142(2A) of the Act. - Levy of penalty directed to be deleted.

Summary

Issues Involved:
1. Levy of penalty under Section 271B of the Income-tax Act, 1961.
2. Compliance with statutory requirements under Section 142(2A) of the Income-tax Act, 1961.
3. Existence of reasonable cause under Section 273B of the Income-tax Act, 1961.

Detailed Analysis:

1. Levy of Penalty under Section 271B of the Income-tax Act, 1961:
The appeals concern the levy of penalties amounting to Rs. 1,00,000/- for AY 2010-11 and Rs. 1,50,000/- for each of the remaining six years under Section 271B of the Income-tax Act, 1961. The penalties were imposed due to the assessee's failure to get its books of accounts audited and furnish a report as required under Section 44AB of the Act. The Assessing Officer (AO) noted that the turnover of the assessee exceeded Rs. 40 lakh, necessitating an audit, which was not complied with, thus leading to the penalty.

2. Compliance with Statutory Requirements under Section 142(2A) of the Income-tax Act, 1961:
A survey under Section 133A was conducted on 28.04.2015 at the office of Rich Udyog Network Ltd., which was later converted into a search under Section 132. During the search, various incriminating documents were found. The AO found the accounts voluminous and complex, leading to a referral for a special audit under Section 142(2A). However, the AO noted that no books of account were found or produced during the survey, search, or assessment proceedings, leading to the conclusion that the assessee had not maintained any books of account, thus violating Section 44AB.

3. Existence of Reasonable Cause under Section 273B of the Income-tax Act, 1961:
The Tribunal referred to a similar case, Ashesh Agrawal Vs. DCIT, where penalties under Section 271(1)(b) were imposed. It was found that the reasonable cause as stated under Section 273B existed, which applies to the present appeals. The Tribunal noted that the books of account were impounded by the AO during assessment proceedings, preventing the assessee from complying with the special audit requirements under Section 142(2A). The Tribunal emphasized that the existence of reasonable cause within the meaning of Section 273B was demonstrated, which prevented the assessee from fulfilling statutory requirements.

Conclusion:
The Tribunal concluded that the existence of reasonable cause within the meaning of Section 273B was evident, preventing the assessee from complying with the special audit requirements. Consequently, the penalties imposed under Section 271B were directed to be deleted. The findings in the case of Ashesh Agrawal were applied mutatis mutandis to the present appeals, thereby allowing all the appeals of the assessee. The order was pronounced in the open Court on 9th January 2023.