2024 (3) TMI 430 - AT - Income Tax

Levy of penalty u/s 271B - Delay in filing of Tax Audit report u/s. 44AB - delay was due to the late receipt of the audit report from the Joint Registrar (Kerala Co-operative Societies). - HELD THAT - It needs to be appreciated that as against obtaining a tax audit report or indeed a statutory audit report as under the Companies Act which are to be from independent auditors who could be pursued in the matter and are obliged by law to limit the number of auditees a cooperative society under the Kerala Act is by law obliged to get it s accounts audited only from the specified Authority thereunder who is to conduct the annual audit of accounts of all such societies and further within the time limit prescribed under the Act. Once therefore the assessee has done all it could within it s means in the facts and circumstance of it s case visiting it with penalty which cannot be a result of a mechanical exercise defeating the purpose and intent of s. 273B would be unfair. In this view of the matter we think that the assessee s case qualifies for non-imposition of the impugned penalty. We may though clarify that we are not in agreement with the assessee that the default u/s. 44AB which attracts penalty u/s. 271B is a technical or venial breach of law particularly where the audit reports are furnished during the course of the assessment proceedings which plea the assessee also banks on with reference to some case law. This aspect stands considered in detail per several decisions by this Bench of the Tribunal. Besides the decision in Peroorkada SCB Ltd. v. ITO 2020 (1) TMI 624 - KERALA HIGH COURT binding on us would allay all doubts in the matter. In the facts of that case the assessee who had furnished only the audit report from the Jt. Registrar contended on that basis sufficient compliance of s. 44AB. The same did not find approval of the Hon ble Court which held that only furnishing both the reports as mandated by the provision would be in sufficient compliance of the law. To conclude the assessee has been able to reasonably demonstrate existence of a reasonable cause for the two-month delay attending the compliance of the provisions of s. 44AB. The Revenue has in our view acted mechanically inasmuch as there is nothing to suggest that the assessee s conduct is as claimed not bona fide. The impugned penalty is accordingly directed for deletion - Decided in favour of assessee.

Summary

Issues involved:
The appeal concerns the maintainability of penalty under section 271B of the Income Tax Act, 1961 for assessment year 2017-18, imposed on a Co-operative Society registered under the Kerala Co-operative Societies Act, 1969, due to a delay in filing the tax audit report.

Summary:
The Appellate Tribunal ITAT Cochin addressed the issue of penalty under section 271B of the Income Tax Act, 1961 in the context of a Co-operative Society's appeal against the order of the Commissioner of Income-tax (Appeals). The society had filed the tax audit report with a delay of 62 days, citing receipt of the audit report from the Joint Registrar after the specified date. The tribunal analyzed the facts and circumstances to determine if the society qualified for the saving of penalty under section 273B, which requires showing a reasonable cause for the delay.

The tribunal considered the case law and emphasized the need for an equitable interpretation of the law, avoiding a hyper-technical approach. It noted that the society had submitted its accounts for audit on time to the Joint Registrar and acted promptly upon receiving the audit report, demonstrating bona fides. The tribunal highlighted the unique audit requirements for cooperative societies under the Kerala Act, which limited the society's options in obtaining the audit report within the prescribed time frame.

While acknowledging the technical breach of law regarding the delay in filing the audit reports, the tribunal concluded that the society had established a reasonable cause for the delay and that the penalty was unjustified. It criticized the Revenue's mechanical approach and ruled in favor of the assessee, directing the deletion of the penalty. The tribunal allowed the assessee's appeal, emphasizing the existence of a reasonable cause for the delay in compliance with the provisions of section 44AB.

In conclusion, the Appellate Tribunal ITAT Cochin ruled in favor of the Co-operative Society, finding that it had demonstrated a reasonable cause for the delay in filing the tax audit report and directing the deletion of the penalty imposed under section 271B of the Income Tax Act, 1961.