2014 (4) TMI 287 - AT - Income Tax

Penalty u/s 271B of the Act - furnishing of form 3CB instead of form 3CA - Whether the assessee is required to wait till completion of statutory audit under the relevant provision of the Act or it has to furnish the tax audit report as contemplated u/s 44AB Held that - The assessee is left with no other alternative but to furnish the report in form 3CB along with form 3CD to make substantial compliance with the provisions of section 44AB - proviso cannot expand or limit the construction of principle provision - the assessee had made substantial compliance with the provisions of section 44AB. Report in form 3CB requires the auditor to examine the balance sheet and profit and loss account and certify that the same are in agreement with the books of account maintained by the assessee, whereas form 3CA only requires the audit report along with audited financial statement to be annexed with the report - primarily the only difference in form 3CA and form 3CB is that in form 3CA the Auditors are not required to give separate audit report - when an assessee had furnished the tax audit report in form 3CB then it cannot be said that it has not complied with the provisions of sec. 44AB merely because the report is not in form 3CA which was not possible for assessee to furnish - law does not require an assessee to do impossible - form 3CB, form 3CA are not mutually exclusive but form 3CA is only supplemental to form 3CB thus, the order of the CIT(A) for levying penalty u/s 271(1)(c) is set aside Decided in favuor of Assessee.

Summary

Issues:
1. Penalty under section 271B of Income Tax Act for A.Y. 2009-10.

Analysis:
The appeal was against the order of the ld. CIT(A) sustaining the penalty under section 271B of the Income Tax Act for the assessment year 2009-10. The assessee initially declared a loss in the return of income, which was later revised. The AO initiated penalty proceedings due to delays in the signing of accounts by the statutory auditors. The assessee contended that the delay was due to unavoidable reasons and differences among stakeholders and auditors. The AO imposed a penalty of Rs. 1,50,000, which was later restricted to Rs. 1 lakh by the ld. CIT(A).

Before the ITAT, the assessee argued that substantial compliance was made with the provisions of section 44AB as the tax audit report in Form 3CB was submitted. The counsel referred to circulars and rules supporting the filing of Form 3CB due to the company's accounting period. The CIT(DR) argued that the report should have been in Form 3CA as per the second proviso to section 44AB and Rule 6G. The ITAT analyzed the provisions of section 44AB, Rule 6G, and Forms 3CA and 3CB. It concluded that the assessee had fulfilled the conditions of substantial compliance by submitting the report in Form 3CB.

The ITAT held that the second proviso to section 44AB did not apply in this case as the necessary conditions were not met. It emphasized that the assessee was required to furnish the tax audit report as per section 44AB, and in this situation, filing Form 3CB was sufficient compliance. The ITAT highlighted that the forms 3CA and 3CB were not mutually exclusive, and the assessee had done what was possible under the circumstances. Therefore, the ITAT set aside the penalty imposed under section 271(1)(c) and allowed the assessee's appeal, rendering the stay petition moot.