2020 (9) TMI 233 - AT - Income Tax

Penalty u/s 271 (1) (c) - Defective notice - non recording of proper satisfaction in terms of provisions of Section 271 (1) ( C ) - assessee submitted none of the twin charges has been struck off - filing revised computation of income - HELD THAT - Such penalty cannot be sustained in view of the decision of Sahara India Life Insurance Co Ltd . 2019 (8) TMI 409 - DELHI HIGH COURT wherein cancelled the penalty as none of twin charges were struck off in notice u/s 274 of the Act. Therefore respectfully following the decision of the honourable jurisdictional High Court, we do not find any reason to sustain the penalty. Accordingly, reversing the order of the lower authorities, we delete the penalty imposed u/s 271 (1) ( c) - Additional grounds raised by the assessee are allowed. Penalty u/s 271B - Failure to get the books of accounts audited as required u/s 44AB - appellant is carrying on two different businesses in his individual capacity, one is trading in footwear and other is trading of clothes and in the return of income assessee did not disclose, profit of cloth business - HELD THAT - There is no dispute with respect to disclosure of profit of footwear business and audit of books of accounts of that business. Assessee when confronted was found to have not disclosed profit from cloth business. In assessment proceedings assessee submitted computation of profit of cloth business, paid tax thereon and it appears submitted tax audit report of that business also. The tax audit report is dated prior to the due date of filing of the return for assessment year 2012 13. The notification issued by the Central Board Of Direct Taxes dated first may 2013 clearly states that the assessee was required to file audit report along with the income tax return form assessment year 2013 14 onwards. Assessee may have a view that prior to the date he was not required to file the audit report along with the return of income but obtain tax audit report prior to due date of filing of ROI.Therefore, it cannot be said that assessee did not have a reasonable cause for not filing tax audit report along with the return of income. Lower authorities are not justified in confirming the penalty u/s 271B - Decided in favour of assessee.

Summary

Issues Involved:
1. Penalty levied under Section 271(1)(c) of the Income Tax Act.
2. Penalty levied under Section 271B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Penalty Levied under Section 271(1)(c):

The assessee filed an appeal against the penalty of ?160,019 levied under Section 271(1)(c) of the Income Tax Act, confirmed by the Commissioner of Income Tax (Appeals). The assessee argued that the penalty was wrongly imposed as there was no intention to conceal income. The assessee had revised the computation of income during the assessment proceedings, adding ?3,09,974 suo moto and later surrendered an additional ?2,90,026 to avoid litigation. The Assessing Officer, however, was not convinced and initiated penalty proceedings, which were confirmed by the CIT(A). The CIT(A) held that the revised computation indicated concealment, and the explanation provided was not bona fide.

The Tribunal admitted additional grounds raised by the assessee, which questioned the recording of proper satisfaction and the specific charge of concealment or furnishing inaccurate particulars. The Tribunal found that the notice under Section 274 and the assessment order did not specify the charge, and the penalty was levied on an estimated addition of ?6 lakhs. Citing the Delhi High Court's decision in Principal Commissioner Of Income Tax Versus Sahara India Life Insurance Co Ltd, the Tribunal held that the penalty could not be sustained as the specific charge was not recorded. Consequently, the penalty of ?160,019 was deleted, and the appeal was allowed.

2. Penalty Levied under Section 271B:

The second appeal concerned the penalty of ?88,220 levied under Section 271B for not getting the accounts audited as required under Section 44AB. The assessee argued that the accounts were audited before the due date, and the audit report was obtained on 25.09.2012. The assessee contended that there was no requirement to file the audit report electronically for the assessment year 2012-13, as per the CBDT Notification effective from AY 2013-14.

The Assessing Officer and CIT(A) held that the assessee failed to disclose the income from the cloth business and did not get the accounts audited before filing the return. The Tribunal, however, noted that the tax audit report was dated prior to the due date, and the requirement to file the audit report electronically was applicable from AY 2013-14. The Tribunal concluded that the assessee had a reasonable cause for not filing the audit report with the return and that the penalty under Section 271B was not justified. Therefore, the penalty of ?88,220 was cancelled, and the appeal was allowed.

Conclusion:

Both appeals filed by the assessee were allowed. The penalties levied under Sections 271(1)(c) and 271B were deleted based on the lack of specific charges and the reasonable cause for not filing the audit report, respectively. The Tribunal's decision was pronounced in the open court on 04/09/2020.