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TMI Blog2024 (8) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... ng while declaring interim dividend which it failed to do so, which ultimately led to all disputes and finally the delay in getting the audit results finalized and approved and the Tax Audit Report being subsequently filed. AO contends that this failure of the assessee-company to adhere to the agreement cannot be said to be a reasonable cause for delay in filing the Tax Audit Report. CIT(A) agrees with the AO. No merit in this reasoning of the Revenue Authorities for dismissing the assessee s explanation as being unreasonable. Whosoever may have been responsible for the dispute and standoff between the Board of Directors of the assessee-company and the nominee-director of the Govt. undertaking, the fact remains that the audited results of the assessee were delayed for approval, as a consequence of which the Tax Audit Report was also delayed for filing since it was dependent on the audited results. We, hold that there was sufficient cause adduced by the assessee for the delay in filing the Tax Audit Report and, therefore, there is no case for levying any penalty u/s 271B of the Act. The penalty so levied, directed to be deleted. Appeal of the assessee allowed. - Smt. Annapurna Gup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. The same are reproduced by the Assessing Officer at page No.2 to 7 of his order as under:- During the course of penalty proceeding u/s. 2718 of the Income-tax Act, 1961 a fresh opportunity was given to assessee on 22-12-2022 to file the explanation as to why penalty u/s. 2718 should not be levied. The assessee in its reply filed on 12-01-2023 asked for adjournment and in its reply filed on 06-02-2023 furnished the copy of VC Assistance Agreement, Extract of VC Assistance Agreement, Article of Association, Extract of VC Assistance Agreement, Minutes of the Board Meeting held on 22.08.2016, GVFL letter to Auditor- Naresh co., Minutes of the Board Meeting, Copy of the approval letter of ROC, Minutes of the Board Meeting held on 25.11.2016 and stated the following: Facts and Circumstances that caused the Delay: The facts of the entire matter stems from the fact that we had raised a sum of Rs. 250 lacs from the Gujarat Biotechnology Venture Fund of M/s. Gujarat Venture Finance Limited (GVFL), a Govt. of Gujarat Undertaking, in January, 2008 by way of Private Placement of Equity Shares and Debentures. Our Company had been undertaking research in biotechnology and the amount was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts were approved we would have been in a position to have the Tax Audit Report conducted immediately thereafter and submitted the same well within the original due date. Unfortunately, GVFL raised an objection at the time of Board Meeting on 22.08.2016 that the Interim Dividend paid in March 2016 was without their prior approval and hence demanded that the same be reversed as also the accounts be revised to incorporate the reversal of dividend. This Chairman gave a detailed clarification on the matter. However, the GVFL representative insisted that GVFL sought reversal of dividend and also did not approve the accounts without reversal of the Dividend. Since, the Board and GVFL were at loggerheads on this issue, it was unanimously decided to make further representation to the higher authorities of GVFL for allowing the Interim Dividend and approving the accounts. Considering the same, the approval of accounts got postponed till the matter was not resolved. The Minutes of the Board Meeting held on 22.08.2016 in which the detailed discussion on the subject are covered are enclosed as Annexure E On the same day, GVFL also wrote a letter to our Statutory Auditors, M/s. Naresh Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts including the Dividend vide letter dtd. 24.11.2016 indicating that they Ire giving consent only to allow the compliance to be completed and that the same should not be construed as a post facto approval and it also reiterated its stand that the Company had violated the provision of VC Assistance Agreement and Articles and hence it its reserved its rights to take appropriate action subsequently. During the Board Meeting on 25.11.2016, the Chairman gave a detailed explanation of the situation including the stand of GVFL in the matter. The Accounts of the Company were finally approved in the aforesaid meeting on 25.12.2016. The Minutes of the Board Meeting held on 25.11.2016 are enclosed as Annexure 1. Immediately on approval, the accounts were sent to the Statutory Auditors for signing who also signed after noting the above matter in their Audit Report which is already on record. Thereafter, the Tax Auditors also issued their report in Form 3CA/3CD on the same day and the same was immediately furnished on 25.11.2016 itself. Thus, the chain of events will clearly indicate that the delay was on account of dispute with GVFL over the Interim Dividend and their refusal to approve the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial period of time resulting in statutorily stipulated period for holding the Annual General Meeting, for placing the final accounts before the shareholders, being exceeded. The assessee, as per the law, therefore applied to the Registrar of Companies seeking extension of AGM by three months from 30.09.2016 to 31.12.2016 which was approved by the Registrar. Subsequently, the standoff was cleared, dispute was resolved, the nominee director of the Govt. undertaking accorded his approval on the accounts and the final accounts of the assessee-company duly audited were ultimately approved by the shareholders on 25.11.2016 and on the same date the Tax Audit Report was also finalized and filed. This Tax Audit Report, which was supposed to be filed by the assessee by 17.10.2016, was accordingly delayed by approximately one month being filed on 25.11.2016 because of the standoff between the directors of the assessee-company resulting in the audited accounts not being approved for finalization of the assessee-company. I have noted that all evidences to substantiate this explanation for the delay in filing the Tax Audit Report was also filed by the assessee filing the minutes of all the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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