Proves That There Was Reasonable Cause For The Said Failure.reliance Has Been Placed On Aé_E Decision Rendered _ Incommissioner Of Income Tax v. Haryana Agro Services(2005) 279 Itr 1153

1.T.A. No. 549 of 20081 IN THE HIGH COURT OF PUNJAB & HARYANAAl CHANDIGARH I.T.A. No. 549 of 2008 (O&M)Date of Decision: 12.03.2014 Tne Shanbad Primary Coop. Agri. & Rural Development Bank| VS, ... Appellant Commissioner of Income Tax ... Respondent CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTALHON ' BLE MRS, JUSTICE ANITA CHAUDHRY, Present: Mr. Rajiv Sharma, Advocate for the appellant. Mr. Yogesh Putney, Advocatefor the respondent. | ANITA CHAUDHRY, J.. 1.Tne appellant is aggrieved witn the order dated1.4.2008 (Annexure A-1) passed by the Income Tax AppellateTribunal, Bench “B”, Chandigarh(for brevity, ‘the Tribunal’), videwhich the order dated 14.11.2007 passed by the Commissionerof Income Tax(Appeals)(in short, ‘'CIT(A)'), deleting the penaltimposed by the Assessing Officer vide order dated 28.11.2006under Section 271-B of the Income Tax Act, 1961 (for short, theAct’), has been set aside. ? The instant appeal was admitted for determining thefollowing substantial questions of law:- (1)Whether the Tribunal was justified in confirmingthe penalty u/s 271B treating the lapse of appellantas negligence thougn the CIT(A) accepted the sameas reasonable cause? 1.T.A. No. 549 of 20089) (il)Whether the Tribunal was justified in confirmingthe penalty u/s 271B though the same was imposedby the AO witnout regard to discretion given bySection 271B to AO wherein the word used is “may’and the provision of Section 2/73B further givingdiscretion to the AO not to levy the penalty in case ofreasonable cause? (iil)Whether the order of the Tribunal is perverseand against the provisions of law? 3.All the substantial questions of law are inter-relatedand dependent upon each other. The factual aspect of the matteris not in dispute. It is own case of the appellant bank that itsaudit report under Section 44AB was completed on 20.10.2005.It filed its return on 24.01.2006, but without attaching the auditreport, whicn was required to be filed upto 31[%!]October, 2005.Tne audit report was subsequently filed on 19.6.2006 when theAssessing Officer issued notice dated 17.05.2006 for levyingpenalty under Section 271B of the Act. The explanation renderedby the appellant bank was not accepted by the Assessing Officerand penalty @ 0.5% of gross turnover i.e. |“60,254/- wasimposed. The CIT(A) deleted the penalty, but as noticed above,tne Tribunal restored tne order of Assessing Officer. 4.The contention of the appellant bank is_ thatimposition of penalty for non-compliance with the provisionscontained in Section 44AB is not mandatory and discretion hasbeen provided in non-obstante clause contained in Section 273Bof the Act for not imposing any penalty on the assessee if he 1.T.A. No. 549 of 20083 proves that there was reasonable cause for the said failure.Reliance has been placed on aé_e decision rendered _ inCommissioner of Income Tax Vs. Haryana Agro Services(2005) 279 ITR 1153. 5A conjoint reading of provisions contained inSection271B and Section 2/73B of the Act makes it clear that if theassessee fails to get the accounts audited and furnish the reportthereof within the time specified, he is liable for penalty providedin the clause itself. However, if the assessee_ satisfactorilyexplains a reasonable cause’ for the failure, no penalty can beimposed on him by virtue of non-obstante clause contained inSection 2/73B. Section 273B places the initial burden on theassessee to prove that he had a reasonable cause for the failurereferred to in the various sections. Thereafter, the officer has toconsider whether tne explanation offered py the assessee orother person as regards tne reason for failure was for areasonable cause. 6.In the backdrop of the admitted case of the parties,firstly it has to be seen that whether the appellant had shown“reasonable cause” in not filing the audit report within thespecified time. The reply filed by the appellant to the snow causenotice issued by the Assessing Officer is on record and wasreproduced by the Assessing Officer. Tne same reads as under:- 6.In the backdrop of the admitted case of the parties,firstly it has to be seen that whether the appellant had shown“reasonable cause” in not filing the audit report within thespecified time. The reply filed by the appellant to the snow causenotice issued by the Assessing Officer is on record and wasreproduced by the Assessing Officer. Tne same reads as under:- "In this respect it is further submitted that becausefor the last huge losses and every year this loss hasaccumulating and has reached in fens of lacs ofpapers. Because of the loss we had forgotten to filethe Income tax return for the Asstt. Year 7005-06 on 1.T.A. No. 549 of 20084 the due date as per section 139(i) of the Income TaxAct, 1961. Sir, when our counter part bank officers fromother stations remained(?) us regarding the same, weimmediately went to file the Income tax Return in themonth of January 2006. Sir, Decause we were in a shock and in @aconfused situation like that we filed that the [ncomeTax return for the said Asstt. Year 2ZOO5-06 on24.01.2006 attacning in tne internal audited BalanceSneet thougn we got the Balance Sheet thougn wegot the Balance Sheet Audited as per the Income Taxsection 44 AB from out learned advisor of the BankSh. Dinesh Bansal CA who advice out bank from timeto time otherwise also. Sir, this Balance Sneet though received by theBank in the last week of Oct. 2005 but was put intoanother file and placed in safest drawer of then officerin chage who forget to file the CA Audited BalanceSheet along with the Income tax return it is onlywhen the Bank received notice in May this year thatthe audited balance sheet was searched and wesfound from the abandoned corner of the Bank store. Sir, the Bank feels really sorry for not filing theAudited Balance Sheet along with income tax returnand putting itself in inconvenience situation now theBank whicn its already running in huge lossesexpects. / A perusal of the reply makes it clear tnat the appellant raised plea of clemency by asserting that though thereport was got prepared from CA and received by it in the lastweek of October, 2005, but initially due to change in theincumbent and then misplacing the audit report, it could not be 1.T.A. No. 549 of 20085 filed with the return. The explanation would not be a “reasonablecause” for invoking the provisions contained in Section 273B, thesnelter of wnich has been sougnt to be taken by the appellant. |8.As per reply filed by the appellant, the audit reportwas obtained in time, but it could not be furnished by theappellant for their own fault. The change of incumbent andmisplacement of the report, in our opinion, cannot be said to be areasonable cause. The appellant, as per its own case, availed theservices of CA and it cannot be accepted that audit report, whicnis dated 20.10.2005, escaped notice of the concerned officials orthe CA when tne return was filed on 24.1.7006. Tne Bank nasaturnover of more than a crore. It is unacceptable that they hadno idea that the audit report was to be furnished within thestipulated time. The appellant Bank was under an obligation toTurnisn tne audit report to the Assessing Officer before thespecified date. Tne explanation appears to be an after-thoughtand just to escape the rigours of the penal clause contained inSection 271B of the Act. onThe provisions contained in Section 273B of the Actrelates to the subjective satisfaction of the competent authority,if the explanation rendered by the assessee is found satisfactory,tne penalty is not to be imposed. Tne appellant cannot derive anybenefit from Haryana Agro's case (supra), as the facts therein aredistinguishable. In that case, the audit report was not filed withinthe stipulated time, but was filed alongwith the return. Therefore,it was held that since the assessee had substantially compliedwith the requirement of filing of the audit report, the penaltyimposed by the Assessing Officer was deleted. But in the case in 1.T.A. No. 549 of 20086 onThe provisions contained in Section 273B of the Actrelates to the subjective satisfaction of the competent authority,if the explanation rendered by the assessee is found satisfactory,tne penalty is not to be imposed. Tne appellant cannot derive anybenefit from Haryana Agro's case (supra), as the facts therein aredistinguishable. In that case, the audit report was not filed withinthe stipulated time, but was filed alongwith the return. Therefore,it was held that since the assessee had substantially compliedwith the requirement of filing of the audit report, the penaltyimposed by the Assessing Officer was deleted. But in the case in 1.T.A. No. 549 of 20086 hand, the assessee neither filed the audit report within thestipulated time nor when the return was filed. It was filed onlywhen the Assessing Officer issued notice proposing imposition ofpenaity under Section 271B of tne Act. Tne explanation renderedfor non-submission of the audit report is found to be notacceptable. 10.In the light of above discussion, we answer thesubstantial questions of law in favour of the revenue and againsttne assessee. The appeal is dismissed. (AJAY KUMAR MITTAL)JUDGE12.03.2014Jiten (ANITA CHAUDHRY )JUDGE