P.senthil Kumar v. Principal Commissioner Of Income Tax-5, Chennai

In the High Court of Judicature at Madras Dated : 18.12.2018 Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mr.Justice N.SATHISH KUMAR Tax Case Appeal No.604 of 2018 P.Senthil Kumar...Appellant Vs Principal Commissioner of Income Tax-5, Chennai ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961against the order dated 28.2.2017 in ITA No.3398/Mds/2016on the file of the Income Tax Appellate Tribunal Madras 'D'Bench for the assessment year 2012-13 against the orderdated.20.10.2016 by the Commissioner of Income Tax(Appeals)-4 in ITA.No.124/2015-16/CIT(A)-4/AY 2012-13 against thepenalty order dated 29.09.2015 for the Assessment Year2012-2013 Passed by the Income Tax Officer,Non CorporateWard -3(3), Chennai. In PAN ABBPS 1019H and Assessmentorder dated 29.03.2015 for the Assessment Year 2012-2013Passed by the Income Tax Officer,Iron Corporate ward-3(3),Chennai. For Appellant : Mr.T.Vasudevan For Respondent :Mrs.R.Hemalatha, SSC Judgment was delivered by T.S.SIVAGNANAM,J This appeal by the assessee under Section 260A of theIncome Tax Act, 1961 (hereinafter called the Act) isdirected against the order passed by the Income TaxAppellate Tribunal (for short, the Tribunal), Madras 'D'Bench dated 28.2.2017 made in ITA.No.3398/Mds/2016 for theassessment year 2012-13. 2. The above appeal has been filed raising thefollowing substantial questions of law :“i. Whether the interpretation andapplication of Section 271B read withSection 273B was correctly made by the https://hcservices.ecourts.gov.in/hcservices/ Income Tax Appellate Tribunal ?ii. Whether the Tribunal hadrightly considered and applied theprovisions of Section 273B providingfor no penalty to be levied ifreasonable cause is explained by theassessee ? Andiii. Whether the Tribunal wascorrect in law in confirming thepenalty levied when the audit reportwas filed along with the return andhence constitutes only a venialbreach?” 3. We have heard Mr.T.Vasudevan, learned counsel forthe appellant and Mrs.R. Hemalatha, learned Senior StandingCounsel appearing for the respondent – Revenue. 4. The short issue, which falls for consideration, isas to whether the appellant had shown sufficient cause fornot filing the audit report before the last date for filingthe same namely 30.9.2012. 5. The assessee filed the audit report along with thereturn of income on 31.3.2013. The assessment was completedby the Assessing Officer under Section 143(3) of the Actvide order dated 29.3.2015. Since the audit report was notfiled before the last date namely 30.9.2012, penalty hasbeen levied on the assessee under Section 271B of the Actvide order dated 29.9.2015 to the tune of Rs.1.5 lakhs.Aggrieved by that, the assessee carried the matter by wayof appeal to the Commissioner of Income Tax (Appeals)-4,Chennai [hereinafter called the CIT(A)], who dismissed theappeal by order dated 20.10.2016. The assessee moved theTribunal by way of further appeal and it was also dismissedby the impugned order. 6. Admittedly, under Section 273B of the Act, there ispower to condone the delay in filing the audit reportprovided the assessee shows reasonable cause for thefailure to file the audit report. 7. The assessee is an individual carrying on businessof dealing in granites. His case was that the accountantsuddenly resigned and left without notice in the month ofAugust 2012, that the assessee had to engage a newaccountant and compile all the accounting data and thatmany files were in disarray, which led to the delay infiling the audit report. 8. The Department opposed the appeal before theTribunal by contending that the appellant was habitual infiling the tax audit reports belatedly and referred to theproceedings for the assessment year 2011-12. 6. Admittedly, under Section 273B of the Act, there ispower to condone the delay in filing the audit reportprovided the assessee shows reasonable cause for thefailure to file the audit report. 7. The assessee is an individual carrying on businessof dealing in granites. His case was that the accountantsuddenly resigned and left without notice in the month ofAugust 2012, that the assessee had to engage a newaccountant and compile all the accounting data and thatmany files were in disarray, which led to the delay infiling the audit report. 8. The Department opposed the appeal before theTribunal by contending that the appellant was habitual infiling the tax audit reports belatedly and referred to theproceedings for the assessment year 2011-12. 9. The learned counsel for the appellant would submitthat during the said assessment year namely 2011-12, theassessee's father and mother passed away, as a result ofwhich, the audit report could not be filed and ultimately,the explanation given by the assessee was accepted and theTribunal deleted the penalty by order dated 23.11.2016 inITA.No.1222/Mds/ 2016. 10. Admittedly, the reasons assigned by the assesseehave not been found to be false nor with any mala fideintention, the reasons were assigned. Therefore, this Courtis of the view that the explanation offered by the assesseecan be taken as a reasonable cause for his failure to filethe audit report within time. We are also aware that theassessment was completed under Section 143(3) of the Actonly on 29.3.2015 and on that date, the audit report wasvery much available with the Assessing Officer. 11. The Hon'ble Apex Court, in the case of HindustanSteel Limited Vs. State of Orissa [reported in (1972) 83ITR 26], considered the validity of levy of penalty underthe provisions of the Orissa Sales Tax Act, 1947. One ofthe questions, which was framed for consideration was as towhether imposition of penalty for failure to register as adealer was justified. The Hon'ble Apex Court pointed outthat the liability to pay penalty does not arise merelyupon proof of default in registering as a dealer, that anorder imposing penalty for failure to carry out a statutoryobligation is the result of quasi criminal proceeding andthat penalty will not ordinarily be imposed unless theparty obliged either acted deliberately in defiance of lawor was guilty of conduct contumacious or dishonest or actedin conscious disregard of its obligation. It was furtherheld that whether penalty should be imposed for failure toperform a statutory obligation is a matter of discretion ofthe authority to be exercised judicially and on aconsideration of all the relevant circumstances and thateven if a minimum penalty is prescribed, the authoritycompetent to impose the penalty will be justified inrefusing to impose penalty, when there is a technical orvenial breach of the provisions of the Act or where thebreach flows from a bona fide belief that the offender isnot liable to act in the manner prescribed by the statute. 12. Though the above decision arises under the OrissaSales Tax Act, 1947, the ratio decidendi of the said https://hcservices.ecourts.gov.in/hcservices/ decision could very well be applied to the assessee's case.We find that the non filing of the tax audit report before30.9.2012 is a technical breach and admittedly, theassessee filed the audit report along with the return ofincome on 31.3.2013 and that the assessment was framed bythe Assessing Officer only on 29.3.2015, on which date, theaudit report was very much on the file of the AssessingOfficer. Thus, we are of the view that the explanationoffered by the assessee can be accepted as a reasonablecause for his failure to file the audit report within timeand the case on hand is not a fit case for imposing penaltyon the appellant. https://hcservices.ecourts.gov.in/hcservices/ decision could very well be applied to the assessee's case.We find that the non filing of the tax audit report before30.9.2012 is a technical breach and admittedly, theassessee filed the audit report along with the return ofincome on 31.3.2013 and that the assessment was framed bythe Assessing Officer only on 29.3.2015, on which date, theaudit report was very much on the file of the AssessingOfficer. Thus, we are of the view that the explanationoffered by the assessee can be accepted as a reasonablecause for his failure to file the audit report within timeand the case on hand is not a fit case for imposing penaltyon the appellant. 13. For the above reasons, the above tax case appealfiled by the assessee is allowed and the substantialquestions of law raised are answered in favour of theassessee. The penalty imposed on the assessee vide orderdated 29.9.2015 shall stand deleted. No costs. Sd/- Assistant Registrar(CS) //True Copy// Sub Assistant Registrar RS To 1.The Income Tax Appellate Tribunal, Madras 'D' Bench. 3.The Commissioner of Income Tax(Appeals)-4,121, Mahathma Gandhi Road, Chennai. 34. 4.The Income Tax officer,Non corporate Ward 3(3), Chennai. 34. +1cc to Mr.T.Ravi Kumar , Advocate SR.No. 88633 A.SK(05/03/2019)