The Commissioner Of Income-Tax,Coimbatore v. L.s.lakshmanaswamy

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 09.06.2007 Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.476 of 2007 The Commissioner of Income-tax,Coimbatore. ..Appellant Vs L.S.Lakshmanaswamy ..Respondent Appeal under Section 260A of the Income-tax Act, 1961 againstthe order of the Income Tax Appellate Tribunal, Bench 'D', Chennaiin I.T.A. No.1522/Mds/2004 dated 28.09.2006 for the assessmentyear 2001-02 against ITA.No.349/02-03 on the file of theCommissioner of Income Tax (App) I, Coimbatore in PAN/GIR-L-17718/AATPC 8408N/circle/III CBE on the file of the AsstCommissioner Income Tax Circle III, Coimbatore 18. For Appellant :Mr.T.Ravi Kumar,Standing Counsel forIncome-tax DepartmentJUDGMENT (Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.) This appeal is filed under Section 260A of the Income TaxAct, 1961 by the Revenue, against the order of the Income TaxAppellate Tribunal, Bench 'D', Chennai in I.T.A. No.1522/Mds/2004dated 28.09.2006 raising the following substantial questions oflaw:- 1. Whether on the facts and in thecircumstances of the case, the Income TaxTribunal was right in law in deleting thepenalty imposed under Sec.271B of the Income-tax Act for the assessment year 2001-02 wasnot proper?2. Whether on the facts and in thecircumstances of the case, the Income Tax https://hcservices.ecourts.gov.in/hcservices/ Tribunal was right in law in deleting thepenalty imposed under Sec.271B of the IT Actespecially when the assessee had been takendifferent stands before the assessing officer,CIT Appeals and the Tribunal?3. Whether on the facts and in thecircumstances of the case, the Income TaxTribunal was right in law in holding that theaccountant had became nervous and could notfile the 44AB report along with the return,without any material record to establish thatfact? 2.The facts leading to the above substantial questions oflaw are as under: The assessee is the proprietor of M/s.S.S.Corporation,trading in yarn and fabrics. The relevant assessment year is2001-2002 and the corresponding accounting year ended on31.03.2001. The assessee filed Return of income on 31.12.2001showing total income as Rs.6,71,234/-. While processing theReturn of income under Section 143(1) of the Income-tax Act ("Act"in short), it is seen that this proprietory firm's Trading Accountreflects a sales turnover of Rs.4,14,17,456/-. The assessee wastherefore required to furnish the Tax Audit Report under Section44AB of the Act by 31.10.2001. He failed to do so. Hence PenaltyProceedings under Section 271B was initiated and notice was alsoissued on 06.11.2002. The assessee sent explanation by letterdated 25.11.2002. The explanation was rejected and the AssessingOfficer levied penalty of Rs.1,00,000/-. Aggrieved by the orderof levying penalty, the assessee filed an appeal to theCommissioner of Income-tax (Appeals). The C.I.T.(A) dismissed theappeal and confirmed the order of the Assessing Officer.Aggrieved, the assessee filed an appeal to the Income-taxAppellate Tribunal ("Tribunal" in short). The Tribunal deletedthe penalty on the ground that there was a reasonable cause forfiling the report belatedly by only two months and hence held thatthere was no justification for levying penalty. Hence the presentappeal is filed by the Revenue. 3.Learned Standing Counsel appearing for the Revenuesubmitted that the Audit Report is dated 31.10.2001 and the samewas required to be filed on or before 31.10.2001, but the same wasfiled only on 31.12.2001. Hence there was a delay of two months.He further submitted that the reason offered by the assessee isnot convincing and it is only an afterthought. The assessee hasgot a turnover of more than Rs.4 Crores. Hence, he ought to havemore vigilant in filing the Audit Report. Hence the AssessingOfficer is justified in levying penalty. 4.Heard the counsel. The assessee had filed Tax AuditReport under Section 44AB of the Act on 31.12.2001. The assesseehttps://hcservices.ecourts.gov.in/hcservices/ had misplaced the tax challan. Therefore the Return could not befiled in time and the Tax Audit Report was also not filed in time,even though the Tax Audit Report was ready before the due date.An affidavit was also filed by the assessee stating that theAdvance Tax Challan had been misplaced by the Accountant of theconcern who was trying to locate the same. It was stated that theReturn could not be filed in the absence of such challan and theAccountant had become little nervous and therefore, even the TaxAudit Report could not be filed on the due date. Such anexplanation offered by the assessee was accepted by the Tribunal.The matter was entrusted to the employee who is not an educatedperson and also he did not know the consequences for which theassessee would be exposed on account of the failure to file theTax Audit Report. The assessee was under the firm belief that theTax Audit Report would have been filed in time. Only at the timeof filing the Return, the assessee came to know that the Tax AuditReport was not filed by the employee, as instructed. The reasonsgiven by the assessee was accepted by the Tribunal and theTribunal, after considering the materials and evidence came to theconclusion that there is a reasonable cause in filing the reportbelatedly. Section 273B of the Income-tax Act, reads as under:- "Notwithstanding anything contained in theprovisions of clause (b) of sub-section (1) ofsection 271, section 271A, section 271AA,section 271B, section 271BA, section 271BB,section 271C, section 271D, section 271E,section 271F, section 271FA, section 271FB,section 271G, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section272A, sub-section (1) of section 272AA orsection 272B or sub-section (1) of section272BB or sub-section (1) of section 272BBB orclause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273,no penalty shall be imposable on the person orthe assessee, as the case may be, for anyfailure referred to in the said provisions ifhe proves that there was reasonable cause forthe said failure." From a reading of the above, it is clear that if the assesseeshows sufficient cause for belated filing of Audit Report, theassessee is not subject to levy of penalty under Section 271B ofthe Act. In the present case, the explanation offered by theassessee was accepted by the Tribunal as a sufficient one. Thereis only a delay of two months. Whether there is a sufficientcause for belated filing of a report or not, is a pure question offact. The Tribunal held that there is a sufficient cause forbelated filing of the Tax Audit Report. Findings given by theTribunal are based on valid materials and evidence and we do notfind any error or illegality in the order of the Tribunal so as towarrant interference. https://hcservices.ecourts.gov.in/hcservices/ 5.Under the circumstances, no substantial questions of lawarise for consideration of this Court and accordingly, the taxcase is dismissed. No costs. km https://hcservices.ecourts.gov.in/hcservices/ 5.Under the circumstances, no substantial questions of lawarise for consideration of this Court and accordingly, the taxcase is dismissed. No costs. km Sd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1. The Assistant Registrar, Income-tax Appellate Tribunal, Bench "D", Chennai.2. The Secretary, Central Board of Direct Taxes, New Delhi.3. The Commissioner of Income-tax (Appeals) I, Coimbatore.4. The Assistant Commissioner of Income-tax, Circle-III, Coimbatore-18.+ 1 cc to MR. N. Muralikumaran, Advocate CCSR No.33374MBS(CO)SR/18.6.2007 T.C.(A) No.476 of 2007