2021 (11) TMI 328 - AT - Income Tax

Tax Tribunal: Genuine belief & audit compliance = reasonable cause. Penalty deleted.

Shetkari Sahakari Dudh Utpadak Sanstha Limited, Shridatta Sahakari Dudh Utpadak Sanstha Limited, Ahilyadevi Mahila Dudh Utpadak Sahakari Sanstha Limited, Raja Shivaji Gramin Bigar Sheti Sahakari Pat. Sanstha Limited Muktai Mahila Sahakari Dudh Utpadak Sanstha Limited Versus ITO, Ward-1, Pandharpur

Shetkari Sahakari Dudh Utpadak Sanstha Limited, Shridatta Sahakari Dudh Utpadak Sanstha Limited, Ahilyadevi Mahila Dudh Utpadak Sahakari Sanstha Limited, ... Issues:Appeal against penalty under section 271B of the Income Tax Act 1961 for failure to obtain tax audit report as per section 44AB.Analysis:The appellant, a cooperative society engaged in the business of milk and cattle feeds, filed its return for the assessment year 2014-15 declaring total income as NIL. The Assessing Officer completed the assessment at a total income of Rs. 7,62,646 and initiated penalty proceedings under section 271B for not obtaining the tax audit report as required by section 44AB. The appellant contended that it believed in good faith that no audit report was needed under section 44AB as it maintained proper accounts audited under the Maharashtra Cooperative Societies Act and had income exempt under section 80P(2). The appellant argued that penalty under section 271B is discretionary and not mandatory for a technical breach, citing the Hindustan Steel Ltd. case. Despite the appellant's explanation, the Assessing Officer imposed a penalty of Rs. 1,23,800, which was upheld by the CIT(A).The Tribunal considered whether the appellant's belief constituted a reasonable cause for not obtaining the audit report under section 44AB. The appellant's explanation that it believed no audit report was required due to income exemption under section 80P(2) and government audit of its accounts was not found false by the lower authorities. The Tribunal found no reason to doubt the appellant's explanation and held that the appellant's genuine belief constituted a reasonable cause for not obtaining the audit report. The Tribunal noted that the audit report under the Maharashtra Co-operative Society Act was obtained after the penalty was imposed, negating the need for a tax audit report at the time of filing. Consequently, the Tribunal directed the Assessing Officer to delete the penalty levied under section 271B.The Tribunal applied its decision in the first appeal to subsequent appeals with identical facts and issues, allowing all appeals by the appellant. The Tribunal emphasized that the appellant's genuine belief and compliance with relevant audit requirements constituted a reasonable cause for not obtaining the tax audit report under section 44AB, leading to the deletion of the penalty.