2023 (6) TMI 574 - AT - Income Tax

Tribunal upholds penalties for delayed audit reports under Income-tax Act

Chavakkad Service Co-operative Bank Limited Versus The Income Tax Officer Ward 1 And TPS Guruvayoor

The Tribunal confirmed penalties under section 271B of the Income-tax Act for assessment years 2012-2013 and 2017-2018 against a co-operative society. The ... Penalty u/s 271B - assessee having not furnished the audit report before the specified date, as required by sec.44AB - delayed receipt of audit report under the Kerala Act - HELD THAT:- Nothing on record to exhibit the stated dates of receipt of the audit reports under the Kerala Act. Two, even granting so, the said information may not by itself be complete, and would require being supplemented by the date/s of making available the books of account to the Auditor for audit. Delay therein, extent of which is not known, could certainly not be attributed to the Auditor. Be that as it may, there is no explanation for the admitted delay of six years and over six months beyond the stated dates of receipt for the two successive years respectively. Infact, the said explanation would carry weight only where the tax audit report in the prescribed form, duly signed and verified, as required by sec.44AB, had been furnished by the assessee by the specified date, further furnishing the audit report received from the Registrar soon after its receipt in July, 2013 and December, 2017, respectively. The law has been amended since 01.7.1995, effectively delinking the furnishing of the said report from furnishing the return of income, requiring the assessee to, instead, furnish along with the return of income a proof of furnishing the said report earlier. Inasmuch as we have, for the reasons stated above, found the assessee’s explanation not tenable, we do not insist on it furnishing material to bear out its case. Infact, a similar plea, i.e., the delayed receipt of audit report under the Kerala Act, was found not acceptable by the Hon'ble jurisdictional High Court in Peroorkkada SCB Ltd. [2020 (1) TMI 624 - KERALA HIGH COURT] The argument that the audit reports were available with the AO at the time of assessments, is, neither here nor there. As stated of the delinking of the requirement of furnishing the audit report from that of the return of income. It is the non-furnishing of the audit report in time, as opposed to the return of income, that constitutes the default u/s. 44AB, providing for penalty where the same is not shown to be due to a reasonable cause. How the information furnished per an audit report is used by the Revenue is only it’s concern. Notice u/s.271B r.w.s. 274 was issued only on 19.11.2019, i.e., much after the end of the relevant assessment year, questioning thus the validity of the said notice on the basis of the time of its issue - We find no such restriction either u/s.271B or u/s.274. That apart, notice for the said year was issued only on the conclusion of the assessment u/s.147 r.w.s. 143(3) on 19.11.2019, as we find the case to befor AY 2017-2018. That is, for both the years,s.274 notice stands issued within a reasonable time of the conclusion of the assessment proceedings. The assessee may not have filed the return for a particular year, as infact is the case for AY 2012-2013, so that the fact of non-furnishing the audit report u/s.44AB would not come to the notice of the Revenue. It is presumably for such like reasons that the Legislature had deemed it fit not to prescribe any time limitation for the issue of the said notice. Once commenced, the proceedings though are to be concluded within prescribed time. Decided against assessee. Issues:The judgment involves confirmation of penalty under section 271B of the Income-tax Act, 1961 for assessment years 2012-2013 and 2017-2018 against a co-operative society registered as a Primary Agricultural Credit Society (PACS) under the Kerala Co-operative Societies Act, 1969.Details of the Judgment:Background and Circumstances:The assessments for both years denied the assessee the benefit of deduction u/s. 80P(2)(a)(i) following a decision by the Hon'ble jurisdictional High Court. The deduction u/s. 80P was restricted to income from providing credit to members for agricultural purposes. Penalty proceedings were initiated for non-compliance with sec. 44AB, and penalties were levied. The tax audit reports were furnished much beyond the specified dates, leading to the penalty proceedings.Arguments and Findings:The assessee argued that the delay in furnishing audit reports was due to receiving them from the Registrar of Co-operative Societies after the specified dates. However, the explanation was deemed inadequate as the reports were filed along with the return of income, not meeting the requirements of sec. 44AB. The Tribunal found the explanation untenable, citing precedents where similar pleas were rejected by the High Court. The argument that audit reports were available with the AO during assessments was dismissed as irrelevant to the non-furnishing of reports in time.Validity of Penalty Notices:An additional plea regarding the validity of the notice u/s. 271B for AY 2012-2013 was raised, questioning its timing. The Tribunal found no restriction on the timing of such notices and noted that the notices were issued within a reasonable time of concluding the assessment proceedings for both years.Conclusion:The Tribunal found the assessee's case without merit and declined interference, ultimately dismissing the appeals. The stay petitions were also dismissed as the appeals were decided. The order was pronounced on June 12, 2023, under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963.