The Cochin Bench of Income Tax Appellate Tribunal (ITAT) has held that the Co-operative department auditor failed to furnish audit report of account within the specified date under section 44AB of Income Tax Act, 1961
The assessee, Paravur Service Cooperative Bank Ltd is a Co-operative Society registered under the Kerala Cooperative Societies Act, 1969. The assessee filed the return of Income on 19/01/2018 declaring total income of Rs. NIL after claiming deduction under Section 80P of Income Tax Act.
The case was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer (AO) observed that as per return of income the gross receipts from business of the assessee exceeded One Crore Rupees, however the assessee failed to furnish audited report as required under Section 44AB of the Income Tax Act within the specified date. Therefore, penalty proceedings under Section 271B of the Income Tax Act were initiated.
The AO given final opportunity to furnish documents but the assessee failed to furnish audit report of the accounts audited by Cooperative Department Auditor within specified date as per provisions of section 44AB of the Income Tax Act. Hence the AO imposed a penalty under Section under Section 271B of Income Tax Act.
Aggrieved by the order assesee filed an appeal before the tribunal.
According to the representative for the assessee, Santhosh P Abraham, it was stated that in the preceding year as well, the complete accounts underwent auditing by the statutory auditors in compliance with the provisions outlined in the Kerala Co-operative Societies Act. The auditors subsequently issued an audit certificate and audit memorandum, which encompassed the comprehensive financial consolidation of the transactions conducted throughout the year.
Further, authorities below went wrong in imposing a penalty under Section 271B of Income Tax Act on technical grounds, when the statutory audit report is available.
J. M Jamuna Devi counsel for the revenue submitted that unless the assessee has a reasonable cause for non-filing of audit report as envisaged under Section 44AB of the Income Tax Act, invited penalty under Section 271B of the Income Tax Act .
It was also observed by the tribunal that since the assessee being registered under the Co-operative Societies Act 1969, the 3rd proviso to section 44AB Income Tax Act gets attracted since it is required by Co-operative Societies Act to get its account audited by the departmental auditor before the specified date; and therefore assessee need to furnish a copy of departmental auditor as well as a further report by an accountant as stipulated under Section 44AB of the Income Tax Act.
Thus, in above case, the assessee failed to file the departmental audit & audit report of the accountant as per 3rd provision to section 44AB of the Income Tax Act.
Therefore, the two member bench of Sanjay Arora (Accountant Member ) and Aby T. Varkey (Judicial Member) observed the assessee has not been able to give any ‘reasonable cause’ for not levying a penalty under Section 271B of the Income Tax Act for failure to audit its account.
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