The Raipur Bench of Income tax Appellate Tribunal (ITAT) has directed re-adjudication as penalty under Section 271B of the Income Tax Act,1961 would not be leviable when audit has been completed within a reasonable time by the appointment of auditors by the regulatory authority.
The assessee, Gramin Sewa Sahakari Samiti was a Primary Agricultural Co-operative Society engaged in carrying out business of banking, paddy procurement, sale of fertilisers, seeds, manures, and pesticides and of control items under Public Distribution System. During the course of assessment proceedings, it was noticed that the assessee had failed to get its accounts audited within the specified due date i.e. 30.09.2012.
Audit was done in the case on 23.02.2013. Thus, the AO observed that the assessee had committed default within the meaning of section 44AB of the Income Tax Act. Accordingly, penalty under Section 271B of the Income Tax Act, was levied
The assessee in his written submission submitted that the Audit Certificate by the Auditor of Co-operative Society which was issued after the due date for completion and submission of the same i.e. on 20.02.2013, whereas, the due date for completion of the audit as per the provisions of Section 44AB of the Income Tax Act, was 30.09.2012.
Satya Prakash Sharma on the other hand, submitted that since the assessee was non-compliant before the CIT(A), the appeal of the assessee should be dismissed on this count itself or alternatively, the issues in the present appeal needed to be restored back to the file of the CIT(A) for fresh adjudication of the same on merits.
The two-member Bench of Ravish Sood, (Judicial Member) and Arun Khodpia, (Accountant Member) observed that there was nothing on the part of assessee which made assessee responsible for the delay. The appeal filed by the assessee was partly allowed restoring the issue to the files of AO to verify the documents and accordingly, in terms of our aforesaid observations herein either enforce or vacate the penalty imposed under Section 271B of the Income Tax Act in the present case.
The Bench also observed that it was necessary to verify when the statutory auditors and tax auditor were appointed by the regulatory authority i.e. registrar of cooperative society. The order of penalty levied by the AO under Section 271B of the Income Tax Act and confirmed by the CIT(A) was liable to be set aside with a direction to verify that the appointment of the statutory/tax auditor was done after the due date of completion of audit under Section 44AB of the Income Tax Act, and if same was the case and audit was completed within a reasonable time of such appointment, then the penalty under Section 271B of the Income Tax Act could not be held as justified.
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