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Smart Summary

Factual and Procedural Background

This judgment, authored by J.K. Ranka, J., concerns three income-tax appeals filed by the appellant-assessees under Section 260A of the Income-tax Act (IT Act) directed against an order of the Income-tax Appellate Tribunal, Jaipur Bench. The Tribunal had affirmed the Assessing Officer's (AO) order and reversed the order of the Commissioner of Income-tax (Appeals) [CIT(A)], thereby dismissing the assessee's appeals; the present appeals challenge that Tribunal decision. The appeals relate to the assessment year 1997-98 (referred to as asst. yr. 2007-08 (sic) in the pleadings).

Each appeal was admitted on specified substantial questions of law concerning imposition of penalty under Section 271B for failure to furnish the audit report under Section 44AB by the specified date, and whether non-communication of change of jurisdiction under Section 127 is sufficient to avoid penalty in view of Section 273B.

The three matters involve separate assessee AOPs (association of persons) engaged in liquor trading (referred to in the record as Kotputli Group, Alwar Group and Hanumangarh Group). In each matter the turnover exceeded Rs. 40 lakhs and the accounts were audited under Section 44AB. The auditors finalized audit reports on 6th or 8th October 1997 but the audit reports and returns were filed belatedly (dates of filing include 27th March 1998 and 29th January 1998). The AOs issued show-cause notices and imposed the minimum penalty of Rs. 1 lakh each under Section 271B, concluding that there was neither reasonable cause nor tangible evidence that the audit reports/returns had been presented to the authority holding jurisdiction on or before the specified date.

The CIT(A) deleted the penalties, accepting the assessee's explanation that change/centralization of jurisdiction (from Bharatpur to Jaipur) prevented timely filing. The Revenue appealed to the Tribunal, which restored the penalties, concluding that the assessees had not placed tangible evidence of presenting the audit reports/returns before the earlier AO, and that the jurisdictional transfer was not shown to be defective. The present appeal is from the Tribunal's order; the High Court considered the parties' contentions and the statutory provisions and dismissed the appeals, sustaining the penalty.

Legal Issues Presented

  1. "Whether the learned Tribunal was justified in sustaining the imposition of the penalty under S. 271B of the IT Act, 1961, despite the fact that the audit report was obtained under S. 44AB before the specified date and the same was filed along with return of income?"
  2. "Whether non-communication of the fact of changed jurisdiction of the AO under S. 127 of the Act is sufficient not to impose the penalty in view of the overriding provisions contained in S. 273B of the Act?"
  3. A related formulation appearing in one appeal: "Whether the learned Tribunal was justified in sustaining the imposition of the penalty under S. 271B for furnishing the audit report after the date specified under S. 44AB to the changed jurisdictional AO in the facts and circumstances where the audit report under S. 44AB had been obtained on or before the specified date and the same was filed along with return of income under S. 139(4) more so where the learned Chief CIT or the CIT undisputedly has failed to comply with the statutory mandate enshrined in S. 127 to communicate the facts of changed jurisdiction to appellant?"

Arguments of the Parties

Assessee's Arguments

  • The assessee contended that audit reports were prepared on 6th/8th October 1997 (i.e., on or before the specified date) and therefore there was no fault in obtaining the audit report in time.
  • The assessee asserted that the change/centralization of jurisdiction (from AO, Bharatpur to Dy. CIT, Central Circle-2, Jaipur) was effected unilaterally by the department and the assessee was not served with any intimation under Section 127; thus the assessee remained under the bona fide impression that returns should be filed at Bharatpur.
  • It was argued that the audit reports and returns were presented before the AO at Bharatpur immediately after preparation but were not accepted and were therefore kept at the assessee's office until later filed at Jaipur; that circumstance constituted a reasonable cause within Section 273B so as to avoid penalty under Section 271B.
  • Counsel relied on several judicial authorities to support the contention that reasonable cause exists where the assessee could not file due to transfer/centralization or where an external authority prevented timely audit/filing.
  • Assessee further emphasized the discretionary nature of penalty under Section 271B (use of "may") and submitted that no prejudice was caused to the Revenue by the belated filing.

Revenue's Arguments

  • The Revenue contended that the three assessees were well aware of statutory obligations to obtain audit and file returns by the due date, and that there was no mistake by the AO at Bharatpur: the audit reports/returns were not produced on or before the due date either at Bharatpur or at Jaipur.
  • Revenue pointed to a public instruction (Instruction No. CC/AC(Adm.)/lnst/4/1997-98/545) and contended that a public notice had been given about transferring and centralizing liquor cases to a designated officer at Jaipur, so assessees were not prevented by lack of communication.
  • The Revenue maintained that there was no reasonable cause and that the imposition of the minimum penalty under Section 271B by the AO, and its restoration by the Tribunal, was correct in law.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Rajasthan Co-operative Dairy Federation Ltd. v. Dy. CIT: (2002) 176 CTR (Raj) 622 : (2003) 259 ITR 126 (Raj) The opinion describes this case as one where the auditor could only be appointed by the Registrar of Co-operative Societies and, despite repeated requests, the auditor was not appointed; this lack of appointment constituted a reasonable cause for failure to get accounts audited. The Court used this authority to illustrate circumstances where a reasonable cause exists (i.e., when the assessee is prevented from getting audited by action/inaction of the competent authority).
Rajasthan State Electricity Board v. ITAT: (2003) 183 CTR (Raj) 361 : (2003) 262 ITR 262 (Raj) The opinion states this case involved a claim that the accountant general (competent authority) had to audit and the accountant general did not complete the audit despite books having been handed over; that prevented the assessee from complying in time and was held a reasonable cause. The Court relied on this authority as another example where interference by or non-cooperation of the competent auditing authority constituted reasonable cause to avoid penalty.
Ajantha Industries v. CBDT: 1976 CTR (SC) 79 : (1976) 102 ITR 281 (SC) The judgment is listed among authorities relied upon by the assessee; the opinion does not expound in detail the precise rule or principle taken from this case within the text provided. The case was cited by the assessee's counsel; the opinion's text does not show detailed reliance or analysis of this authority in the Court's reasoning (it is one of several authorities listed by counsel).
Commissioner Of Income-Tax v. Apex Laboratories P. Ltd: (2010) 320 ITR 498 (Mad) Cited by counsel; the opinion does not specify the particular rule/principle extracted from this authority in the text provided. The authority appears in the list of cases relied upon by the assessee's counsel; the Court's reasoning does not elaborate detailed application of this case in the judgment text supplied.
Commissioner Of Income-Tax v. K.K. Spun Pipe: (2006) 200 CTR (P&H) 107 : (2006) 284 ITR 301 (P&H) Cited by counsel; the opinion does not explain the specific principle from this precedent in the portions reproduced. Listed among authorities relied upon by counsel; the Court's written reasoning as provided does not analyze this specific case in detail.
CIT v. Shri Shiv Dayal Sharma (DB IT Appeal No. 119 of 2006, decided on 13th Feb., 2007) Cited by counsel; the opinion text does not set out the rule/principle attributed to this decision. Included in the list of cases cited by the assessee's counsel; the judgment's text does not show any further analysis of this authority.
K. Ravindranathan Nair v. Dy. CIT & Anr.: (2009) 319 ITR 108 (Ker) The opinion records that Kerala High Court held that if there is an acceptable explanation, penalty could be avoided; in absence of evidence before the Tribunal, the minimum penalty was upheld. The Court cited this authority for the proposition that acceptable evidence/explanation can avoid penalty, but where evidence is lacking before the Tribunal, penalty may be sustained.

Court's Reasoning and Analysis

The Court's analysis proceeded in several identifiable steps, strictly following the material in the opinion:

  1. Statutory framework: The Court quoted and analysed Sections 44AB (audit requirement and "specified date"), 271B (penalty for failure to furnish audit report) and 273B (penalty not to be imposed where reasonable cause is proved). It noted the legislative change by the Finance Act, 1995 (w.e.f. 1st July 1995) which required furnishing the audit report by the due date of filing the return.
  2. Evidentiary burden and insufficiency: The Court emphasised that the assessees' core factual contention—namely that they had presented the audit reports and returns at the Bharatpur office immediately after audit but were refused due to transfer of jurisdiction—was not supported by tangible evidence (e.g., affidavits or refusal memos). The Court held that a mere assertion without supporting evidence is no explanation; accordingly the Tribunal was right to reject the explanation.
  3. Discrepancy in turnover figures: The Court observed discrepancies between turnover figures in the annexed audit report and figures quoted by the AO in the penalty order. The Court noted that counsel was asked to clarify the discrepancy and failed to do so at final hearing. The Court did not base its decision solely on this discrepancy, but recorded it as a relevant factual observation undermining the assessee's case.
  4. Conduct regarding jurisdictional transfer: The Court noted that the assessee neither challenged the transfer of cases from Bharatpur to Jaipur under Section 127 nor raised jurisdictional objections at the time of transfer; instead, the assessee submitted to the jurisdiction of the Dy. CIT, Jaipur and participated in assessment proceedings there without protest. This conduct weighed against a finding of reasonable cause based on non-communication of transfer.
  5. Precedent comparison: The Court distinguished and discussed authorities cited by counsel where reasonable cause was found (e.g., instances where the competent authority prevented audit or appointment of auditor). Those cases supported the concept that interference by a competent auditing authority may constitute reasonable cause. However, the Court concluded that the facts of the present cases did not present analogous circumstances because the assessees failed to produce evidence showing that they were actually prevented from filing by the department or that they had indeed tendered the documents on time and been refused.
  6. Final synthesis: Given the absence of tangible evidence, the assessees' submission of themselves to the jurisdiction at Jaipur without challenge, and the failure to explain/clarify factual discrepancies, the Court agreed with the Tribunal that the minimum penalty properly imposed under Section 271B should be sustained. The Court therefore answered the substantial questions in favour of the Revenue.

Holding and Implications

HOLDING: The High Court upheld the Tribunal's decision sustaining the penalties imposed by the Assessing Officer under Section 271B. The three appeals were dismissed as devoid of merits. The Court answered the substantial questions of law in favour of the Revenue and against the assessees. No costs were awarded.

Implications:

  • The direct effect is that the penalties of Rs. 1 lakh each under Section 271B, as imposed by the AO and restored by the Tribunal, remain valid and enforceable against the respective assessees in these appeals.
  • The Court's decision underscores that assertions of timely filing or of departmental prevention must be supported by tangible evidence (e.g., proof of tendering documents or formal refusal): mere oral or uncorroborated claims are insufficient to establish "reasonable cause" under Section 273B.
  • The opinion does not purport to lay down a new legal precedent beyond applying existing statutes and authorities; it confines its outcome to the facts and record of these three appeals (i.e., no broader doctrinal innovation is announced in the portions of the opinion provided).

    Shis Ram Raja Ram And Party And Ors. v. Chief Commissioner Of Income Tax And Ors.

    JUDGMENT

    J.K. Ranka, J.

    1. These three income-tax appeals filed by the appellant-assessee under S. 260A of the IT Act (for short, "IT Act") are directed against the order passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for snort, "Tribunal") by which the Tribunal, while affirming the order passed by the AO and reversing the order passed by the CIT(A), has dismissed the appeals filed by the appellant-assessee. It relates to asst. yr. 2007-08 (sic). Since the facts and controversy involved is identical, all these three appeals are decided by this common order.

    2. The DB IT Appeal No. 15 of 2007 was admitted vide order dt. 26th March, 2007 on the following substantial questions of law:

    "1. Whether the learned Tribunal was justified in sustaining the imposition of the penalty under S. 271B of the IT Act, 1961, despite the fact that the audit report was obtained under S. 44AB before the specified date and the same was filed along with return of income?

    2. Whether non-communication of the fact of changed jurisdiction of the AO under S. 127 of the Act is sufficient not to impose the penalty in view of the overriding provisions contained in S. 273B of the Act?"

    3. The DB IT Appeal No. 2 of 2007 was admitted vide order dt. 13th Feb., 2007 on the following substantial question of law:

    "Whether the learned Tribunal was justified in sustaining the imposition of the penalty under S. 271B for furnishing the audit report after the date specified under S. 44AB to the changed jurisdictional AO in the facts and circumstances where the audit report under S. 44AB had been obtained on or before the specified date and the same was filed along with return of income under S. 139(4) more so where the learned Chief CIT or the CIT undisputedly has failed to comply with the statutory mandate enshrined in S. 127 to communicate the facts of changed jurisdiction to appellant?"

    4. The DB IT Appeal No. 5 of 2007 was admitted vide order dt. 22nd March, 2007 on the following substantial question of law:

    "Whether on the facts and circumstances of the case, the Tribunal was justified in sustaining the imposition of penalty under S. 271B of the IT Act, 1961, despite the fact that the audit report was obtained under S. 44AB before specific date and the same was filed along with a return of income?"

    5. The facts of all the three appeals would be dealt in a nutshell and thereafter legal issues would be dealt.

    6. The brief facts in the case of the appellant-assessee M/s. Shis Ram Raja Ram & Party (DB IT Appeal No. 15 of 2007) are that it was being assessed to income-tax by the AO, Bharatpur till asst. yr, 1996-97 and it, being an AOP popularly known as 'Kotputli Group', is carrying on the business of liquor trading. During the previous year, since the turnover was exceeding Rs. 40 lacs, therefore, the assessee was required to get its accounts audited by a chartered accountant as required under S. 44AB of the IT Act, 1961. The due date of furnishing of the return of income under S. 139(1) of the IT Act so also the audited accounts, was on or before 31st Oct., 1997. Though it is claimed that the auditor prepared audit report on 8th Oct., 1997 under S. 44AB in the Form No. 3CB and 3CD but it was filed on 27th March, 1998 along with return of income of the AOP for the asst. yr. 1997-98. It alleged that immediately after preparation of the audit report on 8th Oct., 1997, the same along with return of income, was presented before the AO, Bharatpur but neither the return of income nor audit report was accepted and it was verbally conveyed that the jurisdiction over the case stands transferred to authority at Jaipur but who the authority is, was not conveyed. But the fact remains that the return of income and audit report was being kept at the office of assessee at Bharatpur and filed before the authority at Jaipur on 27th March, 1998.

    7. The brief facts in the case of the appellant-assessee--M/s. Raja Ram & Party (DB IT Appeal No. 2 of 2007) are that it was being assessed to income-tax by the AO, Bharatpur till asst. yr. 1996-97 and it, being an AOP popularly known as Alwar Group', is carrying on the business of liquor trading. During the previous year, since the turnover was exceeding Rs. 40 lacs, therefore, the assessee was required to get its accounts audited by a chartered accountant as required under S. 44AB of the IT Act, 1961. The due date of furnishing of the return of income under S. 139(1) of the IT Act so also the audited accounts, was on or before 31st Oct., 1997. Though it is alleged that the audit report was finalized on 6th Oct., 1997 and the same was sent it to its office at Bharatpur for submitting it with the return of income with the IT Department, Bharatpur, however, when presented, it was conveyed verbally that the jurisdiction over the case has been centralized with an officer at Jaipur but nothing more was conveyed and thus neither the return of income nor audit report was accepted and the return of income and audit report remained at assessee's office at Bharatpur and the assessee's office at Bharatpur had totally forgotten to submit return of income with the IT Department. However, on realizing the mistake and recollection, the return along with audit report was presented before the ITO, Bharatpur, who then accepted on 29th Jan., 1998.

    8. The brief facts in the case of the appellant-assessee--M/s. Jaimal Ram & Party (DB IT Appeal No. 14 of 2007) are that it was being assessed to income tax by the AO, Bharatpur till asst. yr. 1996-97 and it, being an AOP popularly known as 'Hanumangarh Group', is carrying on. the business of liquor trading. During the previous year, since the turnover was exceeding Rs. 40 lacs, therefore, the assessee was required to get its accounts audited by a chartered accountant as required under S. 44AB of the IT Act, 1961. The due date of furnishing of the return of income under S. 139(1) of the FT Act so also the audited accounts, was on or before 31st Oct., 1997 Although it is alleged that the audit report was finalized on 6th Oct., 1997 and sent to its office at Bharatpur for submitting it with the return of income to the IT Department, Bharatpur. however, when presented, it was conveyed verbally that the jurisdiction over the case has been centralized with an officer at Jaipur but who the authority is, was not conveyed and thus neither its return of income nor the audit report was accepted and the return of income and audit report, thereafter, were kept at assessee's office at Bharatpur and the return along with audit report was presented before the ITO, Bharatpur, who then accepted on 29th Jan., 1998.

    9. On a show-cause notice having been issued by the AO that when there was requirement of getting the accounts audited and to file the audit report on or before 31st Oct., 1997, as to why the audit report under S. 44AB has been filed after sufficient long time and prima facie, was of the opinion as to why penalty under S. 271B may not be levied on the assessee.

    10. The assessee in the case of M/s. Shis Ram Raja Ram & Party (DB IT Appeal No. 15 of 2007) contended that the jurisdiction over the case was with the IT Department, Bharatpur and unilaterally it was transferred to the office of the Dy. CIT, Central Circle-2, Jaipur and before passing of the order neither the assessee received any intimation nor any notice from the office of the authority so as to come to the conclusion that the jurisdiction over the case stood shifted/transferred from Bharatpur to Jaipur and the assessee remained under the impression that the return is to be filed at Bharatpur itself and accordingly, the accounts were audited well in advance and much before the due date of furnishing the audit report and sent to the office of the assessee at Bharatpur for onward submission to the ITO, Bharatpur but on being presented, was not accepted. It was further contended that there is no mistake on the part of the assessee and it was presented on or before the due date and since the audit report was prepared on 8th Oct., 1997, there was no reason to withhold and therefore, no penalty in law is leviable under S. 271B of the Act.

    11. Insofar as the other two IT Appeals are concerned, it was contended that the auditor prepared audit report on 6th Oct., 1997 under S. 44AB in Form Nos. 3CB and 3CD but it is claimed that immediately after preparation of the audit on 6th Oct., 1997, the same along with return of income, was presented before the AO, Bharatpur, but neither the return of income nor audit report was accepted and it was verbally conveyed that the jurisdiction over the case stood transferred to the Dy. CIT, Central Circle-2, Jaipur, which was not intimated and therefore, no penalty in law is leviable under S. 27 IB of the Act.

    12. However, the AO was not satisfied with the explanation furnished and came to the conclusion that the assessee was well aware of the cases having been centralized in August, 1997. i.e. much before the due date of filing of the return. The AO was also of the view that the explanation appears to be an afterthought and no tangible evidence was placed on record so as to come to a conclusion that the return along with the audit report was presented on or before the due date of filing of the return at Bharatpur. The AO was also of the view that there was no reasonable cause or excuse and at least on the given facts stated the assessee was unable to prima facie satisfy and thus imposed penalty under S. 271B at Rs. 1 lac each in all the three cases as the said penalty was the minimum penalty prescribed under law.

    13. Dissatisfied with the imposition of penalty in all the three cases, appeals came to be filed by the assessee before the CIT (A). The CIT(A) was, however, satisfied with the explanation so offered and held that there was reasonable cause due to change of jurisdiction and accordingly, deleted the penalty.

    14. Dissatisfied with the deletion of penalty, the Revenue preferred appeal before the Tribunal. The Tribunal restored the penalty levied by the AO and was primarily of the view that no tangible evidence was placed before the AO or before the appellate authorities that the assessee took steps in presenting the return of income and audit report either with the officer having jurisdiction at Bharatpur or having jurisdiction at Jaipur. The Tribunal was also of the view that the jurisdiction was transferred after due compliance provided under the law and that is not a subject-matter of challenge and on the given facts and circumstances, assessee failed to file the return of income and the audit report before the authority holding jurisdiction on or before 31st Oct., 1997.

    15. Learned counsel for the assessee reiterated the submissions and contended that the assessees were being assessed to income-tax at Bharatpur and unilaterally the cases had been transferred to the Dy. CIT, Central Circle-2, Jaipur and it was incumbent upon the Chief CIT under S. 127 of the IT Act to have informed the assessee about change of the jurisdiction, rather it was mandatory on the part of the Chief CIT not only to issue notice but also giving the assessee a reasonable opportunity of being heard in the matter before transferring the cases. He contended that no such notice was served. He further contended that the requirement under S. 44AB is that the audit report should have been obtained on or before the due date which in the first case was 8th Oct., 1997 and in the remaining two cases was 6th Oct., 1997 and though the audit report as well as return of income were all prepared on or before the due date, however, same were said to be presented before the AO at Bharatpur but since it having not been accepted and returned to the representative of the assessee without informing the correct jurisdiction, therefore, there is a reasonable cause insofar as penalty is concerned. He contended that as far as the assessee is concerned, he had no other option except to get the accounts audited in time and in presenting before the AO where it was being filed earlier. He contended that under S. 271B it is not incumbent upon the AO to impose penalty as the word used is "may" and it is discretion of the AO, or. a reasonable cause pleaded, not to impose penalty. He contended that reasonable cause do exists and the Tribunal wrongly sustained the penalty. He contended that no prejudice has been caused to the Revenue, even if the audit report has been filed late or the return was filed late as the assessment was completed after sufficient long time. He relied upon judgments, rendered in the cases of Rajasthan Co-operative Dairy Federation Ltd. v. Dy. CIT: (2002) 176 CTR (Raj) 622 : (2003) 259 ITR 126 (Raj); Rajasthan State Electricity Board v. ITAT: (2003) 183 CTR (Raj) 361 : (2003) 262 ITR 262 (Raj); Ajantha Industries v. CBDT: 1976 CTR (SC) 79 : (1976) 102 ITR 281 (SC); Commissioner Of Income-Tax v. Apex Laboratories P. Ltd: (2010) 320 ITR 498 (Mad); Commissioner Of Income-Tax v. K.K Spun Pipe: (2006) 200 CTR (P&H) 107 : (2006) 284 ITR 301 (P&H) and CIT v. Shri Shiv Dayal Sharma (DB IT Appeal No. 119 of 2006, decided on 13th Feb., 2007).

    16. Per contra, learned counsel for the Revenue contended that all the three assessees are having same address and are renowned liquor group in the State of Rajasthan and all the three assessees were well aware of the provisions of law of getting the accounts audited and to file the same on or before the due date. She contended that there was no mistake on the part of the AO at Bharatpur as the assessees neither produced the audit report nor return on or before the due date either at Bharatpur or at Jaipur. She further contended that a public notice had already been given of transferring and centralizing the liquor cases in the State of Rajasthan to be dealt with by one senior officer of the rank of Dy. CIT and accordingly all the cases relating to the liquor trading were transferred to the officer at Jaipur vide Instruction No. CC/AC(Adm.)/lnst/4/1997-98/545. She contended that there is no reasonable cause and the penalty imposed by the AO and upheld by the Tribunal is correct in law and the assessees, in the instant case, have rightly been penalized by the AO.

    17. We have considered the rival contentions and have perused the orders passed by all the three authorities.

    18. To appreciate the controversy in all the three appeals, it would be appropriate to quote Ss. 44AB, 271B as also 273B of the IT Act, which provide ad infra:

    "Sec. 44AB. Audit of accounts of certain persons carrying on business or profession--Every person,--

    (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds forty lakh rupees in any previous year; or

    (b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year; or

    (c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under S. 44D or S. 44AE or S. 44AF, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year, get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed:

    Provided that this section shall not apply to the person, who derives income of the nature referred to in S. 44B or S. 44BB or S. 44BBA or S. 44BBB, on and from the 1st April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later:

    Provided further that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report (by an accountant) in the form prescribed under this section.

    Explanation : For the purposes of this section,

    (i) 'accountant' shall have the same meaning as in the Explanation below sub-s. (2) of S. 288.

    (ii) 'specified date', in relation to the accounts of the previous year relevant to an assessment year means--

    (a) where the assessee is a company, the 30th day of November of the assessment year,--

    (b) in any other case, the 31st day of October of the assessment year.

    Sec. 271B. Failure to get accounts audited--If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnished a report of such audit as required under S. 44AB, the AO may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred thousand rupees, whichever is less.

    Sec. 273B. Penalty not to be imposed in certain cases--Notwithstanding anything contained in the provisions of cl. (b) of sub-s. (1) of S. 271, S. 271A, S. 271B, S. 271BB, S. 271C, S. 271D, S. 271E, S. 271F, cl. (c) or cl. (d) of sub-s. (1) or sub-s. (2) of S. 272A, sub-s. (1) of S. 272AA or sub-s. (1) of S. 272BB or cl. (b) of sub-s. (1) or cl. (b) or cl. (c) of sub-s. (2) of S. 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure."

    19. A conjoint reading of S. 44AB and S. 271B, mandates that any person carrying on business having total sales, turnover or gross receipts, as the case may be, exceed or exceeds Rs. 40 lacs in any previous year, then not only the account books are required to be audited from a chartered accountant but has to be furnished in the prescribed form duly signed and verified by such accountant along with other particulars. It may be noticed that upto 30th June, 1995, the requirement was only to obtain an audit report on or before the due date but by the Finance Act, 1995, w.e.f. 1st July, 1995, it was mandated that the audit report is required to be furnished on or before the due date of furnishing of the return of income. A perusal of S. 271B, noticed herein above, it also mandates that if the report of such audit, as required under S. 44AB, has not been filed on or before the due date, the AO could levy penalty Under S. 271B of the Act. However, S. 273B prescribes that in case there is reasonable cause for the said failure, penalty need not be imposed and S. 271B forms part of S. 273B.

    20. It would be appropriate to deal with the submission of the counsel that the AO at Bharatpur on account of change of jurisdiction did not accept the return of income or the audit report when presented immediately after completion of the audit of accounts as well as return of income but what was contended, no tangible evidence or material either in the shape of an affidavit or otherwise of the person who claimed that he had presented the return of income along with audit report before the AO at Bharatpur was placed or refusal by the officer at Bharatpur. In our view, mere justification as alleged without any supporting evidence, is no explanation and the Tribunal had rightly rejected the same.

    21. Though It may not be relevant but from the narration of facts, it can be inferred that the audit report, which has been annexed by counsel for the assessee, on an earlier query raised by this Court by way of an additional affidavit in the case of Shish Ram Raja Ram & Party (DB IT Appeal No. 15 of 2007) and on perusal of the audit report, it can be noticed that in the trading account, which is part of the audited accounts, the total sale has been declared at Rs. 4,85,35,759 and even if we consider other receipts i.e., rebate from distillery Rs. 3,09,028 and rebate from WS Rs. 30,07,429, then the total of all the three receipts (sale) is to the extent of Rs. 5,18,52,216 whereas the AO at least at two places in the penalty order states that the turnover as shown by the assessee is, to the tune of Rs. 7,58,62,563. Thus, though as stated herein above, we need not comment upon but at least can be inferred that the turnover as per audit report and the turnover as noticed by the AO in the penalty order is not supported with cogent material on record. This discrepancy, when noticed, was expressed to the counsel for the assessee on the earlier date of hearing and specifically observed in the order-sheet of 13th Feb., 2014 but even after lapse of about 8 months on the date of final hearing, counsel for the assessee was unable to clarify the correct figures or the discrepancy noticed. However, ultimately insofar as imposition of penalty is concerned, the Act provides that it is minimum to the extent of Rs. 1 lac which ultimately has been imposed by the AO and sustained by the Tribunal.

    22. We may also observe that though the assessee has tried to challenge that there was no information about transfer of cases from Bharatpur to Jaipur and S. 127 provides that notice is required to be served to the assessee but it can safely be observed that the assessee neither challenged the transfer of cases from Bharatpur to Jaipur office nor raised issue of jurisdiction at the time of transfer of cases rather the assessee submitted to the jurisdiction of the Dy. CIT, Central Circle-2, Jaipur and not only filed the return of Income but the audit report also, though belatedly and appeared regularly before the Dy. CIT, Central Circle-2, Jaipur in the regular assessment proceedings and submitted to its jurisdiction without even uttering a word assailing the same before any authority.

    23. In the case of Rajasthan Co-operative Dairy Federation Ltd. v. Dy. CIT (supra), the fact can be noticed that the power to appoint auditor was with the Registrar, Co-operative Societies, under S. 68 of the Co-operative Societies Act, 1965 and unless the auditor is appointed by the Registrar, Co-operative Societies, it was not possible for the assessee to get its accounts audited and despite of repeated requests made by the assessee, the auditor was not appointed and therefore, this Court felt that, there was a reasonable cause.

    24. In the case of Rajasthan State Electricity Board v. ITAT (supra), it was the claim that the accounts of the said assessee were required to be got audited through the accountant general and the accountant general was the concerned person and the competent authority to audit the accounts and despite the books having been handed over to the office of the accountant general, the audit was not completed and therefore, that assessee was prevented in getting the accounts audited statutorily by the accountant general in time and thus this Court was of the opinion that its cause was a reasonable cause.

    25. The Kerala High Court in the case of K. Ravindranathan Nair v. Dy. CIT & Anr.: (2009) 319 ITR 108 (Ker) has held that if there is an acceptable explanation, then penalty could have been avoided whereas in the absence of any evidence adduced by the appellant at least before the Tribunal, the minimum penalty imposed under S. 271B for admitted delay for filing audit report was upheld.

    26. Resultantly, in view of what we have observed herein in our view, the Tribunal has rightly sustained the penalty under S. 271B of the Act. Questions are answered in favour of the Revenue and against the assessee. Consequently, all the three appeals, being devoid of any merits, are hereby dismissed. No costs.

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    Shis Ram Raja Ram And Party And Ors. v. Chief Commissioner Of Income Tax And Ors.
    (Nov 12, 2014)