Prabha Engineers P Ltd. v. DCIT–Cir.8 (2), Mumbai
[Citation -2016-LL-1019-76]

Citation 2016-LL-1019-76
Appellant Name Prabha Engineers P Ltd.
Respondent Name DCIT–Cir.8 (2), Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 19/10/2016
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags non-filing of audit report • scheme of amalgamation • tax audit report • audited accounts • total turnover
Bot Summary: During the course of the assessment proceedings, the Assessing Officer noted that assessee has filed Tax Audit Report in Form 3CA and 3CD was obtained on 28.03.2011 was furnished to the Assessing Officer on 30.03.2011. Since the Audit report was filed beyond the stipulated time, accordingly, the Assessing Officer initiated the penalty proceedings under section 271B. In response to the show cause notice the assessee gave the following reasons for non-filing of Audit Report in time:-Assessee has filed return of income for Asst. We havealso to point out that the assessee company was never late insubmitting Audit Report and filing of return of Income in thepast. The assessee has not specified the how the order of Bombay High Court sanctioning the scheme of amalgamation has caused delay in obtaining the Audit report. 1 the case of APL Private Limited relied upon by the appellant wherein one of the reasons for delay in submitting the audit report was that the personnel from the statutory auditor's office were not conversant with the accounting systems and records maintained by the assessee company which resulted into delay for finalization of tie audited accounts for the year. The Hon'ble Mumbai Tribunal held that without completing statutory audit, the assessee could not have obtained tax audit report, which constitutes reasonable cause. The Hon ble Punjab Haryana High Court in the case of CIT vs. Punjab State Leather Development Corporation Ltd. has held that delay in completion of statutory audit was reasonable cause for non-compliance with section 44AB and it was held that the Tribunal was right in cancelling penalty levied under section 271B. I find that the appellant case is distinguishable on facts and the appellant was not prevented by sufficient cause to file the audit report.


IN INCOME TAX APPELLATE TRIBUNALMUMBAI BENCHC , MUMBAI , ,BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBERITA No. : 6929/Mum/2014 (Assessment year: 2010-11)Vs DCIT Cir.8 (2), Prabha Engineers P Ltd,Aayakar Bhavan, Plot No.38,Mumbai -400 020 MIDC Central Road, Andheri (East), Mumbai -400 093 PAN:AAACP 7472 Q(Appellant)(Respondent)Appellant by Shri Bhupendra ShahRespondent byShri R K Sahu/Date of Hearing: 19-10-2016/Date of Pronouncement : 19-10-2016ORDER,PER AMIT SHUKLA, J.M.:The aforesaid appeal has been filed by assesseeagainst impugnedorder dated 21.08.2014, passed byLd. CIT(Appeals)-17, Mumbai in relation to penaltyproceedings under section 271B for AY 2010-11. 2 Prabha Engineers P Ltd ITA No. : 6929/Mum/2014 2. brief facts of case are that, assessee has filed its return of income for AY 2010-11 on 30.03.2011 declaringNilincome after claiming brought forward losses of Rs.7.96 crores. As against said return of income, assessment under section 143(3) was completed vide order dated 06.12.2012 on book profit of Rs.57,92,128/-. Under normal provisions, income was assessed atNil . During course of assessment proceedings, Assessing Officer noted that assessee has filed Tax Audit Report in Form 3CA and 3CD was obtained on 28.03.2011 was furnished to Assessing Officer on 30.03.2011. Since Audit report was filed beyond stipulated time, accordingly, Assessing Officer initiated penalty proceedings under section 271B. In response to show cause notice assessee gave following reasons for non-filing of Audit Report in time:-Assessee has filed return of income for Asst. Year 2010-11on 30.03.2011, after giving effect to order of Bombay HighCourt sanctioning scheme of Amalgamation of PrabhuExports Pet. Ltd. with assessee. Audit Report undersection 44AB was signed on 28th March 2011. Though thesaid Audit Report was kept in September, 2010 but could notbe signed by Auditors in view of delay in court judgment.The order of Bombay high Court sanctioning scheme ofAmalgamation of Prabhu Exports Pet. Ltd. with PrabhuEngineering Pvt. Ltd is received by assessee on25/01/2011. copy of order from High Court wasreceived by assessee on 25/01/2011.As order of Bombay High Court sanctioning theamalgamation w.e.f. 01.04.2009 was received by theassessee very late i.e. on 25/01/2011 after due dateprescribed in Income Tax Act. Accordingly, AUDIT Reportwas obtained after said order. Audit Report of theamalgamated accounts could not have been obtained beforethe Order of High Court sanctioning Amalgamation.Because of this impossibility, Audit Report of theamalgamated company could not be obtained before duedate. It is well settled law and in many cases by Supreme3 Prabha Engineers P Ltd ITA No. : 6929/Mum/2014Court has held law does not contemplate or require theperformance of impossible act lex non cogit adimpossibillia. Accordingly, Audit Report of Amalgamatedcompany, could not be obtained before due date. We havealso to point out that assessee company was never late insubmitting Audit Report and filing of return of Income in thepast . However, Assessing Officer rejected assessee s contention. He observed that, in case of Prabha Export Pvt. Ltd, which stood amalgamated with assessee as per scheme of amalgamation, had filed its return of income on 15.10.2010 and had also obtained Audit Report by that time, whereas in case of assessee return has been filed on 30.03.2011 and Audit Report has been obtained on 28th March, 2011, therefore this cannot be treated as reasonable explanation. assessee has not specified how order of Bombay High Court sanctioning scheme of amalgamation has caused delay in obtaining Audit report. Further total turnover disclosed by assessee has not been affected as result scheme of amalgamation. Accordingly, he levied penalty of Rs. 1 lakh. Ld. CIT(A) too after detailed discussion has endorsed view taken by Assessing Officer and further observed as under:- I am not in agreement with observation of Ld. AR of appellant sating that appellant was not required to furnish any Audit report with Return of Income filed electronically. Further, there is no merit in argument of appellant that it was not possible to obtain Audited Accounts, Tax Audit Report as order of Bombay High Court sanctioning amalgamationwas not received. As order itself was received late after 30.09.2010, appellant has obtained tax audit report of4 Prabha Engineers P Ltd ITA No. : 6929/Mum/2014 amalgamated accounts after 25.01.2011, date of receipt of order of Bombay High Court sanctioning amalgamation Scheme. This is quite amazing as how come appellant know that order is likely to be received so soon so as to postpone audit for year under consideration and if not received will it wait till next year more to get his account audit. If appellant could not have filed Final accounts of amalgamated company before order of High Court sanctioning amalgamation but what prevented it to file audit report of company before amalgamation. 1 case of APL (India) Private Limited (supra) relied upon by appellant wherein one of reasons for delay in submitting audit report was that personnel from statutory auditor's office were not conversant with accounting systems and records maintained by assessee company which resulted into delay for finalization of tie audited accounts for year. Hon'ble Mumbai Tribunal held that without completing statutory audit, assessee could not have obtained tax audit report, which constitutes reasonable cause. This plea was raised by assessee even before AO and AO has not doubted such contention of assessee. Hon ble Punjab & Haryana High Court in case of CIT vs. Punjab State Leather Development Corporation Ltd. (171 CTR 451) has held that delay in completion of statutory audit was reasonable cause for non-compliance with section 44AB and it was held that Tribunal was right in cancelling penalty levied under section 271B. I find that appellant case is distinguishable on facts and appellant was not prevented by sufficient cause to file audit report. Thus penalty under circumstances is exigible in appellant case and same is being upheld. This ground of appeal is thus dismissed. 5 Prabha Engineers P LtdITA No. : 6929/Mum/2014 3. After hearing both parties and on perusal of impugned orders, we find that main reason for obtaining audit report on 28th March, 2011 and filing it along with return of income on 31.03.2011 was that, order of Bombay High Court sanctioning scheme of amalgamation of Prabha Export Pvt. Ltd with assessee was received by assessee only on 25.01.2011. said amalgamation was effective from 1st April, 2009. assessee had to take cognizance of such amalgamation, assets and liabilities etc. It may not be necessary that there would be impact on turnover as held by AO, but before finalizing accounts Auditors have to incorporate all financial aspects of merger and its impact in balance sheet and accounts and that is why there was delay in filing of return of income also. It is because of this impossibility Audit report of amalgamated company could not be obtained before due date. Otherwise, it is admitted fact that, audit report was there before Assessing Officer during course of assessment proceedings. In such event and circumstances, assessee s do fall within domain ofreasonable causeas envisaged under section 273B, which provides that, no penalty shall be imposable for any failure, if person proves that, there was reasonable cause for said failure. Bombay High Court order sanctioning scheme of amalgamation would definitely have had impact on annual accountsof assessee andwithout taking cognizance of such scheme of amalgamation, assessee could not have finalized its account and certified by Auditors. Thus, we hold that, there was reasonable cause in obtaining and filing Audit report belatedly. Accordingly,6 Prabha Engineers P Ltd ITA No. : 6929/Mum/2014we delete penalty of Rs.1 lakh on ground ofreasonable causewithin scope of section 273B.4.In result, appeal of assessee is allowed.Order pronounced in open court on 19th October, 2016.Sd/- Sd/- ()() (RAJESH KUMAR) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 19th October, 2016./Copy to:-1) /The Appellant.2) /The Respondent.3) CIT (Appeal)17, Mumbai.4) CIT-8, Mumbai5) , ,/ D.R.CBench, Mumbai.6)\ Copy to Guard File. /By Order/ / True Copy / // , Dy./Asstt. RegistrarI.T.A.T., Mumbai *. . *Chavan, Sr.PS Prabha Engineers P Ltd. v. DCIT–Cir.8 (2), Mumbai
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