Interesting judgement : Delay in filing of tax audit report due to Virus in computer system – Whether penalty can de dropped ?

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Interesting judgement : Delay in filing of tax audit report due to Virus in computer system – Whether penalty can de dropped ?

Short Overviiew Where delay in getting the accounts audited occurred due to damage caused to computer system due to virus infection, the same would be considered as a reasonable cause for the delay within the meaning of section 273B and therefore, penalty imposed under section 271B was liable to be deleted.

Delay occurred on the part of assessee in getting its accounts audited. Accordingly, Revenue levied penalty under section 271B for failure to comply with the provisions of section 44AB subject to the provisions of section 273B. Assessee submitted that the said delay occurred as data got erased due to virus infection in computer system.

it is held that since delay in getting the accounts audited occurred due to damage caused to computer system due to virus infection, the same would be considered as a reasonable cause for the delay within the meaning of section 273B. Further, assessee only committed technical venial breach, which did not create any loss to the exchequer, as the audit report was available to the AO before the completion of the assessment proceedings. Therefore, penalty imposed under section 271B was deleted.

Decision: In assessee’s favour.

Relied: CIT v. A. N. Arunachalam (1994) 208 ITR 481 (Mad): 1994 TaxPub (DT) 0973 (Mad-HC).

Referred: CIT (Asst.) v. Amar Chand Raj Kumar (2004) 89 ITD 96 (Chandigarh): 2004 TaxPub (DT) 0007 (Chd-Trib), CIT v. Malayalam Plantations Ltd. (1976) 103 ITR 835 (Ker): 1976 TaxPub (DT) 0635 (Ker-HC), Prem Prakash Senapati v. ITO (I.T.A. Nos. 459 and 185/CTK/2017, dt. 17-4-2018).

IN THE ITAT, COCHIN BENCH

CHANDRA POOJARI, A.M. & GEORGE GEORGE K., J.M.

Johns Biwheelers v. Asstt. CIT

I.T.A. No. 411/Cochin/2018

A.Y. 2013-14

5 February, 2019

Assessee by: R. Sreenivoson, Chartered Accountant

Department by: A S. Bindhu, Senior Departmental Representative

ORDER

Chandra Poojari, A.M.

This appeal filed by the assessee is directed against the order of the Commissioner (Appeals), Kottayam dated 6-8-2018 and pertains to the assessment year 2013-14.

2. The only issue in this appeal is with regard to levy of penalty under section 271B of the Act.

3. The facts of the case are that the gross receipts from business of the assessee for the relevant assessment year was Rs. 74,59,70,875 and there­fore, was liable to get its accounts audited as per the provisions of section 44AB of the Act on or before the due date of filing of return of income, i.e., 30-9-2013. However, the assessee got its accounts audited only on 28-3-2014. Therefore, there was delay in getting the accounts audited and penalty under section 271B was levied for failure to comply with the provisions of section 44AB of the Act subject to the provisions of section 273B of the Act, i.e., reasonable cause for the delay. Hence, the assessing officer levied penalty of Rs. 1,50,000 under section 271B of the Act.

4. On appeal, the Commissioner (Appeals) confirmed the levy of penalty under section 271B of the Act.

5. Against this, the assessee is in appeal before us. The learned Authorised Representative submitted that due to virus infection in the computer system, the data got erased and no back up date was maintained. The learned Authorised Representative relied on following decisions wherein it was held that filing of report is only directory and not mandatory :–

(a) CIT v. Malayalam Plantations Ltd. (1976) 103 ITR 835 (Ker) : 1976 TaxPub(DT) 0635 (Ker-HC)

(b) Asst CIT v. Amur Chand Raj Kumar (2004) 89 ITD 96 (Chandi­garh) : 2004 TaxPub(DT) 0007 (Chd-Trib)

(c) Prem Prakash Senapati v, ITO (I.T.A. Nos. 459 and 185/CTK/ 2017–ITAT-Cuttack).

It was also submitted that there was a reasonable cause for the delay within the meaning of section 273B of the Act.

6. The learned Departmental Representative relied on the order of the Commissioner (Appeals).

7. We have heard the rival submissions and perused the record. In this case, the assessee was required to get his books of account audited and filed along with the return of income under section 44AB within the due date of 30-9-2013 for the assessment year 2013-14. However, the audit report was furnished only on 28-3-2014. The contention of the learned Authorised Representative was that the delay in filing the return of income was due to damage to computer system due to virus infection which is a reasonable cause as prescribed under section 273B of the Income Tax Act. The learned Authorised Representative relied on the following judgments in support of his contentions :–

(a) CIT v. Maloyalam Plantations Ltd. (1976) 103 ITR 835 (Ker) : 1976 TaxPub(DT) 0635 (Ker-HC)

(b) Asst. CIT v, Amur Chand Raj Kumar (2004) 89 ITD 96 (Chandi­garh) : 2004 TaxPub(DT) 0007 (Chd-Trib)

(c) Prem Prakash Senapati v. ITO (L T. A. Nos. 459 and 185/CTK/ 2017, dt. 17-4-2018–ITAT-Cuttack).

7.1 From the material available on record, we are of the view that the assessee got his books of account audited on 28-3-2014 which was made available to the assessing officer and no prejudice has been caused to the Revenue. Now the short question that arises is whether in this scenario, penalty under section 271B of the Act can be levied or not. In our considered opinion, the assessee had only committed technical venial breach which does not create any loss to the exchequer as the audit report was available to the assessing officer before the completion of the assess­ment proceedings. The Madras High Court in the case of CIT v. A. N. Arunachalam (1994) 208 ITR 481 (Mad) : 1994 TaxPub(DT) 0973 (Mad-HC) in the context of filing of audit report for claiming deduction under section 80J of the Act, observed that once audit report has been made available before the learned assessing officer before the completion of assessment proceedings, the assessee should be granted deduction under section 80J of the Act. We observe that this judgment was rendered in the context of adjudication of quantum of deduction claimed by the assessee. Hence, the said analogy can very well be drawn and used in the penalty proceedings like that of the assessee. To sum up, we hold that the assessee had committed only technical venial breach for which he cannot be penalized. In view of the above, we are inclined to delete the penalty made by the assessee under section 271B of the Act.

8. In the result, the appeal of the assessee is allowed.

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