1. We find it convenient to dispose of these two appeals of the assessee for the asst. yrs. 1999-2000 and 2000-01 by this consolidated order. The common issue involved in these appeals is relating to penalty under Section 271B.3. The relevant facts, briefly stated, are that the turnover of the assessee exceeded Rs. 40 lakhs per annum for the respective assessment year and accordingly, it was obligatory upon the assessee to file the audit report under Section 44AB of the IT Act, 1961, for asst. yr.
1999-2000 by 31st Oct., 1999 and for asst. yr. 2000-01 by 31st Oct..
2000. The assessee filed the return of income for the aforementioned assessment years on 31st March, 2001 alongwith audit report. The AO had accordingly initiated penalty proceedings under Section 271B for both the assessment years. According to the AO, there was no response to the opportunity provided to the assessee by issue of notice, he accordingly held that the assessee had committed a default making himself liable to penalty of Rs. 37,540 for asst. yr. 1999-2000 and Rs. 53,600 for asst.
yr. 2000-01.
4. The assessee appealed to the CIT(A). It was claimed on behalf of the assessee that the audit reports were given to the clerk of local tax lawyer who forgot to tell the advocate for two years as a result of which there was a delay in filing of the audit report. It was also claimed that the assessee had changed the advocate as a result of this lapse and that the return of income had been filed by another advocate.
It was also pleaded before the CIT(A) that the AO had not issued any notice before imposition of penalty under Section 271B. The CIT(A) vide para 3.2 of the order held that opportunity of being heard was allowed by the AO before imposition of penalty. It was further held by the CIT(A) that the explanation of the assessee is stereo-type being taken in most of the cases to explain the delay that a professional forgot to file the relevant documents with the Department and that too continuously for two years. The CIT(A) held that no evidence was furnished before any authorities. The judgment of Madhya Pradesh High Court in the case of ITO v. Nanak Singh Guliani (2002) 257 ITR 677 (MP) has been distinguished by the CIT(A) on the ground that in that case reasonable cause has been established and in the present case, reasonable cause has not been established.
5. Being aggrieved, the assessee is in appeal before us. The learned counsel for the assessee reiterated the contention advanced before the CIT(A). It was contended that reasonable opportunity of being heard was not allowed by the AO insofar as no notices had been served upon the assessee before the imposition of penalty under Section 271B. It was further contended that the AO had initiated penalty proceedings under Section 271F simultaneously and in view of the explanation furnished by the assessee, the proceedings were dropped. According to the learned counsel, since the delay in filing of the return has been accepted to be covered by reasonable cause, the delay in furnishing of the audit report ought to have been considered on the same footing. The learned counsel also reiterated that the delay in filing the report was due to the default of the advocate for which the assessee cannot be penalised.
Reliance was placed on the decision of Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC) in support of the contention that the penalty should not be imposed for a mere technical default. At the time of hearing of the appeals, the learned counsel pleaded that the affidavit of the advocate in support of the mistake committed by his clerk would be filed shortly.
Accordingly, the assessee filed an application on 17th May, 2004, stating that the affidavit of the concerned advocate and that of the assessee are enclosed. On perusal of the application and enclosures, it is noted that whereas the affidavit of the assessee is duly signed and notarised, the affidavit of the advocate is neither signed nor notarised. There is thus, a clear attempt to mislead the Bench, which is not appreciated.
Keeping that aspect aside, we proceed to consider the appeals on merit on the basis of evidence on record.
6. In this case, the audit report was required to be filed on 31st Oct., 1999 for asst. yr. 1999-2000 and on 31st Oct., 2000 for asst. yr.
2000-01. The assessee is a contractor and as per the details available with us, the contract receipts for asst. yr. 1999-2000 were at Rs. 75,08,641 and for asst. yr. 2000-01, the contract receipts had gone upto Rs. 1,07,20,462. The assessee had filed the return declaring meager income of Rs. 60,000 for asst. yr. 1999-2000 and Rs. 60,220 for asst. yr. 2000-01. The returns were processed and substantial tax deducted at source of Rs. 1,66,452 and Hs. 2,31,305 for asst. yrs.
1999-2000 and 2000-01 respectively, was refunded to the assessee.
Interest of Rs. 14,828 and Rs. 20,845 under Section 244A was also awarded notwithstanding the fact that there was delay in filing of the return's. From the records, we also find that the assessee has taken contradictory stand and has not come up clean before the authorities.
The assessee has claimed that no notice was issued to the assessee before imposition of penalty. The CIT(A) has recorded a finding of fact to the contrary. We also find from the paper book at p. No. 4 that the assessee had received a notice for asst. yr. 1999-2000 which is dt.
25th Jan., 2002 for hearing on 6th Feb., 2002. The assessee claimed to have responded to this notice which was purportedly issued for the default as contemplated under Sections 271F and 271B. Reply has been placed at page No. 4 of the paper book. As per the rubber stamp affixed at p. 4, the date of receipt for the reply filed in response to the above notice is 11th March, 2002. It is, thus, evident that the assessee was given opportunity before imposition of penalty and that no reply had been filed by 6th Feb., 2002 as the reply filed on 11th March, 2002 is much after the date of hearing. The above facts not only prove that the assessee has attempted to mislead the Bench but also failed to establish the claim that the returns were handed over to the clerk of the advocate. In the reply placed at p. 4, the reason for delay in filing of the return for asst. yr. 1999-2000 is indicated as under : "That I had filed my IT return for the asst. yr. 1999-2000 on 31st March, 2001, declaring the income of Rs. 60,000 vide receipt No. 12615.
That Sir, I could not file the return within prescribed time, because, I remained very busy and tense in looking after my ailing mother for continuously about two years. Hence, requested to drop the proceedings under Section 271F and oblige." 7. The above reply establishes the fact that the notices issued by the AO during the course of penalty proceedings had been received by the assessee and that the claim of the assessee that no such notice(s) were received is contrary to the facts.
8. We now proceed to consider the claim Of reasonable cause. The claim before the AO in the written reply filed after the date of hearing was that the assessee was busy and tense in looking after his ailing mother. However, before the CIT(A), it was claimed that the audit report had been handed over to the clerk of the advocate who had failed to furnish the same to the IT Department. The mistake committed in one year is stated to have been repeated in the second year.
9. The assessee has not furnished any evidence to establish that the audit report had been handed over to the clerk of the advocate. In the letter filed before the Tribunal, the, assessee's counsel stated as under : "That as directed during the hearing of the abovementioned case, the affidavits of the concerned advocate and that of the appellant are enclosed herewith for the kind consideration of the Hon'ble Bench." 10. It has already been pointed that the purported affidavit of the advocate on the stamp paper is neither signed by the advocate nor authenticated by a Notary. Again, the assessee attempted to mislead the Bench by stating that the affidavit of the advocate is enclosed. As pointed out earlier, the learned counsel also attempted to mislead the Bench by claiming that the reply was filed to the penalty notice under Section 271F before the date of hearing. It is observed from the reply placed at p. 4 that the same was filed on 11th March, 2002, when the date of hearing was 6th Feb., 2002.
11. The claim of the counsel that proceedings under Section 271F for asst, yr. 1999-2000 having been dropped, penalty under Section 271B also deserves to be cancelled is bereft of substance as the reasons for not filing the return do not automatically constitute the reasons for not filing the audit report which had been obtained from a chartered accountant. It does not appeal to the common sense that after obtaining the report from chartered accountant, the assessee would have handed over the same to the clerk of the advocate for filing the same with the IT Department and the same mistake would have been continued in the succeeding year as well without verifying as to whether the audit report for the earlier year was filed by the clerk.
12. Taking the totality of the facts and circumstances of the case into consideration including the contradiction in the claim of the assessee coupled with lack of evidence in support of the claim, we are of the considered view that the assessee has failed to establish reasonable cause for failure to file audit report for the respective assessment years within the period specified under Section 44AB. The decisions relied upon on behalf of the assessee are distinguishable on facts insofar as no reasonable cause has been established in this case and, therefore, the penalty under Section 271B is attracted and has rightly been levied by the Revenue Authorities.
13. Finding no merit in the appeals of the assessee, we dismiss the same.