CASE NAME- CHAVAKKAD SERVICE CO-OPERATIVE BANK LTD vs INCOME TAX OFFICERS
CASE NUMBER- ITA NO 9 OF 2023
DATE- 22ND NOVEMBER 2024
QUORUM- HON’BLE JUSTICE DR. A.K. JAYASANKARAN NAMBIAR JUDGE, HON’BLE JUSTICE K.V. JAYAKUMAR
FACTS OF THE CASE
The appellant/ assesses are a co-operative society regulated by the provisions of the Kerala Co-operative Societies Act and Rules, had filed for the returns for income under section 44AB of the Income Tax Act, but they had failed to file the completed audited report along with the prescribed documents within the speculated time, hence were directed to pay a penalty payable under section 271B of the IT act for violating the procedures under the said section. The appellants reasoned out the reason for delay was the due negligence of the statutory auditors however, explanation on late filing was rejected and were directed to pay the fine of Rs. 1.5 Lakhs which was lesser of the two amounts mentioned in section 271B of the IT Act. The said order was upheld by the First Appellate Authority and thereafter by the Appellate Tribunal in the further appeals.
ISSUES OF THE CASE
- Whether on the facts and circumstances of the case the imposition of penalty is justified or not?
- Whether in the facts and circumstances of the case and in view of the decision in Mavilayi Society’s case, that the primary agricultural credit societies are entitled for exemption under Section 80P of the Act, and independent of an assessment of tax imposition of penalty is justified or not?
- Whether on the facts and circumstances of the case the assessee explanation for not furnishing the audit report ought to have been accepted and the penalty imposed is one liable to be interfered with?
- Whether in the facts and circumstances of the case the Tribunal justified in holding that the imposition of penalty on the assesses is justified?
LEGAL PROVISIONS
- Section 44AB of the IT Act- prescribes tax audit to ensure compliance with tax regulations and transparency specifically regarding to businesses having turnovers of Rs. 1Cr and to professionals with receipts surpassing RS. 50 Lakhs a year and non-compliance shall result in fine of Rs. 1.5 Lakhs or 0.5% of the sale receipts. (phrase used being “Shall”)
- Section 271B of the I.T. Act – the penalty may be waived off if the assessee reasons for the delay in filing the audits within the prescribed time limit. (Phrase used being “May”)
- Section 63 of the Kerala Co-operative Societies Act, 1969- The respective state government is the authority responsible for appointing the auditors for the fulfilment of tax audit returns and to ensure the laws and regulations for this very purpose and to maintain transparency and accountability.
- 64B of the Kerala Co-operative Societies Rules- Lays down the powers and responsibilities of the state appointed auditors, director of Co-operative society and procedures for Auditing.
ARGUMENTS
ARGUMENTS BY THE APPELLANT
The appellants argued that the delay was caused by the auditors appointed through the state and appealed on the same cause.
ARGUMEMTS BY THE RESPONDENT
The respondents argued that the Co-operative societies had no control over the completion of the audit by the statutory auditors.
ANALYSIS
The Court, while considering the provisions under Section 44B, observed that the assesses had submitted the audit report prior to the completion of the assessment. It was further noted that there was no prejudice caused to the Department during the completion of the assessment against the appellants/assesses. It also observed that the assesses had no fault in filing the final report within the stipulated time. Moreover, the Kerala Co-operative Societies Act and Rules provide for an extension of six months from the expiry of the financial year, allowing auditors additional time to file the audit report.
CONCLUSION
The Kerala High Court held that the penalty upon alate filing of audits are dismissible provided that the audits having accountable report has been filed within the expiry of the financial year, and the according to the Kerala Co-operative Societies Act, an extension of ^ months shall be provided if there has been delay or negligence on behalf of the statutory assesses. In the concerned case, the penalty of Rs. 1 Lakh imposed on the appellants have been waivered off and the appeals stand accepted.
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WRITTEN BY SALIL GAURAV
