Karalan Arul Kumar Vs ITO (ITAT Chennai)
Chennai ITAT: Delay in Filing Tax Audit Report Is a Mere Technical Breach; Penalty under Section 271B Deleted
The Chennai Bench of the ITAT, in Karalan Arul Kumar v. ITO (AYs 2017-18, 2018-19, 2021-22 & 2023-24), held that where the tax audit report is furnished before completion of the assessment and is duly considered by the Assessing Officer, the delayed filing constitutes only a technical or venial breach, and therefore penalty under section 271B is not leviable.
For AY 2017-18, the assessee had filed the tax audit report along with the belated return under section 139(4) on 05.02.2018. Although the report was not furnished within the due date prescribed under section 44AB, it was available with the Assessing Officer when the return was processed under section 143(1) and the returned income was accepted. Nevertheless, the Assessing Officer levied a penalty of ₹1.50 lakh under section 271B for delayed furnishing of the audit report, which was upheld by the CIT(A).
The Tribunal observed that the audit report had been available before the Assessing Officer during the assessment proceedings, and the assessment had been completed after taking note of the same. Consequently, the delay did not prejudice the Revenue or impair the assessment process and amounted only to a technical or venial default.
Relying on the judgment of the Madras High Court in P. Senthil Kumar v. PCIT (416 ITR 336) and its earlier decisions in Kalaiarasan Selvaraj v. ITO and Balaji Logistics v. ACIT, the Tribunal held that where the audit report is on record before completion of assessment, penalty under section 271B cannot be sustained merely because it was not furnished within the prescribed due date. Accordingly, the penalty for AY 2017-18 was deleted.
Since the facts for AYs 2018-19, 2021-22 and 2023-24 were identical, the Tribunal applied the same reasoning mutatis mutandis and deleted the penalties levied under section 271B for those years as well. All four appeals were allowed.
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