T.J. Mathai and Company Vs ITO (ITAT Cochin)
The Income Tax Appellate Tribunal (ITAT), Cochin Bench, allowed an appeal filed by T.J. Mathai and Company, setting aside the order of the National Faceless Appeal Centre (NFAC) and deleting a penalty of Rs. 1.5 lakh imposed by the Assessing Officer (AO) under Section 271B of the Income Tax Act, 1961. The penalty was levied for the assessee’s failure to file the tax audit report within the stipulated time for the Assessment Year (AY) 2014-15. The appellant, a partnership firm involved in road repair works for the Corporation of Cochin, had not filed its income tax return within the original deadline under Section 139(1). Subsequently, a notice under Section 148 was issued, and the return was filed on April 13, 2021, declaring a total income of Rs. 37,41,790. The assessment was completed without any additions, but the penalty under Section 271B was imposed for the delayed submission of the audit report. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision.
Before the ITAT, the primary contention was the justification for the delay in obtaining the tax audit. The assessee had submitted before the CIT(A) that the delay was attributable to the death of the firm’s managing partner, who was 84 years old. However, the CIT(A) did not accept this explanation, noting that the death occurred a year prior and did not explain the subsequent timely filing in other years. The ITAT, however, took a different view. It observed that the assessment for the relevant year was completed without any income additions, indicating no prejudice to the revenue due to the delayed audit report. Furthermore, the ITAT relied on a precedent set by the Hon’ble Kerala High Court in the case of Chavakkad Service Co-op. Bank Ltd., which had deleted a similar penalty under comparable circumstances. Respectfully following the jurisdictional High Court’s decision, the ITAT concluded that the demise of the managing partner constituted a reasonable cause for the delay and consequently deleted the penalty of Rs. 1.5 lakh. The appeal of the assessee was thus allowed.
