Penalty for delay in filing Audit Report due to Dispute with Auditor is invalid: ITAT

M/s. Care Concern Hospital Pvt. Ltd Vs. ACIT (ITAT Kolkata)

AO imposed the penalty u/s. 271B of the Act for not submitting the audited accounts of the assessee by an accountant before the specified date required as per sub-section (a), (b) & ( c) of section 44AB of the Act by 3009-2009. We find that the AO imposed penalty of Rs. 42,887/- i.e. ¹/₂% of gross receipts of Rs. 85,77,353/- found during the survey for the A.Y under consideration.

The AO opined in his order that the sub-section (a),(b) & (c) of section 44AB of the Act is that every person carrying on business with total sales, turnover or gross receipts exceeding Rs. 40 lakhs, needs to be accounts audited and furnished the same before the specified date. On perusal of the paper book pages 1-13, we find that earlier the auditor, M/s. P. Ghosh & Associates resigned from the Office of statutory auditor of assessee on 09-12-2010.

Thereafter, the assessee appointed a new auditor, M/s. B.S. Murthy & Associates on 22-12-2010. From pages 5,7, 10,11 & 12, clearly shows that the assessee had disputes with earlier auditor, M/s. P.Ghosh & Associates and lodged a complaint to Institute of Chartered Accountants of India. Thereafter, the assessee withdrew the same. It establishes that due to such disputes with earlier auditor, there was delay in auditing the books of account required u/s. 44AB of the Act for the A.Y under consideration. On perusal of statement of date of audit/tax audit as filed by the assessee before us, we find that the assessee started its business from the F.Y 2007-08 relevant to A.Y 2008-09 and the audit was completed on 02-09-2008 i.e within time.

We note that for the A.Y under consideration the assessee required to file the tax audit report by 30-09-2009. However, due to such disputes and delay, the same was filed by the assessee on 15-03-2011 by a new auditor, M/s. B.S. Murthy & Associates, who was appointed on 20-12-2010. Therefore, it clearly shows that due to disputes between the assessee with its earlier auditor and resignation thereof, the same (audited accounts) was filed before the AO belatedly.

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