Case Law Details
Kalaiarasan Selvaraj Vs ITO (ITAT Chennai)
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals)/NFAC dated 10.11.2025 for AY 2020-21, confirming the penalty levied under Section 271B of the Income Tax Act, 1961 for non-filing of the Tax Audit Report (TAR) under Section 44AB.
The assessee, an individual, filed the return of income on 12.09.2024 in response to a notice issued under Section 148. The return was accompanied by the Tax Audit Report and declared total income of ₹5,59,460. The Assessing Officer accepted the returned income by an assessment order dated 27.12.2024 passed under Sections 147 read with 144B. Thereafter, the Assessing Officer initiated penalty proceedings under Section 271B on the ground of belated filing of the Tax Audit Report.
In response to the penalty notice, the assessee submitted that the Tax Audit Report had been filed along with the return of income on 12.09.2024, well before completion of the assessment on 27.12.2024, and therefore the delay should not attract penalty. The Assessing Officer rejected the explanation and levied a penalty of ₹1.50 lakh under Section 271B. The Commissioner (Appeals) upheld the penalty.
The Tribunal noted that the Tax Audit Report had been filed before completion of the reassessment and was available to the Assessing Officer when the assessment order was passed. It held that the failure to file the report within the prescribed due date constituted only a technical breach.
The Tribunal also took judicial notice of the Supreme Court’s order in Re: Cognizance for Extension of Limitation reported in [2022] 441 ITR 722 (SC), observing that the due date for filing the Tax Audit Report under Section 44AB fell during the Covid-19 period, which had been excluded from computation of limitation from 15.03.2020 to 28.02.2022 under the Supreme Court’s order.
Referring to Section 273B, the Tribunal held that the facts established reasonable cause for non-levy of penalty. It found that the delay in filing the Tax Audit Report was attributable to problems created by Covid-19 and not to any deliberate omission by the assessee. The Tribunal further observed that since the Assessing Officer had accepted the returned income after considering the Tax Audit Report, the report was available during the assessment proceedings.
Relying on the decision of the Madras High Court in P. Senthil Kumar v. CIT reported in (2019) 416 ITR 336 (Mad.)(HC), the Tribunal concluded that the case was not fit for imposition of penalty under Section 271B.
Accordingly, the Tribunal cancelled the penalty imposed by the lower authorities and allowed the assessee’s appeal.
Cases Discussed
- Re: Cognizance for Extension of Limitation (SC), [2022] 441 ITR 722 (SC)
- P. Senthil Kumar v. CIT (Madras HC), (2019) 416 ITR 336 (Mad.)(HC)
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)‘), Delhi, dated 10.11.2025 for the Assessment Year (hereinafter referred to as ‘AY‘) 2020-21.
2. The main grievance of the assessee is against action of the Ld.CIT(A) confirming the penalty levied by the AO u/s.271B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) for non-filing of Tax jAudit Report (TAR) u/s.44AB of the Act.
3. The brief facts are that the assessee is an individual, who filed his return of income (RoI) on 12.09.2024, pursuant to the notice issued by the AO u/s.148 of the Act for AY 2020-21. And the assessee is noted to have filed RoI along with TAR admitting total income at ₹5,59,460/-. The AO is noted to have accepted the return filed by the assessee by assessment order dated 27.12.2024 passed u/s.147 r.w.s.144B of the Act. Thereafter the AO initiated penalty u/s.271B of the Act for belated filing of TAR. Pursuant to the notice issued for levy of penalty, the assessee, inter alia, pleaded that TAR has been filed along with RoI on 12.09.2024 i.e. well before the assessment order was framed on 27.12.2024. Hence, pleaded that belated filing of TAR should not attract penalty. However, the AO levied penalty u/s.271B of the Act and saddled him with penalty of ₹1.50 lakhs. On appeal, the Ld.CIT(A) has confirmed the same.
4. Aggrieved, the assessee is in appeal before this Tribunal.
5. We have heard both the parties and perused the material available on record. We find that the assessee had belatedly filed the RoI along with TAR for AY 2020-21 on 12.09.2024. Pursuant to notice u/s.148 of the Act, the AO is noted to have passed the Assessment Order on 27.12.2024 u/s.147 r.w.s.144B of the Act for AY 2020-21, which means the TAR was filed well before the assessment was framed by the AO. Thus, we find that non-filing of TAR within the due date was technical breach; and also take judicial notice of the fact that the due-date of filing of return and the TAR as per Section 44AB of the Act, falls during Covid-19 period, which period was excluded suo-motto by the Hon’ble Supreme Court exercising powers under Article 142 of the Constitution of India in the case of Re: Cognizance for Extension of Limitation reported in [2022] 441 ITR 722 (SC) from 15.03.2020 to 28.02.2022, for the purpose of computing limitation under all general and special laws which includes Income Tax Act, 1961. It is undisputed that the due-date for filing of TAR falls in the period of exclusion (supra). Thus, we note that in this case, there is reasonable cause for non-levy of penalty as per Section 273B of the Act, which empowers authorities discretion not to levy penalty. Further, non-filing of TAR before the due-date is a technical breach, which delay can’t be attributed to any deliberate omission on the part of the assessee. Hence, the assessee filing TAR only on 12.09.2024 along with the return pursuant to the notice u/s.148 of the Act, and the AO duly accepting the returned income by passing the assessment order on 27.12.2024, reveals that TAR was available with the AO when he framed the assessment order. In such a scenario, the explanation of the assessee that the TAR was belatedly filed due to problems created by Covid-19 and not due to deliberate omission on the part of the assessee which on the facts of the case as explained by the assessee is found to be reasonable; and therefore, we are of the considered opinion that this is not a fit cases for imposing penalty on the assessee and for such preposition, we rely on the decision of the Hon’ble Madras High Court in the case of P. Senthil Kumar v. CIT reported in (2019) 416 ITR 336 (Mad.)(HC). Hence, we cancel the penalty imposed by the authorities below.
6. In the result, appeal filed by the assessee is allowed.
Order pronounced on the 04th day of February, 2026, in Chennai.
Author Bio
