No Section 271B penalty if reasonable cause exist for delay in furnishing Tax Audit Report

Sanjeev Kumar Goyal Vs ITO (ITAT Delhi)

The appeal in the case of Sanjeev Kumar Goyal versus Income Tax Officer (ITO) before the Income Tax Appellate Tribunal (ITAT) Delhi centered around the imposition of a penalty under section 271B of the Income Tax Act, 1961, for Assessment Year 2013-14. Let’s delve into the details of the case to understand the context, arguments, and the tribunal’s decision.

Background:

• Sanjeev Kumar Goyal, an individual engaged in the business of trading and manufacturing timber products and firewoods, filed his income tax return for A.Y. 2013-14, declaring an income of Rs. 4,82,499/-. This income was later revised to Rs. 6,34,500/-.
• During the assessment proceedings, it was revealed that the audited Profit and Loss Account submitted with the revised return showed gross receipts of Rs. 17,89,07,251/-. However, the assessee failed to get his accounts audited as required under section 44AB of the Act.

Penalty Proceedings:

• The Assessing Officer (AO) initiated penalty proceedings under section 271B of the Act due to the non-furnishing of the Tax Audit Report within the stipulated time.
• The assessee requested the AO to keep the proceedings in abeyance until the disposal of his first appeal pending before the CIT(A), Muzaffarnagar.
• After the disposal of the quantum first appeal, the AO issued a show cause notice and subsequently imposed a penalty of Rs. 1,50,000/- on the assessee.

Appeal and Tribunal’s Decision:

• The assessee appealed against the penalty before the CIT(A), which was dismissed, leading to the appeal before the ITAT Delhi.
• Despite the summons for physical hearing, no one attended on behalf of the assessee, and the appeal proceeded with only the Senior Departmental Representative (DR) present.
• The ITAT considered the arguments and records, noting that the Tax Audit Report was filed along with the revised return, albeit after the stipulated time.
• The tribunal observed that the AO himself acknowledged the submission of the Audit Report with the revised return. It was not disputed that the original return was filed within the prescribed time under section 139(1) of the Act.
• The assessee provided explanations for the delay, citing personal and unavoidable circumstances such as the death of his elder brother, who managed the financial affairs, and his own critical medical condition.
• The tribunal found reasonable cause for the delay in furnishing the Tax Audit Report and held that the penalty under section 271B was not justified.
• Consequently, the ITAT Delhi allowed the appeal of the assessee, vacating the penalty.

FULL TEXT OF THE ORDER OF ITAT DELHI

The appeal filed by the assessee is directed against the order dated 26.09.2023 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)”] whereby he confirmed the penalty of Rs. 1,50,000/- imposed by the Ld. Assessing Officer (“AO”) u/s 271B of the Income Tax Act, 1961 (the “Act”) for Assessment Year (“A.Y.”) 2013-14.

2. The assessee is an individual who is engaged in the business of trading and manufacturing of timber products and fire woods. He e-filed his return for A.Y. 2013-14 on 04.10.2023 declaring income of Rs. 4,82,499/- later revised to Rs. 6,34,500/- on 17.06.2014. During the course of assessment proceedings, it was noticed that as per the copy of audited P & L Account furnished with revised return, the gross receipts were Rs. 17,89,07,251/-. Since the assessee had failed to get his account audited u/s 44AB of the Act, proceedings u/s 271B of the Act were initiated in the assessment order dated 22.03.2016 passed u/s 143(3) of the Act.

3. During penalty proceedings before the Ld. AO, the assessee requested the Ld. AO to keep the proceedings in abeyance till disposal of his quantum first appeal pending before the Ld. CIT(A), Muzafar nagar. After the disposal of the quantum first appeal, the Ld. AO issued show cause notice on 11.02.2019. The Ld. AO imposed the impugned penalty for want of compliance by the assessee vide order dated 29.03.2019 u/s 271B of the Act.

4. The appeal filed by the assessee has been dismissed by the Ld. CIT(A). This has brought the assessee before the Tribunal.

5. The appeal was called for physical hearing but none attended for the assessee, though the Ld. Sr. DR was present. We, therefore proceeded to decide the appeal after hearing the Ld. Sr. DR.

6. We have considered the arguments advanced by the Ld. Sr. DR in support of the order(s) of the Ld. AO / CIT(A) and perused the records. It is revealed from the assessment order dated 22.03.2016 that the assessee filed Tax Audit Report dated 04.08.2013 along with the revised return on 17.06.2014 which has been duly considered. Para 3 of the assessment order refers. In para 4 of the assessment order, the Ld. AO himself observed that the Audit Report has been furnished on 17.06.2014 with the revised return and hence it is not filed within the stipulated time. The Ld. AO initiated the penalty proceedings u/s 271B for non-furnishing of Tax Audit Report in time. Section 44AB casts an obligation upon the assessee to get accounts audited before the specified date and furnish by that date the report of such audit. It is not the case of the Revenue that the original return e-filed on 04.10.2013 was not within time prescribed u/s 139(1) of the Act. Section 139(5) of the Act permits an assessee to file revised return before the completion of assessment. The assessee has filed revised return within the legally permissible time along with Audit Report. During the course of assessment proceedings itself it was explained by the assessee that delay was caused due to the death of his elder brother who was looking after the financial affairs of the assessee’s business. Before the Ld. CIT(A) in reply uploaded on the ITBA Portal on 06.10.2021, it was submitted that the assessee himself was going through a critical medical condition in the year under consideration. It was also submitted that the delay in furnishing Audit Report in time was caused due to inadvertent mistake committed by his Chartered Accountant. The assessee’s explanation has merely been disbelieved. In our opinion, there was reasonable cause for failure in furnishing the Tax Audit Report in time. As stated earlier, it is not a case of not getting the accounts audited in time. We, therefore, hold that the impugned penalty u/s 271B is not exigible which we hereby vacate.

7. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 7^th March, 2024.