Case Law Details
Partyaksh Sharma Vs ITO (ITAT Delhi)
An inadvertent omission to fill a column in Form 3CD due to a software error, without any mala fide intention, constitutes “reasonable cause” under section 273B and cannot justify penalty for non-compliance with section 44AB.
Summary : The Legal Case concerns an appeal before the ITAT Delhi that was filed with a delay of 173 days. The Tribunal condoned the delay after considering the assessee’s affidavit stating that the delay resulted from a change of tax consultant and subsequent discovery of the appellate order on the Income Tax Portal. The appeal arose from an order passed under section 250 of the Income-tax Act, 1961, relating to a penalty levied on the ground that column 40 of Form 3CD was left unfilled, leading the authorities to treat the audit report as incomplete and hold that section 44AB was not complied with. The assessee submitted that the omission was inadvertent, supported by an affidavit from the Chartered Accountant stating that the details remained unfilled due to a software error, and contended that the case was covered by the “reasonable cause” provisions of section 273B. After considering the rival submissions, the Tribunal held that the assessee’s case fell within the definition of “reasonable cause” under section 273B, found the penalty unsustainable, and allowed the appeal.
Core Issue: Whether penalty for an allegedly incomplete tax audit report under section 44AB was sustainable where Column 40 of Form 3CD remained unfilled due to an inadvertent software error.
Facts: During assessment proceedings, the Assessing Officer noticed that Column 40 of Form 3CD was left blank and concluded that particulars relating to gross turnover, net profit, stock-in-trade and other prescribed details had not been furnished. Treating the audit report as incomplete, the Assessing Officer held that the statutory requirements of section 44AB were not complied with and levied penalty. Before the appellate authorities, the assessee produced an affidavit from the Chartered Accountant stating that the omission was purely inadvertent and occurred due to a software error, without any mala fide intention.
ITAT Held: The Tribunal observed that the expression “sufficient cause” implies absence of negligence, deliberate inaction or lack of bona fides. Considering the affidavit of the tax auditor, the explanation regarding the software error, and the absence of any mala fide intention, the Tribunal held that the omission was bona fide. On the totality of the facts, the case squarely fell within the ambit of “reasonable cause” under section 273B, and therefore an incomplete audit report arising from such inadvertent omission could not be equated with a deliberate violation of section 44AB so as to attract penalty.
The Tribunal also condoned the 173-day delay in filing the appeal, accepting the explanation that it occurred due to a change of tax consultant and subsequent discovery of the appellate order.
Outcome: The Tribunal allowed the appeal and deleted the penalty, holding that the inadvertent omission to fill Column 40 of Form 3CD due to a software error constituted reasonable cause under section 273B, rendering the penalty unsustainable.
Cases Discussed
- CIT vs. Chembara Peak Estates Ltd. (Ker.), 183 ITR 471
- CIT vs. Jaipur Electro P. Ltd. (Raj.), 183 ITR 476
- CIT vs. Bhikaji Ramchandra (Bom.), 183 ITR 478
- CIT vs. Mysore Fertilizer Co. (Mad.), 145 ITR 91
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The ITAT Registry has reported that the present appeal is time barred by 173 days. The assessee has filed an affidavit seeking condonation of delay as under: –
“I, Partyaksh Sharma(“the appellant”), S/o Sh. Teeka Ram Sharma, aged about 34 years, presently residing at VPO Khambi, Shraiya Mohalla, Tehsil Hodal, District Palwal, Haryana, 121106 do hereby solemnly affirm and state on oath as under:
1. That the Ld. Commissioner of Income Tax (Appeals), NFAC, passed an order u/s 250 of the Income-tax Act, 1961 (“the Act”) for the A.Y. 2017-18 dated 26-06-2025.
2. Pursuant to some financial disputes, the appellant changed histax consultant. Due to change in tax consultant, the appellant was not aware of the said order. The newly RAPY P10 appointed tax consultant was also not cognizant of the order. Upon review of records on the Income Tax Portal, the new tax consultant discovered the order and informed the appellant that no appeal has been filed against it. Thereafter, the appellant promptly filed an appeal before the Hon’ble ITAT, Delhi resulting in a delay of 173 days (appx.).
3. That the delay in filing the present appeal before the Hon’ble ITAT, Delhi has occurred solely on account of change in tax consultant and the time taken in reviewing and compiling the complete records and facts of the case. That the delay is bona-fide, unintentional, and due to reasonable cause.
4. That the appellant had no intention whatsoever to delay the filing of the appeal or to gain an undue advantage, and no prejudice would be caused to the Revenue if the delay is condoned.
5. That it is, therefore, most respectfully prayed that Hon’ble Tribunal may kindly condone the delay in filing the present appeal in view of the sufficient cause shown hereinabove and admit the same for adjudication on merits.”
1.1 Considering the reasons given in the said affidavit, the delay is hereby condoned and the appeal is admitted for adjudication.
2. This appeal arises from order dated 26.06.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by NFAC, Delhi. In this case, the peculiar facts deserve to be briefly captured. It was noticed during assessment proceedings that the audit report filed by the assessee had an unfilled column 40 in Form 3CD. Thus, it was inferred that critical information pertaining to gross turnover, net profit, stock-in-trade, etc. was not filed by the assessee. On this basis, it was held that the statutory requirement u/s 44AB of the Act was not fulfilled. Thereafter, the impugned penalty was levied.
2.1 The aggrieved assessee has filed the present appeal with as many as seven grounds out of which grounds 5 & 6 pertain to the oversight in omitting to file details under item 40 of Form 3CD.
3. Before us the Ld. AR mentioned that even an affidavit was filed from the Chartered Accountant who prepared the said audit report, indicating that the details were inadvertently left out to be filled and that there was no malafide intention in doing so. The Ld. AR further stated that these facts have been captured in detail in the impugned order especially on pages 14 to 15 and again in para 7.4 at page 17 of the impugned order. It was stated that in the affidavit filed before the Ld. CIT(A) it was mentioned that due to a software error the details could not be filled out. It was the submission that even otherwise this kind of penalty is duly covered under “reasonable cause” as envisaged u/s 273B of the Act.
3.1 The Ld. DR relied on the orders of the authorities below and stated that an incomplete audit report deserved to be equated with a violation of Section 44AB of the Act. The Ld. DR supported the penalty levied and confirmed in the impugned order.
4. We have carefully considered the rival submissions and have gone through the records before us. The dictionary meaning of “sufficient cause” would imply no negligence or in action or want of bonafides on the part of an assessee. A review of judicial literature shows that good and sufficient cause has been described in the following case laws:
i. CIT vs. Mysore Fertilizer Co. reported in 145 ITR 91 (Mad.);
ii. CIT vs. Chembara Peak Estates Ltd. reported in 183 ITR 471 (Ker.);
iii. CIT vs. Jaipur Electro P. Ltd. reported in 183 ITR 476 (Raj.); and
iv. CIT vs. Bhikaji Ramchandra reported 183 ITR 478 (Bom.).
Considering the totality of facts and circumstances of the case, and the provisions of Section 273B of the Act, it is felt that the assessee’s case would fall within the definition of “reasonable cause” as envisaged u/s 273B of the Act and therefore the impugned penalty would certainly not be sustainable in the eyes of law.
5. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 17.07.2026
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