Firm penalty deleted for late tax return filing due to unforeseen circumstances

The Tribunal deleted the penalty imposed under section 271B of the Act on a firm for the delay in filing its income tax return for the assessment year 2006-07. The delay was attributed to various factors such as the sudden demise of a partner, partners' travel, and firm reconstitution, leading to cascading effects from previous years. The Tribunal found no deliberate or intentional inaction by the firm and exercised discretionary leniency, overturning the penalty upheld by the CIT(A) in the interest of justice.

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Issues involved: Penalty u/s 271B of the Act for delay in filing audit report u/s 44AB due to partner's demise, reconstitution of firm, and other factors.

The assessee, a firm, filed its return of income for the assessment year 2006-07 with a delay of five months, citing reasons such as sudden demise of a partner, partners' travel, and reconstitution of the firm. The Revenue issued a show cause notice u/s 271B of the Act for the delay. The ld. AO levied a penalty of Rs. One lakh, which was confirmed by the ld. CIT(A). The appellant contended that the delay was due to cascading effects from the non-finalization of accounts for the previous years. The ld. AR argued for relief based on similar situations in previous assessment years.

The ld. AR argued that the delay in filing the return for the assessment year 2006-07 was due to the cascading effect from the non-finalization of accounts for the previous years. The ld. AO and CIT(A) had granted relief for the earlier assessment years based on similar reasons. The assessee had been regularly filing returns within the prescribed time since then. The Tribunal noted that there was no deliberate or intentional inaction on the part of the assessee. The discretionary power conferred by the Act allowed for leniency in such cases. Therefore, the Tribunal decided to delete the penalty confirmed by the ld. CIT(A) in the interest of justice.

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