2014 (4) TMI 206 - AT - Income Tax

Appeal successful: Penalty under Income Tax Act section 271B deleted for reasonable cause

APL (India) Private Limited Versus JCIT (OSD) -8(1), Mumbai

The Tribunal allowed the Assessee's appeal, directing the deletion of the penalty imposed under section 271B of the Income Tax Act, 1961. The Tribunal ... Levy of penalty u/s 271B – Delay in getting and furnished Tax Audit report - non-compliance with provisions of section 44AB – Held that:- According to section 273B, no penalty shall be imposable on person, for any failure which interalia include defaults mentioned in section 271B, if he proves that there was reasonable cause for the said failure - Section 271B maintains imposition of penalty on failure but, by reason of rule of evidence provided u/s 273B, such imposition of penalty is dependent on proof that there was no reasonable cause for failure - Material on record stated that Assessee was prevented by sufficient cause for non-compliance with provisions of section 44AB - Reason given in present case for non-compliance with statutory provisions of section 44AB is late completion of statutory audit by auditors which was completed on 21.04.2009 - After completion of said statutory audit, within a reasonable time, assessee obtained tax audit report on 25/06/2009 and return was e-filed on 03.09.2009 - Without completing statutory audit, Assessee could not have obtained tax audit report, which constitutes reasonable cause - Punjab & Haryana High Court in case of CIT vs. Punjab State Leather Development Corporation Ltd. [2001 (7) TMI 1275 - PUNJAB AND HARYANA HIGH COURT] held that delay in completion of statutory audit was reasonable cause for non- compliance with section 44AB and it was held that Tribunal was right in cancelling penalty levied under section 271B - CIT(A) was not right in upholding the levy of penalty under section 271B – Decided in favor of Assessee. Issues:Levy of penalty under section 271B of the Income Tax Act, 1961 for non-compliance with the provisions of section 44AB - Reasonable cause for delay in obtaining and filing Tax Audit Report.Analysis:The appeal was filed against the order passed by the ld. CIT(A) for the assessment year 2008-09, concerning the levy of penalty under section 271B of the Income Tax Act, 1961. The Assessee, engaged in the business of shipping agents, filed the return of income on 03/09/2009, declaring income at Rs. 15,26,85,450/-. The Assessee received gross revenue on account of commission, necessitating the obtainment of a Tax Audit Report under section 44AB of the Act. The Tax Audit Report was obtained on 26.06.2009 and furnished along with the return filed on 03.09.2009, resulting in non-compliance with the provisions of section 44AB. The AO initiated penalty proceedings under section 271B, imposing a penalty of Rs. 1,00,000, the maximum penalty under the section, due to the delay in obtaining and filing the Tax Audit Report.The Assessee contended that the delay in the statutory audit prevented timely obtainment of the tax audit report, constituting a reasonable cause for the delay. The ld. CIT(A) upheld the penalty, leading to the appeal. Section 273B provides that no penalty shall be imposable if reasonable cause for the failure is proven. The legislative intent was to make the provision of section 271B coercive rather than penal, with the requirement to prove the absence of reasonable cause for failure. The word 'may' in section 271B allows discretion, constrained by section 273B, enabling the assessee to prove reasonable cause to avoid penalty imposition. The liability for penalty arises if reasonable cause is not demonstrated, irrespective of substantive compliance.The Tribunal, considering the facts and legal precedents, concluded that the Assessee was prevented by sufficient cause for non-compliance with section 44AB. The delay in statutory audit completion was deemed a reasonable cause, supported by the completion of the tax audit report within a reasonable timeframe after the statutory audit. The Tribunal referenced a decision by the Hon'ble Punjab & Haryana High Court, emphasizing that delay in statutory audit completion constituted a reasonable cause for non-compliance. Consequently, the Tribunal held that the ld. CIT(A) erred in upholding the penalty under section 271B and directed the deletion of the penalty.In conclusion, the appeal by the Assessee was allowed, and the penalty under section 271B was ordered to be deleted.