2016 (12) TMI 1488 - AT - Income Tax

ITAT cancels penalty under Income Tax Act, emphasizes electronic filing compliance

Saral Plastics Pvt. Ltd. Versus Income Tax Officer, Ward-8 (1), Ahmedabad

The ITAT set aside the First Appellate Authority's decision and directed the AO to delete the penalty of Rs. 1,00,000 under section 271B of the Income Tax ... Levy of penalty u/s. 271B - non furnish of the required Tax Audit Report - Held that:- The undisputed fact is that the return of income was filed electronically and being a paperless return, there was no requirement to file the Audit Report along with the return of income. It is also an undisputed fact that complete details of Auditors were furnished in the return of income itself. Details as required in Form 3CD were also furnished with the E-return so filed which is evident from the copy of return exhibited at pages 54 to 80 of the paper book. Merely because due to some unforeseen circumstances, the assessee could not furnish the physical Audit Report before the A.O. that would not justify the levy of penalty u/s. 271B of the Act. More so, because the details of the Auditors, the details of the Audit Report and the Audited Financial Statements were placed before the A.O. in the form of E -return of income. - Decided in favour of assessee Issues:Levy of penalty under section 271B of the Income Tax Act for non-furnishing of Tax Audit Report as required under section 44AB.Analysis:1. The appellant contested the levy of penalty under section 271B for not submitting the Tax Audit Report despite several notices from the Assessing Officer. The appellant argued that they had filed their return of income electronically and had mentioned in the form that they were liable for tax audit, providing necessary details. They also cited a reasonable cause for the delay in submission due to unforeseen circumstances.2. The Assessing Officer dismissed the appellant's contentions, stating that merely claiming in the return of income that the audit had been conducted was not sufficient compliance with section 44AB. The AO emphasized the necessity of submitting the physical Audit Report during assessment proceedings and highlighted the failure to do so. The AO also rejected the argument regarding the AR's absence, stating that the director or principal officer could have filed the report.3. The First Appellate Authority upheld the penalty, but the ITAT Ahmedabad disagreed. The ITAT noted that the return was filed electronically, making it a paperless return, and all necessary audit details were provided. The ITAT found that the appellant had furnished the required information in the E-return, including details of auditors and financial statements, even though the physical report was not submitted due to unforeseen circumstances.4. Considering the facts, the ITAT concluded that the penalty under section 271B was not justified in this case. The ITAT set aside the CIT(A)'s decision and directed the AO to delete the penalty of Rs. 1,00,000, ultimately allowing the appeal filed by the Assessee.This judgment emphasizes the importance of providing necessary audit details and complying with tax audit requirements under the Income Tax Act. It also highlights the significance of electronic filing and the acceptance of E-returns as valid submissions, even in the absence of physical documents due to reasonable causes.