2017 (6) TMI 433 - AT - Income Tax

Tribunal overturns penalty for non-filing audit report: Assessee's technical issues and e-filing challenges considered.

The Tribunal allowed the appeal, overturning the penalty imposed under section 271B for non-filing of the audit report u/s 44AB. The decision was based on ... Penalty under section 271B for non-filing of audit report - Requirement to file audit report under section 44AB - Bona fide belief and absence of conscious breach - Technical failure in e filing and assessees' liability - Precedential reliance on similar facts for deletion of penaltyPenalty under section 271B for non-filing of audit report - Bona fide belief and absence of conscious breach - Technical failure in e filing and assessees' liability - Whether the penalty under section 271B for non-filing of the audit report required by section 44AB can be sustained where the assessee filed the return with audited accounts, the auditor failed to upload the audit report online due to alleged technical problems, and the assessee had a bona fide belief that the report was filed. - HELD THAT: - The Tribunal noted that the assessee had obtained the physical tax audit report before the due date and had filed the ITR electronically attaching the audited accounts. The failure to upload the audit report on the e filing portal was attributed to the auditor and to technical problems in the e filing system, matters outside the assessee's direct control. The assessee ultimately had the report uploaded subsequently and there were no adverse qualifications in the audit report; the income declared was accepted by the Department. The Tribunal applied its earlier decision in a substantially identical fact situation to hold that where there is no conscious breach by the assessee and the non uploading resulted from technical or auditor related issues, imposition of penalty under section 271B is not justified. Relying on these considerations, the Tribunal held that the penalty confirmed by the CIT(A) could not be sustained. [Paras 2, 3]Penalty under section 271B set aside and the assessee's appeal allowed.Final Conclusion: The Tribunal allowed the appeal for AY 2013-14, deleted the penalty levied under section 271B for non-filing of the tax audit report, holding that the non-uploading arose from auditor/technical problems and there was no conscious breach by the assessee. Issues:Confirmation of penalty u/s 271B r.w.s. 274 for non-filing of audit report u/s 44AB.Analysis:The appeal was filed against the order confirming the penalty of Rs. 83,574/- u/s 271B r.w.s. 274 for the assessment year 2013-14. The ld. CIT(A) upheld the penalty stating that the appellant failed to show that the audit report was filed as required u/s 44AB and no reasonable cause for non-submission was provided. The appellant's contention of technical issues for non-filing was not supported by evidence. The appeal proceeded ex parte as the assessee did not appear despite notice. The assessee argued that the audit report was obtained before the due date and submitted online with the ITR, but the auditor failed to file it online due to technical issues. The assessee cited Hindustan Steel Ltd. vs. State of Orissa case to argue against conscious breach of law and highlighted that the ITR was accepted without security concerns. The audit report was later filed online by the auditor. The authorities upheld the penalty citing lack of evidence for technical issues, disregarding the bona fide efforts of the assessee.In a similar case, the Tribunal allowed an appeal where the penalty u/s 271B was imposed for failure to upload the audit report electronically due to technical issues. The Tribunal noted the assessee's lack of familiarity with e-filing systems and the technical breach caused by server problems. The Tribunal considered the assessee's bona fide belief that the report was uploaded and referred to case laws supporting leniency in such cases. The penalty was deemed unjustifiable due to the technical nature of the breach and the assessee's genuine efforts. Following this precedent, the Tribunal allowed the present appeal, emphasizing the similarity in circumstances and the unjust nature of the penalty imposed.In conclusion, the Tribunal allowed the appeal, overturning the penalty imposed under section 271B for non-filing of the audit report u/s 44AB. The decision was based on the precedent set in a similar case where technical issues and the assessee's lack of familiarity with e-filing systems were considered valid reasons for not imposing the penalty.