Tribunal overturns penalty citing reasonable cause for late filing

The Tribunal allowed the appeal, holding that the penalty under section 271B was deleted because the appellant had reasonable cause for not filing the audit report separately before the due date of filing the return of income. The Tribunal emphasized that the amended provisions of Rule 12(2) were not applicable for the assessment year in question and that the appellant's delay in filing the audit report with the belated return was justified. The penalty was overturned based on the reasonable cause for non-compliance with section 44AB.

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Issues:

1. Penalty under section 271B for failure to file audit report before due date of filing return of income.
2. Applicability of Rule 12(2) of the IT Rules for the assessment year in question.
3. Interpretation of CBDT Circular No. 3 of 2009 and Notification No. 24/2014 regarding audit report submission.

Issue 1: Penalty under section 271B

The appellant filed its return of income belatedly for the assessment year 2012-13 on 29th March, 2014. The AO initiated penalty proceedings under section 271B of the IT Act as the audit report was not submitted before the due date of filing the return. The appellant contended that the return was filed under section 139(4) due to unavoidable circumstances, and the audit report was filed along with the return. The ld. CIT (A) upheld the penalty, stating that the appellant failed to comply with section 44AB read with Rule 12 of the IT Rules. However, the Tribunal held that the penalty was not sustainable as the appellant had reasonable cause for not filing the audit report separately before the due date, as per the provisions of section 273B of the Act.

Issue 2: Applicability of Rule 12(2) of the IT Rules

The ld. CIT (A) applied the amended provisions of Rule 12(2) of the IT Rules as on the date of filing the return by the appellant on 29th March, 2014. The Tribunal noted that the AO did not penalize the appellant for not filing the audit report along with the return, but for the delay in filing it with the belated return. The Tribunal emphasized that the amended rule came into effect from 01.04.2013, after the due date of filing the return under section 139(1) of the Act. Therefore, the Tribunal concluded that the appellant had a reasonable cause for not complying with section 44AB, and the penalty under section 271B was not justified.

Issue 3: Interpretation of CBDT Circular and Notification

The appellant argued that CBDT Circular No. 3 of 2009 and Notification No. 24/2014 mandated online submission of audit reports from the assessment year 2013-14 onwards. The appellant contended that the amended provisions of Rule 12(2) were not applicable for the year in question. The Tribunal did not delve deeply into this issue as the penalty was overturned based on the reasonable cause for non-compliance with section 44AB.

In conclusion, the Tribunal allowed the appeal of the appellant, holding that the penalty under section 271B was deleted due to the reasonable cause shown for not filing the audit report separately before the due date of filing the return of income.

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