Appeal allowed: Penalty under Section 271B invalid. Vague notice, reasonable cause cited.

The Tribunal allowed the appeal, finding the penalty under section 271B invalid due to a vague notice and a reasonable cause for delay in filing the Tax Audit Report. The AO was directed to cancel the penalty, with the order issued on 17th June 2020.

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Issues:
1. Validity of penalty notice under section 271B
2. Jurisdiction for imposing penalty under section 271B
3. Reasonable cause for delay in filing Tax Audit Report (TAR)

Issue 1: Validity of penalty notice under section 271B

The appellant challenged the penalty notice dated 15.05.2018 issued under section 274 r.w.s 271B as vague and unspecific. The appellant argued that the notice did not specify the fault for which the penalty was proposed, rendering it untenable and bad in law. The appellant cited the case of M/s. Parkinson Electrical Corprn Vs. ITO, where it was held that a penalty notice must inform the assessee of the precise charge against them. The Tribunal found the notice issued by the AO to be vague and lacking clarity on the fault for which the penalty was being imposed, thus concluding that the notice was bad in law.

Issue 2: Jurisdiction for imposing penalty under section 271B

The AO levied a penalty under section 271B of the Income Tax Act, 1961, due to the assessee's failure to furnish the Tax Audit Report (TAR) by the specified date. The appellant contended that there was a reasonable cause for the delay in filing the TAR, as explained by the assessee regarding the departure of the accountant handling the accounts for the preceding year. The Tribunal noted that the explanation provided by the assessee was reasonable, as supported by the decision in ACIT Vs. Kamlesh R. Agarwal (HUF), where delay in completing the audit of the earlier year was considered a valid ground for delay in the subsequent year's audit. The Tribunal concluded that there was a reasonable cause for the delay in filing the TAR, and the penalty imposed by the AO was not justified.

Issue 3: Reasonable cause for delay in filing Tax Audit Report (TAR)

The Tribunal observed that the assessee had submitted the TAR belatedly due to the delay in finalizing the accounts for the preceding year. The departure of the accountant handling the accounts led to the delay in completing the audit report, which was accepted by the department. The Tribunal found the explanation provided by the assessee to be reasonable, considering the circumstances. Additionally, multiple errors in the penalty order indicated a lack of application of mind by the AO. Therefore, the Tribunal concluded that the penalty levied under section 271B was not sustainable and directed the AO to delete the penalty.

In conclusion, the Tribunal allowed the appeal of the assessee, finding the penalty levied under section 271B to be invalid due to a vague penalty notice and a reasonable cause for the delay in filing the Tax Audit Report. The Tribunal directed the AO to cancel the penalty and pronounced the order on 17th June 2020.

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