2021 (1) TMI 605 - AT - Income Tax

ITAT cancels penalty under sec 271B for late tax audit report filing, citing new e-filing challenges.

The ITAT allowed the appeal and directed the Assessing Officer to delete the penalty imposed under section 271B of the Income Tax Act for failure to file ... Levy penalty u/s. 271B - not filing tax audit report within the due date specified under the Act - HELD THAT:- In this case, on perusal of details filed by the assessee, we find that although there is a delay in filing of audit report as required u/s. 44AB electronically, but such return has been filed much before the date of completion of assessment proceedings. Moreover, audit report as required to be obtained u/s. 44AB was obtained from auditors on 23.09.2013. When audit report was obtained within due date, merely for delay in filing audit report in e-portal of the Department cannot be considered as deliberate attempt made by assessee for not filing audit report so as to impose penalty u/s. 271B - This view is supported by the decision in the case of Harishbhai Babubhai Patel [2017 (2) TMI 1227 - ITAT AHMEDABAD] where the Tribunal, after considering relevant facts has deleted penalty levied by the Assessing Officer for non-submission of electronic audit report within the due date allowed under the Act. Hence, we direct the Assessing Officer to delete penalty levied under section 271B for non-submission of audit report within due date allowed under the Act. Appeal filed by assessee is allowed. Issues:Assessment of penalty under section 271B of the Income Tax Act for failure to file tax audit report within the due date specified under the Act.Detailed Analysis:Issue 1: Assessment of penalty under section 271BThe appeal was filed against the order of the CIT(A) regarding the assessment year 2013-14. The assessee had raised grounds of appeal challenging the CIT(A)'s order, arguing that it was bad in law and against natural justice. The delay in filing the tax audit report was attributed to difficulties in the e-portal system due to the introduction of e-filing for the first time in the assessment year 2013-14. The Assessing Officer initiated penalty proceedings under section 271B of the Act, imposing a penalty of Rs. 1,50,000 for failure to file the tax audit report within the specified due date. The assessee contended that the delay was unintentional and not for deriving any benefit, thus no penalty should be imposed.Issue 2: Appeal before CIT(A)The assessee appealed before the CIT(A), reiterating the reasons for the delay in filing the tax audit report and arguing that there was no deliberate intention to violate the Act. The CIT(A) upheld the penalty under section 271B, stating that the reasons provided did not qualify as a reasonable cause under section 273B of the Act. The CIT(A) found no error in the Assessing Officer's decision to levy the penalty. The assessee, dissatisfied with the CIT(A)'s order, appealed to the ITAT.Issue 3: ITAT's DecisionThe ITAT considered the arguments presented by both parties and reviewed the facts and orders of the authorities below. It noted that the audit report was filed before the completion of the assessment proceedings, albeit with a delay in electronic filing. The ITAT acknowledged the challenges faced by the assessee due to the new e-filing requirements introduced in the assessment year 2013-14. Emphasizing the leniency required during the initial transition period, the ITAT held that the penalty under section 271B should be deleted. The ITAT referred to a similar case decided by the ITAT, Ahmedabad, where the penalty for non-submission of electronic audit report within the due date was deleted. Consequently, the ITAT allowed the appeal filed by the assessee and directed the Assessing Officer to delete the penalty levied under section 271B of the Act for non-submission of the audit report within the due date specified under the Act.This detailed analysis outlines the issues involved, the arguments presented by the parties, the decisions of the authorities, and the final judgment delivered by the ITAT, emphasizing the reasoning behind the deletion of the penalty under section 271B of the Income Tax Act.