2021 (6) TMI 1022 - AT - Income Tax

Tribunal rules penalty not applicable for procedural audit delays, emphasizes consideration of reasonable cause.

The Tribunal allowed the appeal, ruling that the penalty under section 271B of the Income-tax Act should not be imposed solely due to procedural delays in ... Penalty levied u/s 271B - delayed furnishing of tax audit report u/s 44AB due to delay in getting statutory audit report under the companies act - HELD THAT:- We find that assessee had sought to explain the genuine difficulty it has faced in finalizing the accounts without which the statutory audit under Companies Act and Tax audit under Income Tax Act could not be completed. The levy of penalty contemplated under section 271B of the Act is not automatic and the same shall not be levied if the assessee was able to provide reasonable cause for the delay. In the instant case, from the above narration of facts, that led to delay in finalization of statutory audit and tax audit as detailed hereinabove, we find that assessee had indeed sufficient and reasonable cause within the meaning of section 273B of the Act and hence, could not be invited with the levy of penalty under section 271B. Income declared by the assessee in the revised computation of income in the sum has been indeed accepted by the AO in the scrutiny assessment, which proves that all the necessary details were indeed made available by the assessee before the completion of assessment proceedings to the satisfaction of the learned Assessing Officer, together with the tax audit report and its annexures. We find that the Hon’ble Madras High Court in the case of CIT vs A N Arunachalam [1994 (1) TMI 65 - MADRAS HIGH COURT] had held that the tax audit report was ultimately made available to the ld AO before the completion of assessment proceedings and hence no penalty u /s 271B of the Act could be levied on an assessee. - Decided in favour of assessee. Issues:Whether the penalty under section 271B of the Income-tax Act was justified in the given circumstances.Analysis:The appeal pertains to the penalty levied under section 271B of the Income-tax Act, 1961. The assessee, engaged in manufacturing and trading, filed its return of income electronically, declaring total income at Rs. 5,11,95,233/-. The revised computation of total income was submitted during assessment proceedings, which was accepted by the Assessing Officer. However, the assessee failed to furnish the audit report under section 44AB of the Act by the due date of filing the return, leading to penalty proceedings under section 271B.The assessee explained that the delay in finalizing audits was due to various reasons, including changes in personnel handling accounts and audits. Despite appointing experienced individuals, the audits were not completed on time. The company's directors eventually took over and completed the audits. The assessee argued that the delay was beyond its control and constituted a reasonable cause under section 273B of the Act, precluding the levy of penalty.The Tribunal noted that the levy of penalty under section 271B is not automatic and can be avoided if reasonable cause for delay is established. Considering the detailed explanation provided by the assessee and the acceptance of the revised income computation during assessment, the Tribunal held that the assessee had a reasonable cause for the delay in audits. Citing a judicial precedent, the Tribunal emphasized that a procedural delay should not warrant penalty imposition.Therefore, the Tribunal allowed the appeal, concluding that the penalty under section 271B should not be levied solely due to procedural delays. The decision was based on the specific circumstances of the case and the legal provisions regarding reasonable cause for delays in audit compliance.This comprehensive analysis of the judgment highlights the key aspects of the case, including the grounds for penalty imposition, the assessee's explanations, and the Tribunal's decision based on legal precedents and provisions of the Income-tax Act.