ITAT sets aside penalty under section 271B for pending audit report verification.

The ITAT allowed the appeal for statistical purposes, setting aside the penalty imposed under section 271B pending verification of the audit report submission by the AO.

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Issues:
1. Upholding of penalty u/s 271B for non-furnishing of Tax Audit Report.
2. Failure to comply with audit report submission requirements.
3. Reopening of the case under section 147 of the Income Tax Act.

Analysis:

Issue 1: Upholding of penalty u/s 271B for non-furnishing of Tax Audit Report:
The appellant, engaged in trading, filed the return of income for A.Y. 2011-12 but failed to furnish the audit report during assessment proceedings. The AO imposed a penalty of Rs. 1,50,000 under section 271B. The CIT(A) upheld the penalty, emphasizing the necessity of audit as per section 44AB due to turnover exceeding the threshold. The appellant's argument of uploading the audit report with the return was not considered. The ITAT set aside the matter to the AO for verification of the audit report submission, stating that if found in order, the penalty would be vacated.

Issue 2: Failure to comply with audit report submission requirements:
The AO observed the appellant's turnover exceeded the threshold requiring audit under Sec. 44AB, but the audit report was not submitted. Despite the appellant's claim of uploading the report with the return, the CIT(A) upheld the penalty, emphasizing the need for audit compliance. The ITAT directed the AO to verify the audit report submission, indicating that if compliant, the penalty would be canceled.

Issue 3: Reopening of the case under section 147 of the Income Tax Act:
The case was reopened under section 147 as the appellant's turnover necessitated audit under Sec. 44AB. The AO initiated penalty proceedings under section 271B due to non-furnishing of the audit report. The CIT(A) upheld the penalty, citing the appellant's failure to provide the required report. The ITAT remanded the matter to the AO for verification of the audit report submission, with a directive to afford the appellant a reasonable opportunity to be heard.

In conclusion, the ITAT allowed the appeal for statistical purposes, setting aside the penalty imposed under section 271B pending verification of the audit report submission by the AO.

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