2023 (2) TMI 157 - AT - Income Tax

Appeal Dismissed: Tax Penalty for Late Filing Upheld

The Revenue's appeal against the penalty imposed under section 271B of the Income Tax Act for late filing of the tax audit report for the assessment year ... Levy of penalty under section 271B - requirement to get accounts audited under section 44AB - belated filing of tax audit report before completion of assessment - reasonable cause/compelling reasons for delay - technical/venial breach not causing loss to the exchequer - absence of deliberate or wilful contraventionLevy of penalty under section 271B - requirement to get accounts audited under section 44AB - belated filing of tax audit report before completion of assessment - reasonable cause/compelling reasons for delay - technical/venial breach not causing loss to the exchequer - Whether penalty under section 271B is leviable where the assessee filed the tax audit report belatedly but produced it before completion of assessment and had reasonable cause for delay. - HELD THAT: - The Assessing Officer imposed penalty under section 271B on the ground that the assessee's gross receipts exceeded the threshold requiring audit under section 44AB and the audit report was filed after the due date. On appeal the CIT(A) found that the audit was completed belatedly but the audit report was produced before completion of the assessment, and having regard to the assessee's financial distress and supporting facts, the delay amounted to a technical/venial breach which did not cause any loss to the exchequer. The CIT(A) treated the dire financial condition and related circumstances as reasonable causes preventing timely audit and relied on the reasoning in comparable precedents. The Tribunal, after considering the materials and the orders below, found no infirmity in the appellate reasoning that the facts disclosed compelling/reasonable causes for delay and that the belated filing before completion of assessment negated the justification for imposing penalty under section 271B. Consequently the penalty was deleted. [Paras 5, 6, 7]Penalty under section 271B deleted as the tax audit report, though belated, was produced before completion of assessment and reasonable cause existed for the delay; revenue appeal dismissed.Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the penalty under section 271B for AY 2017-18, finding the belated audit report produced before completion of assessment and reasonable causes for delay; the revenue's appeal is dismissed. Issues:- Penalty under section 271B of the Income Tax Act for late filing of tax audit report.Analysis:The appeal was filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, regarding the penalty levied under section 271B of the Income Tax Act for late filing of the tax audit report. The case involved the assessment year 2017-18. The Assessing Officer initiated penalty proceedings as the audit report was filed beyond the due date. The total gross receipts of the assessee were above the threshold requiring a tax audit report under section 44AB of the Act. The penalty of Rs. 1,50,000 was levied under section 271B. The ld. CIT(A) (NFAC) deleted the penalty, citing reasons similar to a precedent case and considering the financial difficulties faced by the assessee. The Revenue appealed to the Tribunal, but the Department failed to comply with the defect notice for filing grounds of appeal. The Tribunal proceeded to hear the appeal on merits, where the ld. DR supported the penalty. However, as the assessee did not appear, the Tribunal upheld the decision of the ld. CIT(A) and dismissed the Revenue's appeal, affirming that it was not a fit case for the penalty under section 271B. The order was pronounced on January 24, 2023, at Chennai.