Tribunal overturns penalty for audit report non-filing, citing reasonable cause

The Tribunal allowed the appeal by the assessee, finding reasonable cause for not furnishing the audit report under section 44AB of the Income Tax Act. The penalty imposed under section 271B was deleted as the Tribunal acknowledged the failure to file the audit report despite the auditor signing reports under the Companies Act. The decision favored the assessee, emphasizing the impact of non-filing on carry-forward benefits and the lack of evidence authorizing the auditor for tax audit.

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Issues:
Levy of penalty under section 271B of the Income Tax Act for failure to get accounts audited as per section 44AB.

Analysis:
The appeal was filed challenging the penalty order dated 28/06/2019 under section 271B of the Income Tax Act for the assessment year 2011-12. The assessee, engaged in various activities, failed to file its original return of income despite substantial receipts. The penalty was imposed as the assessee did not get its accounts audited and failed to furnish the audit report under section 44AB of the Act. The AO initiated proceedings under section 147 and assessed the total income. The penalty was levied at 0.5% of the gross receipts. The CIT(A) dismissed the appeal citing lack of evidence that the auditor was authorized to prepare the tax audit report. The directors were held accountable for not being aware of the filing requirements. The AR argued that the audit report under the Companies Act was filed but not under the Income Tax Act, leading to loss set-off issues. The Departmental Representative supported the lower authorities' decisions, emphasizing the lack of evidence from the auditor regarding the non-filing of the audit report.

The Tribunal considered the submissions and facts. It acknowledged the failure to file the return of income and the audit report under section 44AB. The auditor signed reports under the Companies Act but failed to file under the Income Tax Act. While no documentary evidence authorized the auditor for tax audit, the signed reports were on record. The Tribunal noted the net loss incurred by the assessee, affecting carry-forward benefits due to non-filing. It found reasonable cause for not furnishing the audit report under section 44AB, directing the deletion of the imposed penalty. Consequently, the appeal by the assessee was allowed.

In conclusion, the Tribunal's decision favored the assessee, highlighting the reasonable cause for not furnishing the audit report under section 44AB, leading to the deletion of the penalty imposed under section 271B of the Income Tax Act.

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