Tribunal overturns penalty for late tax audit report filing due to accountant's sudden departure.

The Tribunal allowed the appeal of the assessee, engaged in the bakery business, against the penalty imposed under section 271B for delayed filing of tax audit reports. The delay was attributed to the sudden departure of the accountant responsible for accounts, beyond the assessee's control. Despite the penalty being upheld by the CIT(A), the Tribunal found the delay was not willful and that the assessee had a history of timely compliance. Relying on legal precedents, the Tribunal deemed the penalty unwarranted, directing the Assessing Officer to delete it.

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Issues involved:
The appeal against sustaining a penalty under section 271B of the Act for delay in getting books of accounts audited and furnishing them beyond the due date for filing the return of income.

Details of the Judgment:
1. The assessee, engaged in the business of manufacturing and selling bakery products, had total business receipts exceeding Rs. 1 crore, necessitating the audit of books of accounts under section 44AB of the Act. Due to the sudden departure of the accountant responsible for accounts, the tax audit report was filed after the extended due date. The assessment order accepted the returned loss without any adverse inference against the assessee.

2. The penalty proceedings under section 271B were initiated, with the assessee explaining the delay was due to the accountant leaving abruptly, beyond their control. The assessee had a history of timely filing tax audit reports, except for the exceptional year in question.

3. Despite the reasonable cause for the delay, the Assessing Officer imposed a penalty equivalent to 0.5% of the total turnover. The CIT(A) upheld this penalty, disregarding the assessee's submissions and explanations.

4. The counsel argued against the penalty, citing decisions from different Tribunal benches and legal precedents emphasizing that penalties should not be imposed for technical breaches or where there is a reasonable cause for the delay in compliance with statutory obligations.

5. After considering the submissions and evidence, the Tribunal observed that the delay was not willful but a result of the accountant's sudden departure. The assessee had a consistent record of timely compliance with tax audit requirements in previous and subsequent years, indicating a reasonable cause for the delay in the year under consideration.

6. Referring to legal precedents, the Tribunal concluded that the delay in filing the tax audit report was a technical breach and that the assessee had provided a reasonable cause for the delay. Therefore, the penalty under section 271B was deemed unwarranted, and the Assessing Officer was directed to delete the penalty levied. The appeal of the assessee was allowed.

7. The judgment was pronounced in open court on 09.06.2023.

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