Tribunal overturns penalty for late filing in tax case, citing genuine belief and no deliberate non-compliance.

The Tribunal allowed the appeal, directing the deletion of the penalty imposed under Section 271B of the Income-tax Act, 1961. It emphasized the assessee's bona fide belief that advances received did not constitute turnover until project completion, aligning with the principles in Exque Finmark Pvt. Ltd. vs. ACIT. The Tribunal found no deliberate non-compliance and referenced the Hindustan Steel Ltd. vs. State of Orissa judgment, stating penalties should not apply in cases of genuine belief. Therefore, the penalty was deemed unjustified, and the assessee's appeal was successful.

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Issues Involved:
1. Sustaining Penalty under Section 271B of the Income-tax Act, 1961.
2. Non-compliance with the principles of law laid down in Exque Finmark Pvt. Ltd. vs. ACIT.
3. Legality and factual correctness of the impugned order.

Issue 1: Sustaining Penalty under Section 271B of the Income-tax Act, 1961

The assessee, an Association of Persons, was penalized Rs. 73,250 under Section 271B for failing to maintain books of accounts and get them audited as required under Section 44AB. The Assessing Officer (AO) observed that the assessee received Rs. 1,46,44,225 in the relevant assessment year, which exceeded the stipulated turnover for mandatory audit. The assessee contended that it followed the project completion method and did not recognize the received amount as sales revenue, thus believing no audit was necessary. The CIT(A) upheld the penalty, stating the amount received constituted turnover, making the audit mandatory.

Issue 2: Non-compliance with principles of law in Exque Finmark Pvt. Ltd. vs. ACIT

The assessee argued that the CIT(A) failed to follow the principles laid down in Exque Finmark Pvt. Ltd. vs. ACIT, where it was held that advances received are not part of turnover until the project is completed. The Tribunal found merit in the assessee's reliance on Exque Finmark Pvt. Ltd., noting that the advances were not turnover until crystallized as sales upon project completion. The Tribunal highlighted that the assessee was under a bona fide belief that the advances did not constitute turnover, thus exempting it from audit requirements under Section 44AB.

Issue 3: Legality and factual correctness of the impugned order

The Tribunal examined the facts and submissions, noting that the assessee maintained regular books of accounts and followed the project completion method. The Tribunal found no deliberate act or defiance of law by the assessee. It referenced the Supreme Court's judgment in Hindustan Steel Ltd. vs. State of Orissa, which states that penalties should not be imposed for non-compliance resulting from a bona fide belief. Consequently, the Tribunal concluded that the penalty under Section 271B was not justified and directed its deletion.

Conclusion:

The Tribunal allowed the appeal, directing the deletion of the penalty imposed under Section 271B, and emphasized the bona fide belief of the assessee regarding the nature of advances received. The Tribunal's decision was pronounced on 27/03/2023.

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