2023 (9) TMI 146 - AT - Income Tax

Tribunal cancels penalty for late Tax Audit Report filing, citing physical submission and legal precedent.

Shri Aswarthanarayana Venkata Versus ITO, Ward-1, Anantapur

Shri Aswarthanarayana Venkata Versus ITO, Ward-1, Anantapur - TMI Issues involved: The appeal arises from the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre invoking proceedings under section 271B of the Income Tax Act, 1961.Summary:Issue 1: Levy of penalty under section 271B for default in furnishing Tax Audit ReportThe appellant challenged the order dismissing the appeal, arguing that the penalty under section 271B was erroneously imposed. The appellant contended that the Tax Audit Report was physically filed before the Assessing Officer during assessment proceedings, despite technical issues with the Income Tax Website. The appellant asserted that the Assessing Officer had the report for consideration, thus the penalty was unjustified.Issue 2: Assessment and Penalty ProceedingsThe appellant, an individual, made cash deposits during demonetization but did not file the return of income for A.Y. 2017-18. Assessment proceedings were initiated under section 144 of the Income Tax Act, resulting in an ex-parte assessment. Penalty proceedings under section 271B were initiated for failure to furnish the Audit Report in Form No.3CD as required by section 44AB. The Assessing Officer imposed a penalty, which the appellant contested.Judgment:The appellant argued that no satisfaction was recorded in the assessment order, and penalty under section 271B could not be imposed. The appellant contended that the Audit Report was provided during assessment, satisfying the requirement. The appellant relied on a decision of the Allahabad High Court to support their case.Counter-argument and Decision:The Revenue argued that penalty under section 271B was justified due to the failure to maintain books of accounts and furnish the audit report. The Revenue contended that the Audit Report should have been filed along with the return of income as per section 44AB. The Tribunal noted that the Audit Report was provided during assessment and upheld the appellant's arguments. The Tribunal referred to a Supreme Court decision to support the deletion of the penalty.Conclusion:The Tribunal found in favor of the appellant, deleting the penalty imposed under section 271B. The appeal of the assessee was allowed based on the satisfactory proof of audit of accounts and report thereof, in line with legal interpretations provided by higher courts.