Tribunal cancels penalty for late audit report submission citing reasonable cause

The Tribunal canceled the penalty imposed under section 271B of the IT Act, 1961 on the assessee for failure to furnish audited accounts before the due date. The Tribunal found that the failure to submit the audit report on time was a technical/default, as the income was disclosed correctly under section 44AD, and the audited accounts were not used to determine income. The genuine belief of the assessee's counsel that audited accounts were unnecessary constituted reasonable cause, leading to the cancellation of the penalty and allowing the assessee's appeal.

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Issues:
Levy of penalty under section 271B of the IT Act, 1961 for failure to furnish audited accounts before the due date.

Analysis:
The appeal was against the penalty of Rs. 52,505 imposed under section 271B of the IT Act, 1961 for the assessment year 2001-02. The assessee, a contractor disclosing income as per section 44AD, got its accounts audited but failed to furnish the audited balance sheet and P&L statement before the due date. The assessee argued that since the income was disclosed as per section 44AD, the audited accounts were not submitted initially. The Assessing Officer (AO) accepted the income based on section 44AD. The Departmental Representative contended that as per section 44AD, the audited accounts had to be furnished before the due date. The Tribunal noted that the only default by the assessee was the failure to furnish the audit report on time, while the income was disclosed as per section 44AD, higher than the audited accounts. The Tribunal found that the assessee's counsel genuinely believed that since income was disclosed under section 44AD, audited accounts were not necessary. The Tribunal held that the assessee cannot be penalized under section 271B due to the genuine belief of the counsel, constituting reasonable cause. The Tribunal considered the default as technical/venial, as the audited statement was not used by either the assessee or the Revenue to determine income. Consequently, the penalty under section 271B was canceled, and the assessee's appeal was allowed.

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