2003 (6) TMI 176 - AT - Income Tax

Tribunal cancels penalty for failure to enclose tax audit report

Gem Motors. Versus Income Tax Officer.

The Tribunal allowed the appeal, ruling in favor of the assessee and canceling the penalty imposed under section 271B for failure to enclose the tax audit ... Penalty - For failure to get accounts audited Issues:Appeal against penalty under section 271B for failure to enclose tax audit report as required under section 44AB.Analysis:The assessee, a partnership firm, appealed against the penalty levied under section 271B for not enclosing the tax audit report as required under section 44AB. The counsel for the assessee argued that the tax audit was completed within time, and all necessary documents were sent to the advocate in Calcutta, who handled income-tax affairs. Various evidences, including affidavits, audit reports, and payment receipts, were submitted to support the claim that the audit report was obtained and filed before the due date of the return. The counsel relied on legal precedents to argue that the penalty should not be imposed for technical breaches if there is a sufficient cause. The advocate's mistake should not be held against the assessee, as per previous court decisions.The Departmental Representative contended that the assessee failed to file the audit report as required, and the mistake of the advocate should not be a sufficient cause to avoid the penalty. It was argued that the advocate's role was not legally mandated for filing the tax audit report. The CIT(A) upheld the penalty, relying on lower authorities' orders and legal precedents.The Tribunal analyzed the case and noted that the amendment to section 44AB from the assessment year 1995-96 made it mandatory to furnish the audit report with the return before the due date. It was observed that the returns for other years were filed along with audit reports, but for the assessment year in question, the report was inadvertently not enclosed due to the advocate's failure. The Tribunal found that there was no deliberate violation of the law, as the audit report was obtained and paid for before the due date. The failure to enclose the report was considered a technical mistake that could have been rectified by issuing a deficiency letter. Therefore, the Tribunal held that the penalty under section 271B was not justified, as there was a sufficient cause for the failure, and accordingly, the penalty was canceled.In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee and canceling the penalty imposed under section 271B.