2024 (8) TMI 107 - AT - Income Tax

Penalty under Section 271B deleted due to reasonable cause for delayed Tax Audit Report filing

Century Pharmaceuticals Ltd. Versus Assessment Unit, Income Tax Department represented through DCIT, Circle-1 (1) (1), Baroda

Century Pharmaceuticals Ltd. Versus Assessment Unit, Income Tax Department represented through DCIT, Circle-1 (1) (1), Baroda - TMI Issues Involved:1. Invocation of Section 271B after six years, violating Section 275(1) of the Income Tax Act.2. Confirmation of penalty of Rs. 1,50,000/- for delayed furnishing of Tax Audit Report under Section 44AB.Issue-wise Detailed Analysis:1. Invocation of Section 271B after six years, violating Section 275(1) of the Income Tax Act:This issue was raised by the assessee but was not pressed before the Tribunal. Consequently, it was dismissed as not pressed.2. Confirmation of penalty of Rs. 1,50,000/- for delayed furnishing of Tax Audit Report under Section 44AB:The core of the dispute revolved around the delayed submission of the Tax Audit Report for the Assessment Year 2016-17. The assessee admitted the delay but contended that there was a reasonable cause for it. The explanation provided by the assessee was that the delay was due to a dispute between the Board of Directors and a nominee director from the Gujarat Venture Finance Limited (GVFL), a Government of Gujarat undertaking.The assessee had raised Rs. 250 lakhs from GVFL in January 2008, and as per the Venture Capital Assistance Agreement, GVFL's nominee director's approval was required for finalizing accounts, declaring dividends, and changing accounting policies. In FY 2015-16, the Board decided to pay an interim dividend, which was initially not objected to by the GVFL nominee. However, during the statutory audit in July 2016, the GVFL nominee objected to the dividend payment, leading to a standoff and delay in finalizing the accounts.The delay in finalizing the statutory audit resulted in the Tax Audit Report being filed late. The assessee provided detailed documentation, including minutes of Board meetings and the Registrar of Companies' approval for extending the AGM deadline, to substantiate the delay.The Tribunal found that the explanation provided by the assessee constituted a reasonable cause for the delay. The delay in finalizing the audited accounts directly impacted the filing of the Tax Audit Report. The Tribunal noted that the Assessing Officer and the Commissioner of Income Tax (Appeals) did not provide any substantial reasons for rejecting the assessee's explanation. The Tribunal concluded that the delay was due to circumstances beyond the assessee's control and directed the deletion of the penalty of Rs. 1,50,000/- imposed under Section 271B.Conclusion:The appeal was partly allowed, with the Tribunal holding that there was sufficient cause for the delay in filing the Tax Audit Report and directing the deletion of the penalty. The order was pronounced in the open court on 30/07/2024 at Ahmedabad.