2024 (9) TMI 787 - AT - Income Tax

Penalty under Section 271B upheld for delayed audit report filing despite white ant damage claim

Zoyeb Hyderabadwala Versus ITO – Ward – 1 (2) Direct Taxes Building, Visakhapatnam

The ITAT Visakhapatnam upheld penalty under section 271B for delayed filing of audit report under section 44AB. The assessee claimed books of accounts ... Penalty levied u/s 271B - delay in filing the audit report u/s 44AB within time - HELD THAT:- Admittedly assessee has not completed the audit of the books of accounts u/s 44AB of the Act for the impugned assessment year. Submission of the assessee is that the invoices and other records are destroyed by the white ants forcing the assessee to reconstruct the books of accounts for submitting to the Chartered Accountant for getting the books of account audited under section 44AB of the Act, hence there is delay in filing the audit report under section 44AB. In the instant case, assessee has stated that books of accounts are destroyed by white ants and the audit report of the books of accounts was commenced after 26.11.2018 only. Section 273B provides that no penalty thereby imposable on the assessee, if the assessee proves that there is a reasonable cause for the said failure. However, assessee was not able to submit any evidences to show that assessee is having a reasonable cause showing that the books of accounts have been destroyed by the white ants. The cause adduced by the assessee could not be considered as reasonable cause. In the absence of assessee not being able to demonstrate reasonable cause the non-filing of audit report attracts provisions of section 271B in our considered opinion - no hesitation to confirm the penalty levied u/s 271B AO and we do not find any infirmity in the order of the CIT(A) on this issue. The grounds raised by the assessee is dismissed. Issues:1. Failure to file audit report within the extended due date under section 44AB of the Income Tax Act, 1961.2. Imposition of penalty under section 271B for delayed filing of audit report.Analysis:Issue 1: Failure to file audit report within the extended due date under section 44AB of the Income Tax Act, 1961:The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the penalty imposed under section 271B of the Income Tax Act, 1961 for failure to file the audit report within the extended due date. The Assessing Officer found that the audit report was filed after the extended due date of 31.10.2018, leading to the imposition of the penalty. The appellant argued that the delay was due to the destruction of invoices and records by white ants, which necessitated the reconstruction of books for audit. However, the appellant failed to provide concrete evidence to support this claim. The Tribunal noted that under section 273B, no penalty is imposed if there is a reasonable cause for the failure, but in this case, the appellant's reason was not considered sufficient. As a result, the Tribunal upheld the penalty imposed by the Assessing Officer and the decision of the Commissioner of Income Tax (Appeals).Issue 2: Imposition of penalty under section 271B for delayed filing of audit report:The grounds of appeal raised by the appellant primarily challenged the confirmation of the penalty by the Commissioner of Income Tax (Appeals). The appellant contended that the penalty was upheld without considering the facts and circumstances leading to the delay in filing the audit report under section 44AB. The appellant argued that despite providing explanations and evidence for the delay, the penalty was confirmed. However, the Tribunal found that the appellant's reasons for the delay were not sufficient to warrant the non-imposition of the penalty under section 271B. The Tribunal held that the failure to file the audit report within the prescribed time attracted the provisions of section 271B, as the appellant could not establish a reasonable cause for the delay. Consequently, the Tribunal dismissed the appeal and upheld the penalty imposed.In conclusion, the Tribunal dismissed the appeal of the assessee and confirmed the penalty imposed under section 271B for the delayed filing of the audit report under section 44AB of the Income Tax Act, 1961. The Tribunal found that the reasons provided by the assessee for the delay were not considered as a reasonable cause, leading to the imposition of the penalty.