Penalty under section 271B deleted when audit report filed before assessment completion despite delay

ITAT Cochin allowed the assessee's appeal and deleted the Rs. 1,50,000 penalty imposed under section 271B for delayed audit report filing in AY 2018-19. The tribunal held that penalty cannot be levied when audit report is submitted before assessment completion, which occurred on 1st July 2020. Additionally, the son's illness constituted reasonable cause under section 273B, citing precedent from Attinkara Electronics case where partner's ill health was accepted as reasonable cause for delay.

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The Appellate Tribunal (ITAT Cochin) allowed the assessee's appeal against the penalty levied under section 271B of the Income-tax Act for delay in submitting the audit report for AY 2018-19. The penalty of Rs. 1,50,000 was imposed as the audit report was not filed within the prescribed time. The assessee contended (a) reasonable cause for delay due to illness of his son, (b) audit report was filed before completion of assessment on 1st July 2020, and (c) penalty was barred by limitation if calculated from assessment date. The CIT(A) rejected these submissions.The ITAT held that since the audit report was submitted before completion of assessment, "the penalty cannot be levied in such cases." Further, the illness of the son constituted a "reasonable cause" under section 273B, referencing a precedent in Attinkara Electronics (ITA No.601/Coch/2018), where ill health of a partner was held to be reasonable cause. Accordingly, the penalty was deleted and the appeal allowed.

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