2022 (1) TMI 330

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....on 30.11.2014. However, it filed copy of audit report in Form 3CB & Form 3CD only on 09-12-2016 during the course of assessment proceedings. Since the tax audit report was not obtained and furnished before the due date for filing return of income, the AO initiated penalty proceedings u/s 271B of the Act. 3. It was submitted by the assessee that it had initially engaged M/s K.P Rao & Company, Chartered Accountants for conducting tax audit and Shri Vinay Simha, CA, the partner of the above firm was looking after its case. However, the accounts finalised by them consisted of many mistakes and was not accurate. Hence a new chartered Accountant was engaged and tax audit report obtained from him was filed before the AO. It was also submitted tha....

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....lly. Accordingly, he confirmed the penalty levied by the AO. 6. The Ld A.R reiterated the submissions made before tax authorities and submitted that there was reasonable cause for the delay in furnishing audit report and hence the penalty u/s 271B should not have been levied. He submitted that the tax audit report has been filed before the AO prior to the completion of the assessment. He submitted that non-filing of report electronically will not alter the explanations given for the delay in filing tax audit report. He submitted that there was reasonable cause for the delay. 7. The Ld D.R, on the contrary, submitted that the provisions of sec.44AB mandate furnishing of tax audit report before the due date for filing return of income. He s....

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....1B is neither mandatory nor a must. The plain language of Section 271B provides that if any person fails to get his accounts audited or obtain a report as required under Section 44AB, "the Assessing Officer may direct that such person shall pay by way of penalty". The use of the words "may direct" clearly indicates that the Assessing Officer is vested with the discretion either to impose or not to impose penalty depending upon the facts and circumstances of the case. No doubt, it is true, the said discretion should be exercised judicially and not either arbitrarily or capriciously. When there is a technical or minor breach of the law, the ends of justice require that the discretion should not be exercised in favour of punishing a venial def....

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..... However, provisions of sec.273B exempts from levying of penalty, if the assessee proves that there was reasonable cause. 11. Now the point to be examined is about the meaning of "reasonable cause". The Hon'ble Andhra Pradesh High Court has explained the meaning of "reasonable cause" in the case of Addl CIT vs Dargapandarinath Tujayya & Co. (107 ITR 850)(AP) as under:- "...If a cause, which is reasonable, in other words, a cause which appeals or satisfies any reasonable mind does not exist, then alone penalty can be imposed." Thus, if the cause shown by the assessee appeals or satisfies any reasonable mind, then the same shall constitute reasonable cause. In our view, strained relationship with the earlier CA would constitute reasonabl....