2016 (12) TMI 1590 - AT - Income Tax

Penalty U/s 271B - non filing the audit report U/s 44AB - Held that - Rule 12(2) of the Rules was made effective from 01/04/2013 wherein the assessee was required to furnish the report of the audit U/s 44AB of the Act electronically. However, the auditor of the assessee could not do it in time. This is well established fact that the assessee has got his accounts audited as per provisions of Section 44AB of the Act in time. However, the newly inserted Rule wherein the audit report was to be electronically submitted alongwith the return of income, skipped the attention of the auditor, which he has admitted by filing a letter. On the enquiry from the Bench with regard to filing electronically audit report in the subsequent years, it was stated that the assessee is regularly submitting the same and there was no fault in any subsequent year. It is also observed that the assessee was getting his accounts audited well in time regularly since last three years. The audit for the financial year relevant to assessment year under consideration was completed on 24/09/2013 in time and the assessee submitted its return on 28/09/2013. Therefore, in my considered view, the default on the part of the assessee was a bonafide human mistake. There was no dishonest attempt to break the law. Thus penalty need to be deleted - Decided in favour of assessee.

Summary

Issues:
Penalty under Section 271B for not filing audit report under Section 44AB of the Income Tax Act, 1961.

Analysis:

Issue 1: Penalty under Section 271B
The case involved an appeal against the penalty imposed under Section 271B of the Income Tax Act, 1961 for not filing the audit report under Section 44AB. The assessee's return of income was e-filed, but the audit report was not uploaded electronically. The Assessing Officer levied the penalty, which was sustained by the CIT(A). The assessee argued that it was a first-time requirement to upload audited accounts electronically, and the auditor's mistake was unintentional. The ITAT noted that the accounts were audited on time, but the auditor missed the electronic filing requirement due to a genuine human error. The ITAT referred to various case laws supporting bonafide mistakes and held that there was no dishonest attempt to evade the law. Consequently, the penalty under Section 271B was deleted, and the appeal of the assessee was allowed.

This judgment highlights the importance of considering bonafide mistakes and genuine human errors in tax compliance matters. It emphasizes that penalties should not be imposed in cases where there is no dishonest intent or deliberate attempt to violate the law. The decision provides clarity on the application of penalties under Section 271B in situations involving inadvertent errors despite timely compliance with audit requirements.