2011 (7) TMI 709 - HC - Income Tax

Penalty u/s 271B - Delay in filling of audit report - It is not disputed before me that except the assertion in the reply to the notice issued to the petitioner, the petitioner has not produced any evidence whatsoever as proof of the averments - It was the duty of the petitioner to ensure that the accountant does his job properly. The delay in this case is almost eight months - Decided against the assessee

Summary

Issues:
1. Imposition of penalty under Section 271B of the Income-tax Act for delay in filing audit report.
2. Consideration of explanation provided for delay in filing the report.
3. Burden of proof on the petitioner to establish reasonable cause for delay.
4. Evaluation of responsibility of the petitioner in ensuring timely filing of audit report.
5. Contumacious conduct of the petitioner and imposition of penalty.

Analysis:
1. The petitioner, an assessee under the Income-tax Act, was penalized for delay in filing the audit report for the assessment year 2000-01. The penalty was imposed under Section 271B of the Income-tax Act by the 2nd respondent. The petitioner contended that the delay was due to the misconduct of their accountant, who misutilized funds and failed to file the report on time. The petitioner sought condonation of the delay, arguing that they had completed all formalities in time, and the delay was beyond their control. The 2nd respondent, after considering the explanation, imposed a penalty of Rs. 44,831/- on the petitioner.

2. The petitioner challenged the penalty orders, contending that the imposition of penalty should not be automatic and required contumacious conduct. The petitioner argued that they had taken all necessary steps to file the report on time, but the fault lay with their accountant. The petitioner cited legal precedents to support their contention that the reason provided was sufficient for condonation of delay. The Standing Counsel for the Income Tax Department opposed the petitioner's argument, stating that the burden of proof was on the petitioner to establish a reasonable cause for the delay.

3. The court analyzed the contentions of both parties and emphasized the importance of evidence to support averments. It noted that the petitioner had not produced any evidence to substantiate their claim that the delay was solely due to the accountant's fault. The court highlighted that accepting pleadings at face value without evidence could lead to undesirable outcomes. Additionally, the court observed that the petitioner had a duty to ensure the timely filing of the audit report and could not shift responsibility solely to the accountant. The court found the delay of almost eight months to be significant and concluded that the petitioner's conduct was contumacious, justifying the imposition of the penalty. The court dismissed the writ petition, upholding the penalty orders based on the petitioner's failure to provide sufficient evidence and establish a valid reason for the delay.