2018 (5) TMI 1907 - AT - Income Tax

Levy of penalty u/s. 271B - contravention of s. 44AB - HELD THAT - Assessee being unaware of the audit requirement, coupled with the delay in filing his returns of income. The said delay, which has been discussed in detail in the foregoing part of this order, has neither been explained by the assessee nor enquired into. Laches on the part of the assessee, which therefore has been inferred by us, cannot be a reasonable cause u/s. 273B. There could, however, be a valid reason for the delay in the filing the said returns, constituting a reasonable cause for the delayed audit. The matter, strictly speaking, should therefore go back to the file of the AO for examination of the reason/s for the delayed filing of his returns by the assessee. We, however, in the facts and circumstances of the case, as well as considering the quantum of the penalty involved, do not consider it proper to restore the matter back for the same. Giving the assessee the benefit of doubt, so that he has furnished a reasonable explanation bona fide for the delayed audit of his accounts, we direct the deletion of the impugned penalty. Needless to add, this order, rendered in the peculiar factual matrix of the case, shall not constitute a precedent. - Decided in favour of assessee.

Summary

Issues:
Validity of levy of penalty under section 271B of the Income Tax Act, 1961 for Assessment Year 2014-15.

Detailed Analysis:
The judgment revolves around the appeal by the Assessee challenging the confirmation of the penalty under section 271B of the Income Tax Act, 1961 for the Assessment Year 2014-15. The main issue is the legality of the penalty imposition in the given circumstances. The Assessee, a trader in paddy husk, failed to get his accounts audited as required under section 44AB, attracting penalty under section 271B. The Assessee claimed that the failure was due to not being advised by his counsel, which was considered an afterthought by the authorities. The penalty was upheld in the first appeal, leading to the second appeal by the Assessee (para 2).

The judgment delves into the concept of reasonable cause saving penalty, placing the burden of proof on the Assessee. The Assessee argued lack of proper advice by his counsel as a valid reason for the default. However, the tribunal found the explanation lacking substance as the Assessee's conduct indicated awareness of legal obligations and implications. The tribunal analyzed the timeline of events and lack of proactive approach by the Assessee in meeting the statutory requirements. The tribunal emphasized that ignorance of the law is not an excuse, especially in penalty proceedings where conduct is crucial (para 3.1-3.5).

Furthermore, the tribunal discussed relevant case laws cited by the Assessee, emphasizing that reasonableness is a matter of fact to be determined based on all relevant circumstances. The tribunal highlighted the importance of due diligence and timely compliance with legal obligations. Despite the Assessee furnishing an affidavit and explanations, the tribunal found the conduct lacking a reasonable cause for the penalty imposition. Ultimately, the tribunal, giving the Assessee the benefit of the doubt, directed the deletion of the penalty considering a reasonable explanation for the delayed audit of accounts in the peculiar factual context of the case (para 3.5, 4).

In conclusion, the tribunal allowed the Assessee's appeal, emphasizing that the decision in this case does not set a precedent. The order was pronounced on May 29, 2018, highlighting the resolution of the appeal in favor of the Assessee based on the specific circumstances of the case (para 5).