2007 (6) TMI 144 - HC - Income Tax

Penalty AO imposed penalty on assessee u/s 271B of the Act for not providing any sufficient cause for belated filing of the audit report but rejected by the tribunal on the ground that there is reasonable cause for filing the report belatedly Tribunal order affirmed by the HC

Summary

Issues:
1. Penalty imposed under Sec.271B of the Income-tax Act for the assessment year 2001-02
2. Deletion of penalty by the Income Tax Tribunal
3. Justification for belated filing of Tax Audit Report

Analysis:

Issue 1: Penalty imposed under Sec.271B
The case involves an appeal filed by the Revenue against the order of the Income Tax Appellate Tribunal regarding the penalty imposed under Sec.271B of the Income-tax Act for the assessment year 2001-02. The assessee, a proprietor of a trading firm, failed to furnish the Tax Audit Report under Section 44AB of the Act by the due date, resulting in penalty proceedings being initiated. The Assessing Officer levied a penalty of Rs.1,00,000 which was upheld by the Commissioner of Income-tax (Appeals). Subsequently, the Tribunal deleted the penalty stating that there was a reasonable cause for the delay of only two months in filing the report, hence no justification for the penalty. This led to the Revenue's appeal.

Issue 2: Deletion of penalty by the Income Tax Tribunal
The Revenue contended that the delay in filing the Audit Report was not justified and was only an afterthought by the assessee. The Revenue argued that given the substantial turnover of the assessee, more vigilance was expected in complying with the filing requirements. However, the Tribunal accepted the explanation provided by the assessee, which stated that the delay was due to the accountant misplacing the tax challan, leading to a chain of events resulting in the delayed filing. The Tribunal found the reasons given by the assessee to be reasonable and accepted that there was a sufficient cause for the belated filing of the Tax Audit Report.

Issue 3: Justification for belated filing of Tax Audit Report
The Tribunal's decision was based on the provisions of Section 273B of the Income-tax Act, which states that no penalty shall be imposed if there was a reasonable cause for the failure to comply with the provisions. The Tribunal's findings were supported by valid materials and evidence, concluding that there was a reasonable cause for the delay in filing the report. The Court upheld the Tribunal's decision, emphasizing that the determination of sufficient cause for belated filing is a question of fact. As there was no error or illegality in the Tribunal's order, the Court dismissed the case, stating that no substantial questions of law arose for consideration.

In conclusion, the case highlights the importance of providing a reasonable cause for belated filing to avoid penalties under the Income-tax Act. The Tribunal's decision to delete the penalty was upheld by the Court, emphasizing the significance of valid explanations supported by evidence in such matters.