2016 (8) TMI 595 - AT - Income Tax

Penalty u/s.271B - Failure to get accounts audited - Held that - In the instant case, no doubt the assessee has not furnished the audit report during the course of assessment proceedings but such failure has been explained by the Ld. Counsel for the assessee as due to non-appearance by the Authorised Representative of the assessee due to the marriage of his son and the illness of his younger brother. Considering the totality of the facts of the case and considering the fact that assessee has filed the audit report before the AO during the course of penalty proceedings, got his accounts audited, paid the tax and filed the return of income much before the specified date, therefore, we are of the considered opinion that it is not a fit case for levy of penalty u/s.271B of the I.T. Act. We therefore set aside the order of the CIT(A) and direct the AO to cancel the penalty levied u/s.271B Penalty u/s.271(1)(b) - CIT(A) confirmed the penalty on the ground that assessee could not file documentary evidence to prove the reasonable cause for non-compliances of notices - Held that - Submission of the Ld. Counsel for the assessee that the advocate was busy in marriage function of his son till 30-11-2011 and thereafter from 05-12-2011 onwards he was busy with the treatment of his younger brother who was detected with brain cancer and subsequently he died in our opinion is a reasonable cause for non compliance to the statutory notices. No doubt the assessee should have filed documentary evidence such as marriage invitation card and medical prescriptions of the younger brother of the advocate to substantiate his case that there was a reasonable cause on the part of the assessee for non compliance to such statutory notices. However, taking a lenient view and considering the totality of the facts of the case and the submission of the Ld. Counsel for the assessee at the bar that the younger brother of the tax consultant expired subsequent to the operation, we are of the opinion that there was a reasonable cause on the part of the assessee for non compliance to such statutory notices. We accordingly set aside the order of the CIT(A) and direct the AO to cancel the penalty of ₹ 10,000/- levied u/s.271(1)(b) of the I.T. Act. - Decided in favour of assessee

Issues Involved:
1. Penalty under Section 271B of the Income Tax Act.
2. Penalty under Section 271(1)(b) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Penalty under Section 271B of the Income Tax Act:

The assessee challenged the order of the CIT(A) confirming the penalty of ?1 lakh levied by the AO under Section 271B for not filing the tax audit report as required under Section 44AB. The facts reveal that the assessee, engaged in trading of Iron, Steel, MS Scrap, etc., filed his return on 02-09-2009 declaring an income of ?4,88,380/-. The AO noted that the assessee failed to file the tax audit report by the assessment date and completed the assessment ex parte. The assessee contended that the return was filed along with the tax audit report on 02-09-2009, supported by a Xerox copy of the audit report dated 20-05-2009. However, the AO rejected this, observing discrepancies in the uploaded return and levied a penalty of ?1 lakh under Section 271B.

The CIT(A) upheld the penalty, noting that the assessee failed to furnish the tax audit report during assessment proceedings and did not fill the relevant columns in the return of income regarding the tax audit. The CIT(A) concluded that the assessee did not provide the tax audit report without reasonable cause, justifying the penalty under Section 271B.

Upon appeal, the Tribunal considered the submissions and noted that the assessee had obtained the audit report on 28-05-2009, paid self-assessment tax on 26-08-2009, and uploaded the return on 02-09-2009. The Tribunal found merit in the assessee’s claim that the accounts were audited before the specified date. The Tribunal emphasized that the AO did not present any evidence from the auditor to refute the audit date. Considering the totality of the facts and the reasonable cause for non-compliance, the Tribunal held that it was not a fit case for penalty under Section 271B. Thus, the penalty was cancelled, and the assessee's appeal was allowed.

2. Penalty under Section 271(1)(b) of the Income Tax Act:

The assessee also challenged the order of the CIT(A) confirming the penalty of ?10,000/- levied under Section 271(1)(b) for non-compliance with statutory notices. The AO issued multiple notices under Sections 143(2) and 142(1), which the assessee failed to comply with, leading to an ex parte assessment and penalty imposition.

Before the CIT(A), the assessee explained the non-compliance due to the tax consultant’s son's marriage and the consultant’s brother's illness. However, the CIT(A) was not convinced, noting the lack of documentary evidence to support these claims and upheld the penalty.

On appeal, the Tribunal considered the arguments and noted the reasonable cause for non-compliance, including the consultant’s personal issues. Although the assessee did not provide documentary evidence, the Tribunal took a lenient view due to the consultant’s brother’s critical illness and subsequent death. The Tribunal concluded that there was a reasonable cause for non-compliance and directed the AO to cancel the penalty under Section 271(1)(b). Thus, the assessee's appeal was allowed.

Conclusion:

In both appeals, the Tribunal found reasonable cause for the assessee's non-compliance and directed the cancellation of the penalties under Sections 271B and 271(1)(b) of the Income Tax Act. Both appeals filed by the assessee were allowed.

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