2016 (9) TMI 962 - AT - Income Tax

Penalty u/s 271B - assessee firm could not get the accounts audited within time limit prescribed u/s 44AB - reasonable cause for delay - Held that - The assessee firm got the accounts audited on 1-05-2009 and filed the return of income on 23-05-2009 which resulted delay of almost 08 months. It is noted from the submissions of the assessee that it is the first instance of delay in getting the accounts audited pertaining to assessment year 2008-09. The assessee submitted that the bone of contention of the issue was on account of audit fees of the auditor which resulted delay in completion of the audit and the same was completed by 01-05-2009 and thereafter the assessee filed the return on 26-05-2009. It is noted from the records that the assessee was not provided opportunity by the lower authorities to cross examine the statements given by Shri R.A. Sharma, Auditor of the firm and the assessee was deprived of countering Shri R.A. Sharma, Auditor. It appears from the discussions held hereinabove that the delay made by the assessee firm in filing the return of income is for the first time i.e. in A.Y. 2008-09 which was on account of dispute of audit fee between the assessee and the auditor. Hence, it appears that the dispute with the statutory auditor is a reasonable cause within the meaning of Section 273B as held in the case of Kripa Industries (I) Ltd. vs. JCIT (2001 (10) TMI 300 - ITAT PUNE ) that there is no mala fide reason for not obtaining the accounts audited in time and penalty u/s 271B should not be imposed. Taking into consideration we feel that the ld. CIT(A) is not justified in imposing the penalty u/s 271B. - Decided in favour of assessee.

Summary

Issues involved:
Appeal against penalty imposed under section 271B of the Income Tax Act for delay in getting accounts audited and submitting audit report on time.

Analysis:
The appellant appealed against the penalty imposed under section 271B of the Income Tax Act for not getting accounts audited and submitting the audit report on time. The Assessing Officer (AO) levied the penalty, stating that the delay was caused by the appellant submitting accounts late to the auditor. The appellant argued that the delay was due to a dispute with the auditor over audit fees. The AO did not accept this explanation and imposed the penalty. The appellant contended that there was no delay in filing returns in previous years, changed auditors after the incident, and was not given the opportunity to cross-examine the auditor's statements. The appellant cited various case laws to support their argument. The Tribunal noted that the delay in filing the return was due to a dispute over audit fees, which was a reasonable cause as per Section 273B. Relying on the decision in the case of Kripa Industries (I) Ltd. vs. JCIT by ITAT Pune Bench, the Tribunal held that there was no malicious intent in delaying the audit and thus, the penalty under section 271B should not be imposed. The Tribunal allowed the appeal, stating that the penalty was unjustified.

In conclusion, the Tribunal allowed the appeal of the assessee, finding that the penalty imposed under section 271B was not justified. The delay in getting the accounts audited was attributed to a dispute over audit fees, which was considered a reasonable cause. The Tribunal emphasized that there was no malicious intent in the delay and referred to relevant case laws to support its decision.