2018 (3) TMI 130 - AT - Income Tax

Levy of penalty u/s 271B - delay in submission of the tax audit report - filing return of income belatedly - Held that - We find that in the instant case, the assessee had indeed given substantial reasons for the delay in submission of the tax audit report, even though the said report was duly obtained within time on 30.09.2008. Reasons adduced by the assessee for the delay are not reiterated herein for the sake of brevity. Authorities that the reasons adduced by the assessee were not disbelieved by the Revenue and taking into account the past conduct of the assessee in filing his return in time voluntarily and the difficulty faced by him during the financial year 2008-09 due to his ill health leading to acute physical trouble thereby making him immobile, we find that the assessee has indeed adduced proper reasons and is entitled for immunity in terms of Section 273B. We find that in the case of CIT vs. A.N. Arunachalam 1994 (1) TMI 65 - MADRAS High Court had held that the audit report for claiming deduction u/s 80J though not filed along with return of income but was furnished before the AO before the completion of assessment proceedings, the deduction u/s 80J of the Act could not be denied. It was further held that the stipulation that the audit report is to be filed along with return of income shall not be construed as a mandatory condition for granting deduction u/s 80J of the Act, provided the same was furnished and made available to the Ld. AO before the completion of assessment proceedings. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty u/s 271B of the Income Tax Act, 1961 for assessment year 2008-09.

Analysis:
The appeal was filed against the order confirming the penalty under section 271B of the Income Tax Act, 1961. The main issue was whether the Commissioner of Income Tax (Appeals) was justified in upholding the penalty. The assessee, engaged in wholesale business, faced health issues leading to the delay in filing the return for the assessment year 2008-09. The tax audit report was obtained within the time frame, but the return was filed belatedly due to the assessee's health conditions. The Revenue initiated penalty proceedings citing non-filing of the audit report along with the return by the due date. The assessee argued that the delay was due to reasonable cause, supported by medical certificates and family circumstances. The assessee relied on CBDT Circular No. 5 of 2007, stating that the audit report need not be enclosed with the return. The Revenue, however, imposed the penalty, which was upheld by the Commissioner of Income Tax (Appeals).

The Tribunal observed that the tax audit report was obtained within time, and the assessee's health issues were substantiated by medical certificates. The Commissioner relied on a High Court decision where no reasons for delay were provided, leading to the penalty confirmation. In contrast, the assessee in this case presented substantial reasons for the delay, considering his past timely return filings and health challenges. The Tribunal referred to a Madras High Court case where filing the audit report before completion of assessment proceedings sufficed for deductions. The Tribunal noted that the audit report was filed along with the belated return, and the Circular supported the assessee's position. Consequently, the Tribunal found no grounds for penalty under section 271B and canceled the same, allowing the appeal raised by the assessee.

In conclusion, the Tribunal allowed the appeal, canceling the penalty under section 271B for the assessment year 2008-09. The decision was based on the assessee's valid reasons for the delay in filing the return, supported by medical certificates and past compliance history, along with legal precedents supporting the filing of audit reports before completion of assessment proceedings.