2019 (1) TMI 994 - AT - Income Tax

Levy of penalty u/s 271B - violation of provisions of Section 44AB - assessee did not attach tax audit report u/s 44AB of the Act, along with the return of income - Held that - The assessee had only committed a technical venial breach without creating any loss to the exchequer. In the instant case, the tax audit report was very much made available before AO before the completion of the assessment proceedings. As In the case of Commissioner of Income-tax v. A.N. Arunachalam 1994 (1) TMI 65 - MADRAS HIGH COURT in the context of filing of audit report for claiming deduction u/s 80J of the Act, had observed that once the audit report has been made available before the AO, before completion of the assessment proceedings, then the assessee should be granted deduction u/s 80J of the Act. We observe that this decision was rendered in the context of adjudication of quantum of deduction of the assessee. Hence the said analogy could very well be drawn and used in a penalty proceedings like that of the assessee. As assessee had committed only technical venial breach for which he could not be penalized. - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty u/s 271B of the Income Tax Act, 1961 for failure to attach tax audit report u/s 44AB of the Act along with the return of income for Assessment Year 2013-14.

Detailed Analysis:

1. Background and Penalty Imposition:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming the penalty u/s 271B of the Income Tax Act, 1961. The penalty was levied by the Income Tax Officer for the Assessment Year 2013-14 due to the failure of the assessee to attach the tax audit report u/s 44AB of the Act along with the return of income. The penalty amount was calculated at 0.5% of the gross turnover, amounting to ?77,559.

2. Assessee's Arguments:
The assessee, engaged in the manufacturing of leather goods, had filed the return of income on 31/10/2013. The tax audit was completed on 27/09/2013, but the tax audit report could not be attached with the return due to the sudden illness of the tax auditor. Despite providing a medical certificate indicating the illness of the assessee during the period, the authorities did not find the reason satisfactory. The assessee had taken a divergent stand before the Assessing Officer and the Commissioner of Income Tax (Appeals), attributing the failure to the auditor and personal medical conditions, respectively.

3. Appellate Tribunal's Decision:
The Appellate Tribunal noted that the tax audit report was completed before the due date of filing the return and was submitted to the Assessing Officer prior to the completion of assessment proceedings. Citing a precedent from the Madras High Court, the Tribunal emphasized that the availability of the audit report before the Assessing Officer should suffice, even if not attached with the return. It was deemed a technical venial breach without causing any loss to the exchequer. Relying on this reasoning, the Tribunal directed the Assessing Officer to delete the penalty levied u/s 271B of the Act.

4. Conclusion:
The Tribunal allowed the appeal of the assessee, emphasizing that the technical breach did not warrant the imposition of a penalty. The decision highlighted the importance of timely submission of required documents to tax authorities, even if not attached with the return, to avoid penal consequences. The judgment provided clarity on the interpretation of tax laws concerning the attachment of audit reports and penalties under the Income Tax Act, 1961.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented, and the final decision rendered by the Appellate Tribunal ITAT Kolkata.