2019 (3) TMI 1349 - AT - Income Tax

Levy of penalty u/s 271B - delay in completion of statutory audit - reasonable cause for delay in conducting the audit u/s 44AB - HELD THAT - In the instant case, the C&AG has appointed the statutory auditor of the assessee company on 02.09.2014 and after confirmation of remuneration and other terms of appointment by the Board of Directors, the statutory auditors have given their acceptance on 22.09.2014. The statutory audit was thereafter undertaken and the statutory auditors have given their audit report on 15.01.2015 and thereafter the tax auditor completed the tax audit on 28.09.2015. We therefore find that the facts of the present case are parimateria to the facts in case of the M/s RRVUNL Vs. ACIT 2018 (4) TMI 256 - ITAT JAIPUR wherein held that where there is a delay in completion of statutory audit, there exist a reasonable cause for the delay in completion of tax audit and issuance of tax audit report. The ratio of the said decision equally applies in the instant case as the accounts of the assessee company are subject to statutory audit and once the statutory audit is completed, the tax audit can be initiated. Further, we find that under similar fact pattern, there was delay in completion of tax audit for the previous AY 2013-14 and the penalty proceedings so initiated u/s 271B were dropped by the Assessing officer himself. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271B of the IT Act, 1961 for failure to get accounts audited within the due date.

Analysis:
The appeal was filed against the order of the ld. CIT(A) confirming the penalty of ?1,50,000 imposed under section 271B of the IT Act, 1961 for the assessment year 2014-15. The assessee, a government undertaking in the electricity generation business, declared a loss initially, which was later revised to Nil income. The penalty was imposed by the Assessing Officer due to the failure to get the accounts audited by the specified date of 30.09.2014 as required under section 44AB. The ld. CIT(A) upheld the penalty stating there was no reasonable cause for the delay in getting the accounts audited.

During the hearing, it was argued on behalf of the assessee that the delay in getting the accounts audited was due to the delay in conducting statutory audits for previous years, specifically FY 2008-09 to FY 2012-13. The statutory auditor was appointed by C&AG, and the tax audit could only be conducted after the statutory audit. It was highlighted that the delay in statutory audits led to delays in subsequent tax audits, including the one under consideration. The assessee contended that there was a reasonable cause for the delay as per Section 273B of the Act.

Reference was made to a similar case where the penalty under section 271B was deleted by the Jaipur Bench, emphasizing that delay in statutory audits constituted a reasonable cause for non-compliance with section 44AB. The Tribunal in that case held that delay in statutory audits justified the delay in tax audits. The delay in the present case was also attributed to the completion of statutory audits before tax audits could be conducted.

After considering the arguments and the facts of the case, the Tribunal found that the delay in statutory audits indeed constituted a reasonable cause for the delay in tax audits and the issuance of the tax audit report. The Tribunal noted that the delay in completing the tax audit for the previous assessment year had led to dropped penalty proceedings. Therefore, the penalty under section 271B was directed to be deleted, and the appeal of the assessee was allowed.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that the delay in statutory audits for previous years was a valid reason for the delay in conducting tax audits, thereby justifying the deletion of the penalty imposed under section 271B of the IT Act, 1961.