2019 (6) TMI 96 - AT - Income Tax

Penalty u/s 271B - failure of the assessee to file the audit report before the due date of filing the return u/s 139(1) i.e. 30th September, 2012 - violation of provisions of section 44AB - HELD THAT - Since the assessee has filed the return of income on 29th March, 2014, therefore, the AO considered this late filing of the return along with the audit report as violation of provisions of section 44AB and consequently the AO levied the penalty u/s 271B. AO has not levied the penalty for not filing of the audit report along with the return of income filed by the assessee on 29th March, 2014 but the AO has levied the penalty due to the delay in filing the audit report as it was filed along with the return of income on 29th March, 2014. Further, the rule 12(2) even if it is considered to be applied as on the date of filing the return, the relevant date is the due date of filing the return u/s 139(1). Hence when the assessee has already filed the audit report on 29.03.2014 and as per the return of income the audit report was already obtained and read on 2nd September, 2012, then in the facts and circumstances of the case prior to the return of income filed by the assessee there was no occasion for the assessee to file the audit report separately. The amended provisions of rule 12(2) came into effect from 01.04.2013 whereas the due date of filing the return under section 139(1) is 30th September, 2012 and hence when the amended rule was not applicable as on 30th September, 2012, the assessee has made out the clear case of reasonable cause for not complying with the provisions of section 44AB and consequently the case of the assessee clearly falls under the provisions of section 273B. Accordingly, as relying on KK. SPUN PIPE. 2005 (4) TMI 28 - PUNJAB AND HARYANA HIGH COURT the penalty levied under section 271B is not sustainable - Decided in favour of assessee.

Summary

Issues:

1. Penalty under section 271B for failure to file audit report before due date of filing return of income.
2. Applicability of Rule 12(2) of the IT Rules for the assessment year in question.
3. Interpretation of CBDT Circular No. 3 of 2009 and Notification No. 24/2014 regarding audit report submission.

Issue 1: Penalty under section 271B

The appellant filed its return of income belatedly for the assessment year 2012-13 on 29th March, 2014. The AO initiated penalty proceedings under section 271B of the IT Act as the audit report was not submitted before the due date of filing the return. The appellant contended that the return was filed under section 139(4) due to unavoidable circumstances, and the audit report was filed along with the return. The ld. CIT (A) upheld the penalty, stating that the appellant failed to comply with section 44AB read with Rule 12 of the IT Rules. However, the Tribunal held that the penalty was not sustainable as the appellant had reasonable cause for not filing the audit report separately before the due date, as per the provisions of section 273B of the Act.

Issue 2: Applicability of Rule 12(2) of the IT Rules

The ld. CIT (A) applied the amended provisions of Rule 12(2) of the IT Rules as on the date of filing the return by the appellant on 29th March, 2014. The Tribunal noted that the AO did not penalize the appellant for not filing the audit report along with the return, but for the delay in filing it with the belated return. The Tribunal emphasized that the amended rule came into effect from 01.04.2013, after the due date of filing the return under section 139(1) of the Act. Therefore, the Tribunal concluded that the appellant had a reasonable cause for not complying with section 44AB, and the penalty under section 271B was not justified.

Issue 3: Interpretation of CBDT Circular and Notification

The appellant argued that CBDT Circular No. 3 of 2009 and Notification No. 24/2014 mandated online submission of audit reports from the assessment year 2013-14 onwards. The appellant contended that the amended provisions of Rule 12(2) were not applicable for the year in question. The Tribunal did not delve deeply into this issue as the penalty was overturned based on the reasonable cause for non-compliance with section 44AB.

In conclusion, the Tribunal allowed the appeal of the appellant, holding that the penalty under section 271B was deleted due to the reasonable cause shown for not filing the audit report separately before the due date of filing the return of income.