2021 (11) TMI 264 - AT - Income Tax

Penalty u/s 271B - non-furnishing of Tax Audit Report - HELD THAT - It is the claim of the assessee that it had not only got his accounts audited as per mandate of law u/s 44AB of the Act, but had also duly uploaded the audit report in Form No. 3CB and Form No. 3CD a/w his return of income that was filed on 17.09.2011 - there appears to be some substance in the explanation of the assessee as regards his failure to participate in the course of the proceedings before the lower authorities. Be that as it may, we are of the considered view that in the totality of the facts involved in the present case before us the matter requires to be revisited by the A.O for verifying the aforesaid claim of the assessee i.e he had duly got his accounts audited u/s 44AB of the Act and had uploaded the tax audit reports in Form No. 3CB and Form No. 3CD, dated 05.08.2011 a/w his return of income that was filed on 17.09.2011. In case, if the claim of the assessee is found to be in order, then, the penalty imposed by the A.O u/s 271B would stand vacated. We, thus, in terms of our aforesaid observations set-aside the matter to the file of the A.O for the limited purpose of giving effect to our aforesaid observations. Needless to say, the A.O shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Upholding of penalty u/s 271B for non-furnishing of Tax Audit Report.
2. Failure to comply with audit report submission requirements.
3. Reopening of the case under section 147 of the Income Tax Act.

Analysis:

Issue 1: Upholding of penalty u/s 271B for non-furnishing of Tax Audit Report:
The appellant, engaged in trading, filed the return of income for A.Y. 2011-12 but failed to furnish the audit report during assessment proceedings. The AO imposed a penalty of ?1,50,000 under section 271B. The CIT(A) upheld the penalty, emphasizing the necessity of audit as per section 44AB due to turnover exceeding the threshold. The appellant's argument of uploading the audit report with the return was not considered. The ITAT set aside the matter to the AO for verification of the audit report submission, stating that if found in order, the penalty would be vacated.

Issue 2: Failure to comply with audit report submission requirements:
The AO observed the appellant's turnover exceeded the threshold requiring audit under Sec. 44AB, but the audit report was not submitted. Despite the appellant's claim of uploading the report with the return, the CIT(A) upheld the penalty, emphasizing the need for audit compliance. The ITAT directed the AO to verify the audit report submission, indicating that if compliant, the penalty would be canceled.

Issue 3: Reopening of the case under section 147 of the Income Tax Act:
The case was reopened under section 147 as the appellant's turnover necessitated audit under Sec. 44AB. The AO initiated penalty proceedings under section 271B due to non-furnishing of the audit report. The CIT(A) upheld the penalty, citing the appellant's failure to provide the required report. The ITAT remanded the matter to the AO for verification of the audit report submission, with a directive to afford the appellant a reasonable opportunity to be heard.

In conclusion, the ITAT allowed the appeal for statistical purposes, setting aside the penalty imposed under section 271B pending verification of the audit report submission by the AO.