2022 (1) TMI 835 - AT - Income Tax

Penalty levied u/s 271B - delay in filing the audit report under section 44AB - reasonable cause of delay - HELD THAT - We find that the Department has conducted a search under section 132 of the Act on 11.11.2010 and the search related assessments were completed in all the cases on 28.03.2013. Department has seized the books of account and other records of the assessee and all the firms at the time of search in the middle of financial year 31.03.2011. It is also a fact that the assessee filed the return of income belatedly only on 01.01.2015 for the assessment year 2013-14. It is also a fact that the assessee is also a partner in various firms, wherein, search was conducted and books of accounts were taken under the custody of the Department. The delay was caused due to search conducted by the Department and the books of accounts are not readily available with the assessee. Under the above facts and circumstances, the delay was occurred, in our opinion, the delay in filing the audit report was neither willful nor wanton or inadvertently, it was only beyond the control of the assessee. There is a reasonable cause for the delay in filing the audit report within time by the assessee. Therefore, imposing penalty under section 271B of the Act for belated filing the audit report is unwarranted and not reasonable. We find that both the authorities below have not considered the explanations of the assessee. In view of the above, we set the order passed by the ld. CIT(A) and penalty levied under section 271B of the Act stands cancelled. - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271B for delay in filing audit report under section 44AB of the Income Tax Act, 1961.

Analysis:
The appeal was against the penalty imposed under section 271B of the Income Tax Act for delayed filing of the audit report. The Assessing Officer noted a delay of fifteen months in filing the audit report, leading to the imposition of a penalty of ?1,50,000. The assessee explained that the delay was due to search proceedings conducted by the Department, affecting the availability of necessary documents for filing. The Tribunal found that the delay was beyond the assessee's control and not willful. The Department had conducted a search, seizing books of accounts, and completing assessments in related cases by March 2013. The delay in filing the audit report was due to the search proceedings and unavailability of books of accounts, justifying the delay as reasonable. The Tribunal concluded that the penalty imposition was unwarranted, as the delay was not intentional, and the explanations provided by the assessee were not disputed by the authorities. Consequently, the Tribunal allowed the appeal, canceling the penalty under section 271B.

In summary, the Tribunal considered the circumstances leading to the delay in filing the audit report and found that the delay was due to factors beyond the assessee's control, primarily the search proceedings conducted by the Department. The Tribunal emphasized that the delay was not intentional or willful, but a result of the search operations affecting the availability of necessary documents. The Tribunal's decision to cancel the penalty under section 271B was based on the understanding that there was a reasonable cause for the delay, as explained by the assessee and supported by the search-related events conducted by the Department.