2022 (3) TMI 776 - AT - Income Tax

Penalty levied u/s 271B - failure to get accounts audited and furnishing of a report of such audit under section 44AB - sufficient cause for default - HELD THAT - As decided in FAITH INTERTRADE VERSUS ITO, WARD-3 (3) (2) AHMEDABAD 2022 (3) TMI 710 - ITAT AHMEDABAD imposition of penalty under section 273B of the Act is not mandatory, rather it is discretionary, because if the assessee proves that there was a reasonable cause for the said failure, then the AO ought to have considered the same and then proceed with levying penalty. In the present case assessee has explained before the lower authorities that non-submission of audited accounts was due to non-finalisation of accounts, because all the books of accounts and other relevant materials were seized by the Investigation Wing of the department, and they were not made available to the assessee. The assessee has filed his return of income on the basis of provisional accounts, and such return was accepted by the department. These facts were not denied by the Revenue and attained finality. AO has simply invoked his discretionary power under section 271B without appreciating the reasons putforth by the assessee for the alleged failure on his part for non-submission of audited accounts - explanation offered by the assessee ought to have been accepted by the Revenue as being sufficient cause. - Decided in favour of assessee.

Summary

Issues:
Confirmation of penalty under section 271B for not furnishing tax audit report under section 44AB of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Confirmation of Penalty under Section 271B
- The appeal was filed against the penalty levied under section 271B of the Act for not furnishing the tax audit report under section 44AB of the Income Tax Act for the assessment year 2013-14.
- The assessee, engaged in land/property and trading in sands/stones, had his documents seized during a search and seizure operation under section 132 of the Act. Due to this, the assessee faced challenges in finalizing accounts and filing the tax audit report.
- The Assessing Officer (AO) issued a penalty notice under section 271B, which the assessee contested, citing genuine hardship due to the unavailability of seized documents for audit purposes.
- The Commissioner of Income-tax (Appeals) and the Revenue upheld the penalty, leading to the appeal before the Tribunal.
- The Tribunal considered a similar case where it was held that the imposition of penalty under section 271BA is discretionary and not mandatory if the assessee proves a reasonable cause for the failure.
- The Tribunal found merit in the assessee's explanation that non-submission of audited accounts was due to the unavailability of seized documents, which hindered the finalization of accounts.
- The Tribunal concluded that the explanation offered by the assessee constituted a sufficient cause for not submitting the audited accounts, and hence, canceled the imposed penalty of ? 54,106 under section 271B.

Conclusion:
The Tribunal allowed the appeal, canceling the penalty under section 271B, considering the genuine hardship faced by the assessee due to the unavailability of seized documents for audit purposes, which hindered the finalization of accounts.