2022 (6) TMI 548 - AT - Income Tax

Penalty u/s 271B - non-compliance of the provisions of sec. 44AB - delay in filing the tax audit report - Scope of reasonable cause of delay - HELD THAT - As stated that the accountant who was looking into the records of accounts was admitted in the hospital and even the Doctor‟s certificate was also enclosed and submitted as evidence - also explained that practically it was difficult to get an experienced accountant within the short period of time in a place like Akkalkot, Dist. Solapur. Therefore, the entire events and circumstances were beyond the control of the assessee and he was helpless and for such reasons delay occurred which was never deliberate nor intentional. The ld. CIT(A) however, as per the reasons appearing at para 6 of his order did not support the submissions of the assessee and upheld the levy of penalty imposed by the A.O u/s 271B of the Act. On going through the entire case records, we find that the assessee has reasonably well explained before the ld. CIT(A) the reasons why there was delay in filing the tax audit report and non-compliance as per the provisions of sec. 44AB of the Act. The reasons are definitely such that they were beyond the control of the assessee and since the Income-tax Act is a welfare legislation the practical difficulties of the tax payers assessee and the bonafide nature has to be considered. In this case, the assessee had even submitted the Doctor's Certificate under whose treatment the accountant was admitted in the hospital. The ld. CIT(A) should have considered all these facts in its proper perspective. Section 273B of the Act provides that the penalty u/s 271B need not be imposed if there is a reasonable cause for the said failure. In our considered view, the assessee in this case through documentary evidence has explained the reasonable cause and accordingly we set aside the order of the CIT(A) and direct the A.O to delete the penalty from the hands of the assessee. Appeal of assessee allowed.

Summary

Issues:
Imposition of penalty under section 271B of the Income-tax Act, 1961 for failure to file audit report on time.

Analysis:
The appeal before the Appellate Tribunal ITAT Pune concerned the imposition of a penalty under section 271B of the Income-tax Act, 1961 on the assessee for failure to file the audit report on time. The assessee, engaged in wholesale trading of food grains, had filed the return of income declaring total income of Rs. 6,33,380/-, which was later scrutinized under CASS resulting in an assessment of total income at Rs. 9,54,780/-. The penalty was imposed as the audit report was not filed within the prescribed date, and was updated only after a significant delay. During the appellate proceedings, the assessee explained the reasons for the delay, citing the hospitalization of the accountant handling the accounts and the difficulty in finding a replacement in a remote location. The Commissioner of Income Tax (Appeals) upheld the penalty imposed by the Assessing Officer, despite the explanations provided by the assessee.

Upon review of the case records, the Appellate Tribunal found that the reasons for the delay in filing the audit report were beyond the control of the assessee. The Tribunal noted that the Income-tax Act is a welfare legislation and must consider practical difficulties faced by taxpayers in a bona fide manner. The assessee had submitted a Doctor's Certificate as evidence of the accountant's hospitalization, supporting the claim of reasonable cause for the delay. Section 273B of the Act provides that a penalty need not be imposed if there is a reasonable cause for the failure. Considering the documentary evidence provided by the assessee, the Tribunal concluded that a reasonable cause existed for the delay and directed the Assessing Officer to delete the penalty imposed on the assessee.

In conclusion, the Appellate Tribunal allowed the appeal of the assessee, setting aside the order of the Commissioner of Income Tax (Appeals) and directing the deletion of the penalty under section 271B of the Income-tax Act, 1961. The Tribunal emphasized the importance of considering practical difficulties faced by taxpayers and the bona fide nature of their actions in such cases.