2023 (2) TMI 635 - AT - Income Tax

Penalty u/s 271B - delay in furnishing a report of such audit as required u/s 44AB - HELD THAT - It is pertinent to note that w.e.f. 01.07.1995, it obligatory on behalf of the assessee that tax audit report has to be got completed by specified date, as specified in clause (ii) of section 139(1) and tax audit report has to be furnished by such specified date. Admittedly, in the present case, it is the case of the appellant that the tax audit report as required to be filed along with return of income though the tax audit report was obtained before the specified date. The submission of the assessee that the audit report was obtained before the specified date remains uncontroverted. The very object behind enactment of the provisions of section 44AB is only to enable the AO to determine the correct taxable income in accordance with the provisions of the Act. The fact that the returned income was accepted by the AO goes to show that no prejudice was caused to the AO on account of delay in submission of tax audit report. The delay in submission of the tax audit report is mere only technical breach of law, which, in our considered opinion, does not warrant levy of penalty u/s 271B of the Act. In the circumstances, we direct the AO to delete the penalty levied u/s 271B - Appeal of assessee allowed.

Summary

Issues:
1. Levy of penalty under section 271B for delay in furnishing tax audit report as required under section 44AB of the Income Tax Act, 1961.

Analysis:
The appellant, engaged in the business of gold ornaments and jewelry, filed an appeal against the penalty imposed under section 271B for delay in submitting the tax audit report for the assessment year 2016-17. The appellant contended that there was no reasonable opportunity provided to them and that there was a bona fide reasonable cause for the delay. The Assessing Officer argued that the tax audit report was required to be filed by a specific date, which the appellant missed. The appellant's explanation for the delay was that they believed the report needed to be filed along with the return of income. The penalty was imposed despite the returned income being accepted during the tax assessment under section 143(3).

The appellant appealed to the Commissioner of Income Tax (Appeals), claiming lack of opportunity to present their case and citing financial constraints as a reason for the delay. However, the CIT(A) upheld the penalty under section 271B. The appellant then approached the Appellate Tribunal, challenging the penalty.

During the Tribunal hearing, the appellant did not appear, but the Senior Departmental Representative supported the penalty. The Tribunal examined the issue of penalty under section 271B for failure to get accounts audited as required by section 44AB. The Tribunal noted that the tax audit report was obtained before the specified date, even though it was not filed along with the return of income. The purpose of section 44AB is to ensure correct taxable income determination, and since the returned income was accepted without prejudice, the delay in submitting the report was considered a technical breach, not warranting a penalty under section 271B.

As a result, the Tribunal directed the Assessing Officer to delete the penalty of Rs. 1,50,000 levied under section 271B. The appeal by the assessee was allowed, and the order was pronounced on February 3, 2023.