2000 (10) TMI 173 - AT - Income Tax

Summary

Issues involved: Appeal against levy of penalty u/s 271B for delay in filing audit report as per s. 44AB of the IT Act.

Summary:
The appeal was filed by the assessee against the penalty imposed under section 271B of the Income Tax Act for not filing the audit report on time as required by section 44AB. The audit report was delayed by 3 months and 26 days, resulting in a penalty of Rs. 1 lakh. The assessee, a cooperative society, argued that the penalty proceedings were initiated after a significant delay and that there was no default as the audit report was eventually filed. The assessee also contended that the delay in obtaining the audit report was due to the appointment of a special auditor by the Registrar of Cooperative Societies, over which the assessee had no control. The Tribunal considered these arguments and held that the penalty imposed was unjustified, citing the principle that penalties should not be imposed for technical breaches. The penalty was cancelled, and the appeal was allowed.

The Tribunal noted that the cooperative society's accounts were required to be audited by a special auditor appointed by the Registrar of Cooperative Societies, and the delay in obtaining the audit report was attributed to the statutory auditors' actions. It was emphasized that penalties should not be imposed on the assessee for non-performance of duties by public agencies like government auditors. Referring to the decision in Hindustan Steel Ltd. vs. State of Orissa, it was established that penalties should not be levied for technical breaches of statutory provisions. The Tribunal found that the delay in filing the audit report was not due to any fault on the part of the assessee, and therefore, the penalty under section 271B was deemed unjustified and cancelled. The Tribunal concluded that the assessee had taken proper care to comply with statutory provisions, and the penalty was not warranted in this case.

In conclusion, the Tribunal allowed the assessee's appeal, canceling the penalty imposed under section 271B of the Income Tax Act. The Tribunal held that the delay in filing the audit report was not attributable to any fault on the part of the assessee, as the audit was completed only after addressing the auditor's points. The Tribunal emphasized that penalties should not be imposed for technical or venial breaches of statutory provisions, especially when the delay was due to actions beyond the assessee's control.