2024 (12) TMI 876 - AT - Income Tax

Levying penalty u/s 271B - assessee had not obtained and furnished the Audit Report from the Accountant within the due date - onus to prove - HELD THAT - Levy of penalty u/s 271B is not automatic. Before levying penalty, the concerned officer is required to find out that even if there was any failure referred to in the concerned provision, the same was without a reasonable cause. The initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to in the concerned provision. Thereafter the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause. Reasonable cause as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. As in the present case from the conduct, behavior and attitude of the assessee, it is clear that as this was the first year of the audit and the assessee had also not filed any returns of income for the earlier years as the income was way below the maximum amount not chargeable to tax, the assessee was not aware that the audit report was required to be filed on or before due dates. There was a delay in identifying a CA for carrying out the Audit finally obtained the audit report on 30/03/2019. The main crux for the delay was that the assessee was on an honest bonafide belief that there is no due date for filing the audit report separately and the same can be filed along with the return of Income within the time prescribed u/s 139(4) of the Act. We have also perused the Assessment record and found that the assessee has only committed a technical breach without any loss to the exchequer of the Government as there was no addition made by the Ld.AO during the assessment proceeding.AO has also observed that the case is audited u/s 44AB of the Act. Tribunal have also taken a consistent view that when the tax audit report was made available to AO before completion of the assessment proceedings, then for technical venial breach without any malafide intention, penalty cannot be levied u/s 271B of the Act. There is nothing contrary that has been brought on record by the Ld. DR at the time of the hearing. Assessee has only committed a technical breach without any loss to the exchequer of the Government. Assessee appeal allowed.

Summary

Issues Involved:

1. Condonation of delay in filing the appeal.
2. Imposition of penalty under Section 271B of the Income Tax Act, 1961.
3. Existence of reasonable cause under Section 273B for failure to comply with Section 44AB.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The appellant filed the appeal with a delay of 8 days. The appellant submitted an affidavit explaining that the delay was due to reasons beyond their control and was neither intentional nor willful. The Appellate Tribunal, after considering the submissions and the principles laid down by the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors., decided to condone the delay. The Tribunal emphasized that substantial justice should prevail over technical considerations, especially when the delay was not deliberate. The Tribunal found this to be a fit case to condone the short delay and admitted the appeal for adjudication.

2. Imposition of Penalty under Section 271B:

The penalty under Section 271B was imposed because the appellant failed to obtain and furnish the audit report within the due date as required under Section 44AB. The appellant argued that the delay was not intentional and was due to a lack of awareness about the requirement to file the audit report by the specified date. The appellant also highlighted that this was the first year of audit, and there was a delay in identifying a Chartered Accountant to carry out the audit. The authorities below, however, held that ignorance of the law is not a valid excuse and upheld the penalty.

3. Existence of Reasonable Cause under Section 273B:

The Tribunal examined whether there was a reasonable cause for the appellant's failure to comply with Section 44AB, as provided under Section 273B. The Tribunal noted that the penalty under Section 271B is not automatic and that the existence of a reasonable cause must be considered. The appellant demonstrated that the delay was due to an honest and bona fide belief about the filing requirements, and there was no deliberate intention to disregard the law. The Tribunal found that the appellant's conduct indicated a lack of awareness rather than willful neglect. The Tribunal also observed that the tax audit report was made available to the Assessing Officer before the completion of the assessment proceedings, and there was no loss to the exchequer. Consequently, the Tribunal concluded that the appellant had a reasonable cause for the delay, and the penalty under Section 271B should not be imposed.

In conclusion, the Tribunal annulled the order of the lower authority and canceled the penalty levied under Section 271B, allowing the appeal filed by the appellant. The decision emphasized the importance of considering reasonable cause and the circumstances surrounding the appellant's failure to comply with statutory obligations.