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2025 (1) TMI 1181 - AT - Income TaxValidity of penalty order u/s 271B - Allegation of non-furnishing audit report under the provisions of Section 44AD - HELD THAT - As the reasons given by the assessee that there was substantial loss in the first year of operation that it was busy in payment of creditors and that partners are senior citizens are not reasonable cause for failure to get the accounts audited u/s 44AB of the Act. It is seen from the order that assessee had turnover of Rs. 8, 53, 66, 166/- which is substantially higher than the limit prescribed u/s 44AB of the Act. We also find that the purported tax audit report dated 23.09.2013 enclosed in submission dated 25.11.2024 had not been submitted before the lower authorities. This is clear from orders of both AO and CIT(A). We further find that the assessee has not any enclosed copies of profit and loss account and balance sheet in the submission dated 25.11.2024. It has enclosed Annexure 4 (fixed assets) Annexure 1 (profit sharing ratio) Annexure 2 3 (books of account) Annexure 6 (quantitative details of principle items) and Annexure 7 (accounting ratios). Hence the contradictory stand taken by the assessee in the present proceedings that it has got its accounts audited and furnished before/by the specified date deserves to be rejected at the threshold itself. The decisions relied upon by the assessee are also based on different set of facts and hence the ratio is not applicable to the facts of the present case - Decided against assessee.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Timeliness of the Penalty Order The Tribunal initially quashed the penalty order under Section 271B, holding it was time-barred. The limitation period was extended by various CBDT Circulars due to the COVID-19 pandemic, allowing orders to be passed by 30.09.2021. The penalty order dated 08.08.2021 was thus within the permissible period. The Tribunal recalled its previous decision based on this extension, affirming the penalty order's timeliness. 2. Reasonable Cause for Non-compliance The assessee claimed ignorance of compliance requirements due to the seniority of partners and substantial business losses as reasonable causes under Section 273B. The Tribunal found these reasons insufficient, emphasizing that ignorance of law is not a valid excuse. The mandatory nature of Section 44AB requires audit compliance, irrespective of the assessee's financial or personal circumstances. 3. Application of CBDT Circulars The Tribunal addressed the assessee's argument that circulars cannot override statutory provisions. However, the Tribunal had previously considered this argument when recalling its earlier order. The Tribunal found that the extension of the limitation period by circulars was valid and applicable, thus upholding the timeliness of the penalty order. 4. Relevance of Cited Case Law The assessee cited several cases to support their position, arguing procedural lapses should not result in penalties. However, the Tribunal found these cases factually distinguishable. For instance, in some cited cases, audit reports were furnished during assessment proceedings, unlike the present case where the audit report was not submitted. The Tribunal also referenced higher court decisions affirming penalties for non-compliance with Section 44AB, reinforcing the penalty's appropriateness. SIGNIFICANT HOLDINGS The Tribunal held that:
The Tribunal concluded that the penalty under Section 271B was rightly imposed, as the assessee failed to demonstrate a reasonable cause for non-compliance with the statutory audit requirements. The appeal was dismissed, and the penalty order was upheld.
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