No penalty u/s 271B, If the audit report is obtained within the due date, but return is filed after the due date.

[AMIT BAJAJ ADVOCATE]

I have had a discussion lately on the topic whether penalty u/s 271B is imposable in case the audit report u/s 44AB is obtained within the due date of filing the ITR u/s 139 but the ITR is filed after such due date? I have tried to examine such situation out of my Legal conscience as follows:
The due date for filing Income Tax Return for corporate and those assessees who are required to get their accounts audited is 30th september every year. But it has been extended to 15th October this year. The Due date for furnishing Audit report u/s 44AB to the Income Tax Department is also 30th september every year which also has been extended to 15th october this year.

Earlier before the introduction of annexure less forms the audit report was required to be submitted with the department before the due date of return of Income, otherwise it attracted penal provisions u/s 271B. Penalty under section 271 B is a sum equal to half per cent of the total sales, turnover or gross receipts from business or profession as the case may be , in such financial year or one lakh rupees, whichever is less.

But after the introduction of annexure less forms i.e ITR4, ITR5, ITR6 etc., the Tax Audit Report is not required to be submitted along with the Return of Income nor it is to be submitted separately any time before or after the due date. But one should get the Tax Audit Report from his CA before the due date of submitting the Return of Income and fill the relevant columns of the Return of Income on the basis of such report.

The Tax Audit Report is required to be submitted if it is called for by the Income Tax Officer during the Assessment proceedings. This has also been explained in CBDT's circular No 3 of 2009. The relevant portion of the said circular is reprduced herebelow:

"7. Following clarifications are also issued in respect of certain issues arising from furnishing the returns in the above mentioned forms:

(i) An assessee should obtain the report of audit from an accountant under section 44AB of the Act on or before the due date of the furnishing of the return and should fill out the relevant columns of the return forms on the basis of such report. However, the report of audit should not be attached with the return or furnished separately any time before or after the due date. The assessee should retain the report with himself. If called for by any income-tax authority during any proceeding under the Act, it shall be incumbent upon the assessee to furnish/produce the same in original. No penalty under section 271B shall be initiated or levied for not furnishing the tax audit report on or before the due date. However, if the audit report has not been obtained before the due date, provisions of section 271B shall continue to be attracted."

As per the above circular You are not in contravention of any provisions if tax audit report is obtained before due date.

There is no Penalty attracted if the Tax Audit Report is not submitted along with the Income Tax Return on or before the due date. However , if the Tax Audit report has not been obtained from the CA on or before the due date of filing return of Income, Penalty under section 271 B shall be attracted.

Although section 234A is attracted for late filing of return .There was one view expressed by someone to me that filing up the ITR ( particularly tax audit columns) is furnishing of the tax audit report and if that is not done before due date , penalty can be levied .  

 In my view  circular asks the assessee to fill up the relevant tax audit columns in the return of Income and file the return . It no where mentions that fill up the columns and file the ITR before due date. Moreover section 271B should be read with section 44AB and not with section 139.

Penalty u/s 271B is imposed on two grounds i.e for not getting the books of accounts audited within due date and for not furnishing the audit report within due date of filling of return of income. Now as per above circular furnishing of audit report has been done away with after the introduction of annexureless forms. The only thing that is required is to obtain the audit report within due date and fill the relavant audit columns of the ITR,  if it is done no penalty can be initiated u/s 271B.

Therefore in my view if you have got the audit report from your C.A. on or before the due date of furnishing the Return of Income, there is no penalty u/s 271B attracted even if you file return after the due date. 

Please Note: The views expressed are my Personal Views only.

Discussions to this article

[DEV KUMAR KOTHARI]

There is no harm in filing TAR and obtaining an acknowledgment from the AO before the due date to avoid all controversies. This will be in strict compliance of S.44AB.

Furnisahing of TAR is an independent requirement. TAR was always  not necessarily to be filed with the return itself, we used to file TAR with return if return was filed timely. In case of delay in filing of return, we used to file TAR. The return form also had question in this regard like whether TAR has been filed, if yes mention the date.

As TAR is not necessarily an enclosure to the Return, but there is  is a seperate and independent requirement to obtain and furnish, I feel the Board has no power to make an exemption. Furthermore, u/s 139C the Board may make rules and cannot provide exemption by way of circular.

For tax payer best way is to play safe.