2016 (10) TMI 220 - AT - Income Tax

Levy of penalty u/s. 271B - Delay in getting the accounts audited and obtaining tax audit report u/s. 44AB - Held that - As per the provisions of section 44AB of the Act the, the assessee was required to get accounts audited for the assessment year under appeal on or before 30-09-2008. However, the assessee could get the accounts audited on 20-01-2009. Thus, there was delay of 3 months and 20 days in getting the accounts audited and obtaining tax audit report u/s. 44AB of the Act. A perusal of the written submissions filed by assessee and impugned order shows that the delay in getting the accounts audited was for the reason that the Accountant of the assessee left his service without finalization of the accounts. The assessee engaged the service of another Accountant. The newly appointed Accountant took some time to pick up the threads of the work left in between by the outgoing incumbent. Further, it has been submitted that the major source of income of assessee is service charges received from M/s. Maxpro Associates, a sister concern of assessee. The income from M/s. Maxpro Associates is accounted on the basis of credit notes issued. Since, M/s. Maxpro Associates could not finalize its books of account in time, M/s. Maxpro Associates issued credit notes to the assessee for the last quarter of the financial year ended on 31-03-2008 in December, 2008. The assessee finalized its books after receiving credit notes from M/s. Maxpro Associates. However, the assessee filed the tax audit report as envisaged u/s. 44AB of the Act along with the return of income within the extended time for filing of return of income u/s. 139(4) of the Act. The explanation furnished by the assessee for delay in finalization of accounts and getting the same audited thereafter seems to be plausible. The delay in finalization of accounts was beyond the control of assessee. In the absence of finalization of accounts it was not possible for the assessee to get the same audited within the time specified under the provisions of the Act. Mere delay in filing of tax audit report as envisaged u/s. 44AB would ipso facto not attract the penalty where the delay in filing of audit report has been reasonably explained. The Co-ordinate Bench of the Tribunal in the case of Prachin Land Infra Pvt. Ltd. Vs. ITO (2013 (11) TMI 1668 - ITAT PUNE) in similar circumstances where the Assessing Officer levied penalty u/s. 271B for obtaining the Audit Report on 11-02-2009 as against the statutory date of 31-10-2007, deleted the penalty levied u/s. 271B of the Act - Decided in favour of assessee

Summary

Issues:
Levy of penalty u/s. 271B for delay in filing audit report as per section 44AB of the Income Tax Act, 1961.

Analysis:
The appeal was against the order confirming the penalty u/s. 271B for violating section 44AB of the Act. The assessee, engaged in property business, filed the return for the assessment year 2008-09, which was accepted with minor disallowances. However, penalty proceedings were initiated for delayed filing of audit report. The Commissioner of Income Tax (Appeals) upheld the penalty, leading to the second appeal by the assessee.

The assessee argued that the delay was due to reasonable causes, such as the accountant leaving during the financial year and issues with the sister concern's credit notes. They emphasized that the delay was only 3 months and 20 days, and there was no malafide intention to defraud revenue. The appellant cited various case laws to support their plea for penalty deletion.

The Department supported the penalty, stating the delay was a violation of section 44AB without sufficient evidence-backed explanations. However, the Tribunal found the assessee's explanations reasonable. The delay in finalizing accounts and obtaining audit was beyond the assessee's control. The Tribunal referred to previous cases where penalties were deleted for similar delays, emphasizing that mere delay in filing the audit report does not automatically warrant a penalty.

Ultimately, considering the circumstances and legal precedents, the Tribunal ruled in favor of the assessee, setting aside the penalty u/s. 271B. The decision highlighted the importance of reasonable causes and lack of malafide intentions in penalty determinations.

This detailed analysis showcases the legal intricacies involved in the judgment, focusing on the arguments presented by both parties, the Tribunal's reasoning, and the relevant case laws influencing the final decision.