2018 (1) TMI 729 - AT - Income Tax

Penalty u/s. 271B / 271(1)(b) 271F - delay in auditing the books of account required u/s. 44AB - Held that - Assessee started its business from the F.Y 2007-08 relevant to A.Y 2008-09 and the audit was completed on 02-09-2008 i.e within time. A.Y under consideration the assessee required to file the tax audit report by 30-09-2009. However, due to such disputes and delay, the same was filed by the assessee on 15-03- 2011 by a new auditor, M/s. B.S. Murthy Associates, who was appointed on 20-12-2010. Therefore, it clearly shows that due to disputes between the assessee with its earlier auditor and resignation thereof, the same (audited accounts) was filed before the AO belatedly. On perusal of the said statement filed by the assessee before us, we find that there was delay in getting the accounts audited only in the A.Ys 2009-10 10-11 and there was no delay in immediate earlier previous year and subsequent years i.e. 2010-11 to 2016-17. Thus, the said delay in filing the tax audit was not intentional. There was reasonable cause in not getting the accounts audited and filing the same before the AO in time. Therefore, in such peculiar circumstances, the penalty is liable to be held as invalid and the same is cancelled. Thus, the penalty imposed by the AO and confirmed by the CIT-A is cancelled. The ground raised by the assessee in this regard is allowed. Penalty u/s. 271F - not filing the return of income in time required u/s. 139(1) as well as at the end of relevant A.Y - whether the delay caused in filing the return of income is reasonable or not? - Held that - We note that the delay in filing the return of income was explained by the assessee before the authorities, which have not been considered by them in their right perspective in terms of section 273B of the Act. The said section explains no penalty shall be imposable on the person or the assessee proves that there was reasonable cause for any failure in terms of section 271F of the Act. We note that the said burden in terms of section 273B was discharged by the assessee by adducing reasonable cause for the said failure. Therefore, in our opinion by reading the section 271F and 273B of the Act conjointly no penalty is invited in the present case. Thereby, in such peculiar circumstances, we cancel the penalty - Decided in favour of assessee Penalty u/s. 271(1)(b) - non submissions of specific documents and evidences sought u/s. 142(1) - Held that - We find that the assessment order dt. 29-12-2011 passed u/s. 147/143(3), wherein we noticed that there was no allegation of non compliance was made by the AO. It is observed that the assessee through his AR complied with the notice and books and other relevant documents were filed, which were examined by the AO. We find that the ld.AR has rightly pointed out that there was no allegation by the AO in not complying with the notice. - Decided in favour of assessee

Issues Involved:
1. Imposition of penalty under Section 271B of the Income Tax Act.
2. Imposition of penalty under Section 271F of the Income Tax Act.
3. Imposition of penalty under Section 271(1)(b) of the Income Tax Act.

Detailed Analysis:

1. Imposition of Penalty under Section 271B of the Income Tax Act:

The primary issue in ITA No. 331/Kol/2016 and ITA No. 334/Kol/2016 was the confirmation of penalties imposed under Section 271B for not getting accounts audited and not furnishing the audit report within the prescribed time. The assessee argued that the delay was due to disputes with the previous auditor, financial hardship, and administrative difficulties. The CIT-A upheld the penalties, stating that the provisions of Section 271B were clear and the onus was on the assessee to comply with the audit requirements.

The Tribunal, however, found that the delay in obtaining the audit report was due to bona fide reasons beyond the control of the assessee, such as disputes with the previous auditor and subsequent resignation. The Tribunal noted that the delay was not intentional and was limited to the assessment years 2009-10 and 2010-11. Consequently, the Tribunal held that there was a reasonable cause for the delay, and thus, the penalties imposed under Section 271B were cancelled.

2. Imposition of Penalty under Section 271F of the Income Tax Act:

In ITA No. 335/Kol/2016 and ITA No. 336/Kol/2016, the issue was the imposition of penalties under Section 271F for not filing the return of income within the prescribed time. The assessee contended that the delay was due to disputes with the previous auditor and financial distress, which were beyond their control. The CIT-A confirmed the penalties, stating that the reasons provided by the assessee were not acceptable and that the assessee failed to comply with the statutory requirements.

The Tribunal observed that the delay in filing the return of income was due to reasonable causes, such as disputes with the auditor and financial difficulties. The Tribunal emphasized that the delay was not intentional and that the assessee had discharged the burden of proving reasonable cause as required under Section 273B. Therefore, the penalties imposed under Section 271F were cancelled.

3. Imposition of Penalty under Section 271(1)(b) of the Income Tax Act:

The issue in ITA No. 332/Kol/2016 and ITA No. 333/Kol/2016 was the imposition of penalties under Section 271(1)(b) for non-compliance with notices issued under Section 142(1). The assessee argued that there was compliance with the notices and that the assessment order did not mention any non-compliance. The CIT-A confirmed the penalties, stating that the assessee failed to provide valid reasons for non-compliance and did not seek adjournments.

The Tribunal found that the assessment order did not allege any non-compliance and that the assessee had produced the required documents and books of account. The Tribunal referred to the decision of the Delhi Tribunal in a similar case, where it was held that penalties under Section 271(1)(b) were not justified when the assessment was completed under Section 143(3), indicating compliance. Therefore, the penalties imposed under Section 271(1)(b) were cancelled.

Conclusion:

The Tribunal allowed all the appeals, cancelling the penalties imposed under Sections 271B, 271F, and 271(1)(b) of the Income Tax Act, citing reasonable cause for the delays and non-compliance, and emphasizing that the delays were not intentional. The orders of the CIT-A confirming the penalties were dismissed.

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