2018 (4) TMI 256 - AT - Income Tax

Levy of penalty u/s 271B - failure to get the accounts audited and furnished the audit report before the specified due date - reasonable cause for the delay in completing the tax audit and submitting the report of the tax auditor within the specified due date - Held that - In the present case, the reason for the delay has been stated to be the delay in completing the statutory audit for the earlier years which has resulted in delay in completion of statutory audit for the year under consideration and the resultant delay in completing the tax audit and submitting the report thereof. As submitted that without completing the statutory audit, the tax audit could not have been completed. Statutory auditors are appointed by the Comptroller & Auditor General of India under section 619(2) of the Companies Act, 1956 and they have completed the statutory audit and submitted their audit report dated 27.03.2014. Thereafter, the tax audit has been completed on 15.07.2014 and the revised return was filed on 16.9.2014. The Hon ble Punjab & Haryana High Court in the case of CIT v. Punjab State Leather Development Corpn. Ltd. 2001 (7) TMI 1275 - PUNJAB AND HARYANA HIGH COURT has held that delay in completion of statutory audit was a reasonable cause for non-compliance with section 44AB and it was held that the Tribunal was right in cancelling penalty levied under section 271B - in the instant case, where there has been a delay in completion of statutory audit, there exist a reasonable cause for the delay in completion and submission of the tax audit report under section 44AB of the Act. The penalty levied under section 271B is therefore deleted. - Decided in favour of assessee

Summary

Issues:
Levy of penalty under section 271B for failure to get accounts audited and furnish audit report before due date.

Analysis:
The appellant, a State Government undertaking, filed its return of income based on unaudited books, later revised based on audited books showing a loss. Penalty under section 271B was imposed for delay in getting accounts audited and furnishing the audit report before the due date. The appellant claimed delay was due to statutory audit delay, demerger issues, and new Companies Act requirements. The Assessing Officer found the reasons unacceptable and imposed a penalty of ?1.5 lakh.

On appeal, the CIT(A) upheld the penalty, stating the reasons for delay lacked evidence, and issues with auditors' fees were not valid excuses. The appellant argued delay was due to statutory audit delays in previous years, affecting the current year's tax audit. The appellant cited cases where delay in statutory audit was considered a reasonable cause for non-compliance with section 44AB.

The Tribunal found the delay in statutory audit completion was a reasonable cause for the delay in submitting the tax audit report under section 44AB. Citing precedent, the Tribunal held that delay in statutory audit completion constituted a reasonable cause for non-compliance with section 44AB, leading to the deletion of the penalty under section 271B. Consequently, the appeal was allowed, and the penalty was revoked.

In conclusion, the Tribunal ruled in favor of the appellant, deleting the penalty imposed under section 271B due to a reasonable cause for the delay in completing and submitting the tax audit report. The decision was based on the precedent that delay in statutory audit completion can be a valid reason for non-compliance with section 44AB, leading to the cancellation of the penalty.