2019 (1) TMI 222 - HC - Income Tax

Penalty u/s 271B - failure to file the audit report - sufficient cause for not filing the audit report before the last date for filing the same namely 30.9.2012 - power to condone the delay in filing the audit report u/s 273B - appellant submited that during the said assessment year namely 2011-12, the assessee's father and mother passed away, as a result of which, the audit report could not be filed - Held that - Admittedly, the reasons assigned by the assessee have not been found to be false nor with any mala fide intention, the reasons were assigned. Therefore, this Court is of the view that the explanation offered by the assessee can be taken as a reasonable cause for his failure to file the audit report within time. We are also aware that the assessment was completed under Section 143(3) only on 29.3.2015 and on that date, the audit report was very much available with the Assessing Officer. We find that the non filing of the tax audit report before 30.9.2012 is a technical breach and admittedly, the assessee filed the audit report along with the return of income on 31.3.2013 and that the assessment was framed by the Assessing Officer only on 29.3.2015, on which date, the audit report was very much on the file of the Assessing Officer. Thus, we are of the view that the explanation offered by the assessee can be accepted as a reasonable cause for his failure to file the audit report within time and the case on hand is not a fit case for imposing penalty on the appellant. - Decided in favour of assessee

Summary

Issues:
Interpretation and application of Section 271B read with Section 273B by the Tribunal, consideration of reasonable cause for penalty, correctness of penalty imposition for late audit report filing.

Analysis:
The appeal under Section 260A of the Income Tax Act, 1961 challenged the order of the Income Tax Appellate Tribunal regarding penalty imposition for late audit report filing. The key questions raised included the correct interpretation of Sections 271B and 273B, consideration of reasonable cause by the Tribunal, and the legality of confirming the penalty for a belated audit report submission.

The primary issue for consideration was whether the appellant had a valid reason for not submitting the audit report by the due date of 30.9.2012. The appellant filed the audit report along with the income tax return on 31.3.2013, leading to penalty imposition under Section 271B. The appellant cited the sudden resignation of the accountant, resulting in disarray of files and delayed compilation as the reason for the late submission.

The Tribunal had to assess whether the appellant demonstrated reasonable cause for the delay in filing the audit report, as allowed under Section 273B of the Act. The appellant's explanation of the accountant's sudden departure and subsequent challenges in compiling the necessary data was considered in this context.

The Department argued that the appellant had a history of late tax audit report filings, referring to the previous assessment year. However, the appellant highlighted exceptional circumstances during the prior year, where the Tribunal had accepted the explanation provided, leading to the penalty's deletion.

The Court, in its analysis, referred to the Hindustan Steel Limited case, emphasizing that penalties should not be imposed for technical or venial breaches, especially when there is a genuine belief that the statutory obligation was fulfilled. Applying this principle, the Court found the appellant's explanation to be reasonable, given the circumstances, and noted that the audit report was available to the Assessing Officer during the assessment process.

Consequently, the Court allowed the appeal, answering the substantial questions of law in favor of the assessee. The penalty imposed on the appellant was deleted, considering the reasonable cause shown for the delay in filing the audit report.