2019 (3) TMI 630 - AT - Income Tax

Levy of penalty u/s. 271B - delay in getting the accounts audited - failure to comply with the provisions of section 44AB of the Act subject to provisions of section 273B i.e. reasonable cause for the delay - contention of the AR was that the delay in filing the return of income was due to damage to computer system due to virus infection - HELD THAT - The assessee got his books of accounts audited on 28/03/2014 which was made available to the Assessing Officer and no prejudice has been caused to the Revenue. The assessee had only committed technical venial breach which does not create any loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings. The Madras High Court in the case of CIT vs. A.N. Arunachalam (1994 (1) TMI 65 - MADRAS HIGH COURT) in the context of filing of audit report for claiming deduction u/s. 80J of the Act, observed that once audit report has been made available before the Ld. Assessing Officer before the completion of assessment proceedings, the assessee should be granted deduction u/s. 80J of the Act. We observe that this judgment was rendered in the context of adjudication of quantum of deduction claimed by the assessee. Thus assessee had committed only technical venial breach for which he cannot be penalized. Penalty to be deleted - Decided in favour of assessee.

Summary

Issues:
Levy of penalty u/s. 271B of the Act for delay in getting accounts audited.

Analysis:
The appeal was against the order of the CIT(A) regarding the penalty u/s. 271B of the Act for the assessment year 2013-14. The assessee's gross receipts required audit as per section 44AB by 30/09/2013 but were audited on 28/03/2014, leading to the penalty. The CIT(A) upheld the penalty. The assessee claimed a virus infection caused data loss as a reasonable cause for the delay, citing relevant case laws. The ITAT considered if the penalty was justified given the timely availability of audit reports to the Assessing Officer. Referring to case law, the ITAT concluded that the delay was a technical venial breach without causing revenue loss, akin to the context of deduction claims. Thus, the penalty u/s. 271B was deleted, allowing the appeal.

This case involved the interpretation of penalty provisions u/s. 271B of the Act for delayed audit report submission. The primary issue was whether the delay in filing the audit report due to a computer virus constituted a reasonable cause under s.273B. The ITAT analyzed the facts, considering precedents and the impact on the Revenue. The ITAT emphasized that the timely availability of audit reports to the Assessing Officer was crucial in determining the penalty applicability. Drawing an analogy from a related case law on deductions, the ITAT concluded that the delay was a technical breach without financial loss, warranting deletion of the penalty. The decision highlighted the importance of timely compliance and the impact on penalty imposition in tax matters.

The case underscored the significance of timely compliance with audit requirements under the Act. The ITAT scrutinized the reasons for the delay, assessing if the virus infection was a valid ground under s.273B for penalty waiver. By referencing relevant judgments, the ITAT established that the delay, though technical, did not prejudice the Revenue as the audit report was available before assessment completion. Drawing parallels to a deduction claim case, the ITAT reasoned that the penalty imposition was unwarranted in the absence of revenue loss. The decision showcased the balance between procedural lapses and substantive impact on tax liabilities, emphasizing the need for a reasonable cause for penalty waiver under the Act.