2020 (4) TMI 458 - AT - Income Tax

Penalty levied u/s 271B - delay in getting accounts audited u/s 44AB - Whether no specific charge was communicated vide the show cause notice, prior to levy impugned penalty? - HELD THAT - We have noted that in the show cause notice, the AO has fairly mentioned to show cause and to appear within 7 days as to why a penalty u/s 271B should not be levied. AO also mentioned about the opportunity of hearing in person or through authorised representative. The assessee failed to substantiate and furnish plausible explanation, the explanation furnished by the assessee was not found to be plausible - no reasonable cause for not levying penalty was disclosed to the AO. AO levied minimum penalty prescribed u/s 271B. - Except making a submission of assessee that senior partner was no well, no plausible explanation was furnished. Assessee filed the copy of death certificate of the Sr Partner of the assessee. The date of death of the partner is 05.04.2018 that is almost six years of the relevant period. Moreover, the assessee was getting the audited report from last several years and cannot plead the ignorance of the provisions. - Levy of penalty confirmed.

Summary

Issues:
1. Confirmation of penalty u/s 271B for assessment year 2011-12.
2. Validity of the penalty order.
3. Reasonable cause for delayed obtaining of tax audit report.
4. Justifiability of the penalty amount.
5. Compliance with statutory provisions regarding audit report submission.

Analysis:

Issue 1: Confirmation of penalty u/s 271B
The appeal was against the order of CIT(A) confirming the penalty levied u/s 271B for the assessment year 2011-12. The AO initiated the penalty as the books of account were audited after the due date for filing the return of income. The assessee argued that there was a reasonable cause for the delay due to the senior partner's illness, but this argument was not accepted by the authorities. The penalty was upheld by both the AO and CIT(A), leading to the appeal before the tribunal.

Issue 2: Validity of the penalty order
The assessee contended that the show cause notice was void ab initio as no specific charge was communicated, making it impossible for the assessee to provide an explanation. The tribunal noted that the notice did mention the penalty provision and provided an opportunity for the assessee to be heard. The absence of a medical certificate for the ill partner weakened the assessee's argument, and no plausible explanation was provided, leading to the penalty being upheld.

Issue 3: Reasonable cause for delayed obtaining of tax audit report
The assessee claimed a reasonable cause for the delayed audit report due to the senior partner's illness. However, the tribunal found the lack of medical evidence and the history of timely audits in previous years undermined this claim. The tribunal emphasized the importance of substantiating reasonable causes for delays in compliance with statutory requirements.

Issue 4: Justifiability of the penalty amount
The penalty amount of ?1.5 lakhs was imposed by the AO as the assessee failed to get the books of account audited before the specified date without any reasonable cause. The tribunal upheld this penalty amount, considering the lack of convincing evidence or explanation provided by the assessee to justify the delay in compliance.

Issue 5: Compliance with statutory provisions regarding audit report submission
The tribunal emphasized the importance of timely compliance with statutory provisions, especially regarding the submission of audit reports. The failure to provide a valid reason for the delay in obtaining the audit report led to the confirmation of the penalty. The tribunal highlighted the need for proper documentation and substantiation of reasons for delays to avoid penalties.

In conclusion, the tribunal dismissed the appeal, upholding the penalty u/s 271B for the assessment year 2011-12 due to the lack of a valid reasonable cause for the delayed audit report submission and the failure to provide convincing evidence to support the assessee's claims.