2022 (3) TMI 764 - AT - Income Tax

Penalty u/s. 271B - delay in obtaining Tax Audit Report - assessee failure to comply with the provision of section 44AB - whether there was reasonable cause for the delay in filing the audit report by the assessee company? - HELD THAT - We find some force in the submission of assessee that assessee being a Public sector company Act had to submit its audit report in Form 3CA in which report u/s. 44AB is required to be submitted for the said purpose. The Tax Audit report u/s. section 44AB of I.T. Act has to be provided with copy of statutory audit report alongwith audited P L Account and balance sheet. Tax Auditor in the case of assessee whose accounts are required to be audited on any other law will have to commence his work only on the basis of such audited accounts together with information required to be submitted in Form 3CD. Being a public sector unit, the assessee company after completion of statutory audit under Companies Act is required to obtain report by CAG. The assessee accounts for the year ended 31.03.13 were not finalized and audited before the specified dated i.e. 30th September 2013. The statutory audit was completed only on 23rd January 2014 and the reports from the CAG was obtained in March 2014, thereafter the tax audit report was undertaken only after April 2014 and the report u/s. 44AB was obtained on 17th September 2014. These facts were stated by the assessee before the AO as well as before Ld. CIT(A). We are of the opinion that there was reasonable cause for the assessee for not getting the accounts audited before the statutory due date. In spite of best effort of the assessee to get it accounts audited and obtained audit report before the specified date, it could not be so due to circumstances beyond its control. Therefore, we are inclined to hold that assessee has shown reasonable cause for its failure to comply with the requirement of section 44AB before the specified date. - Decided in favour of assessee.

Summary

Issues:
1. Penalty levied under section 271B of the Income Tax Act, 1961.
2. Consideration of reasonable cause for delay in obtaining Tax Audit Report.
3. Interpretation of section 273B regarding penalty imposition.

Issue 1: Penalty under Section 271B:
The Appellant challenged the penalty of ?1,50,000 imposed by the Assessing Officer under section 271B of the Income Tax Act, 1961. The penalty was confirmed by the Ld. Commissioner of Income Tax (Appeals). The Appellant contended that the penalty should not have been levied, citing a High Court decision stating that if there is a reasonable cause for the delay and the explanation offered is not false or malafide, then the penalty is not warranted. The Respondent argued that there was no extraordinary situation causing the delay, emphasizing that the tax audit report was filed much beyond the specified date.

Issue 2: Reasonable Cause for Delay:
The Appellant, a public sector company wholly owned by the Government of India, revised its income tax returns multiple times after the original filing, citing reasons related to TDS and audited accounts. The Assessing Officer initiated penalty proceedings under section 271B due to the delay in filing the tax audit report, which was completed after the specified date. The Appellant argued that the delay was due to circumstances beyond its control, such as the process of obtaining statutory audit reports and reports from the Comptroller & Auditor General of India. The Appellant relied on legal provisions stating that no penalty shall be imposed if there was a reasonable cause for the failure.

Issue 3: Interpretation of Section 273B:
The Tribunal analyzed whether there was a reasonable cause for the delay in filing the audit report by the Appellant. Referring to relevant legal precedents, including decisions from the Special Bench of ITAT Hyderabad and High Courts, the Tribunal considered the subsequent actions of the Appellant in obtaining the audit report with minimal delay as a factor supporting the reasonableness of the cause shown for non-compliance with section 44AB before the specified date. The Tribunal ultimately concluded that there was a reasonable cause for the delay and set aside the penalty imposed under section 271B.

In conclusion, the Tribunal allowed the appeal filed by the assessee, ruling that there was a reasonable cause for the delay in obtaining the Tax Audit Report, and hence, quashed the penalty order under section 271B of the Income Tax Act, 1961. The judgment highlighted the importance of considering the specific circumstances and efforts made by the assessee in determining the applicability of penalties for non-compliance with tax regulations.