2022 (5) TMI 328 - AT - Income Tax

Penalty u/s 271B - transactions requiring audit report u/s. 44AB - delay caused in filing a report and the enclosures as per sec 44AB - HELD THAT - It is an admitted fact that the assessee's case is very well covered u/s. 44AB of the Act as his turnover has indeed exceeded the basic threshold limit of Rs. 40 lakhs in the relevant previous year. There is further no dispute that neither the assessee had got prepared his audit report nor the same had been furnished well within time to the assessing authority; as the case may be. We therefore hold that mere ignorance of law pleaded herein at the assessee's behest hardly deserves to be treated as a reasonable cause for disturbing the impugned penalty as upheld in the CIT(A)'s lower appellate discussion. The same stands confirmed therefore.

Summary

Issues:
- Imposition of penalty under Section 271B of the Income Tax Act, 1961 for failure to get accounts audited u/s. 44AB.
- Whether ignorance of law can be considered a reasonable cause for not complying with statutory provisions.

Issue 1: Imposition of Penalty under Section 271B:
The Appellate Tribunal ITAT Hyderabad dealt with the appeal for AY 2014-15 regarding the imposition of a penalty of Rs. 1,50,000 under Section 271B of the Income Tax Act, 1961. The CIT(A) upheld the penalty, emphasizing that the taxpayer, engaged in trading in shares & derivatives, had a turnover exceeding the threshold for mandatory audit u/s. 44AB. Despite being educated and maintaining regular books of account, the taxpayer's ignorance of the law was not accepted as a valid excuse. The CIT(A) referred to legal precedents emphasizing the need for plausible and convincing reasons for non-compliance. The Tribunal dismissed the taxpayer's appeal, affirming the penalty based on non-compliance with audit requirements.

Issue 2: Ignorance of Law as a Reasonable Cause:
The taxpayer contended that being a salaried employee, he was unaware of the statutory requirement for audit u/s. 44AB, citing ignorance as a reasonable cause for penalty deletion under Section 273. However, the Tribunal rejected this argument, noting that the taxpayer's turnover exceeded the threshold, necessitating audit compliance. The Tribunal held that mere ignorance of the law could not justify penalty deletion, as upheld by the CIT(A). The Tribunal affirmed that ignorance of law cannot be considered a reasonable cause for non-compliance with statutory provisions, ultimately dismissing the taxpayer's appeal.

In summary, the Appellate Tribunal upheld the penalty under Section 271B for the taxpayer's failure to comply with audit requirements u/s. 44AB, emphasizing that ignorance of the law cannot serve as a reasonable cause for non-compliance. The judgment underscores the importance of taxpayers' awareness and adherence to statutory provisions, even in cases where ignorance is claimed as a defense.