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2022 (6) TMI 411 - AT - Income TaxPenalty u/s 271B - Tax Audit - delay in getting the books of accounts audited and furnishing the same - period of limitation for passing penalty orders - assessee have failed in complying with the provision of section 44AB - HELD THAT - It is not disputed by both the parties that there is no finding in the assessment order for levy of penalty for the alleged default u/s. 271B of the Act and it is also not disputed that after passing of the order on 31.12.2011, the alleged notice is only issued on 16.06.2014 after two and half year time which is very abnormal time to fasten the liability on account alleged default after the assessment is completed. In between there is not notice and even the assessment order is silent on the levy of the alleged penalty. The argument of the ld. AR has thus, forced and is also supported by the judicial decisions relied upon and as extracted here in above. In the light of the above discussion the levy of penalty by the assessing officer after passage 30 months after the completion of the assessment, we are of the opinion that the penalty proceedings are barred by limitation and consequently penalties levied under section 271B cannot be sustained and thus we delete the said penalty levied under section 271B - Assessee appeal allowed.
Issues Involved:
1. Legality and sustainability of the penalty order under Section 271B of the Income-tax Act, 1961. 2. Confirmation of penalty by the Commissioner of Income Tax (Appeals) despite the assessee's contention of reasonable cause for delayed tax audit. 3. Validity and timing of the notice for penalty under Section 271B. 4. Applicability of judicial precedents in favor of the assessee. Issue-wise Detailed Analysis: 1. Legality and Sustainability of the Penalty Order under Section 271B: The assessee argued that the penalty order passed by the AO was "highly illegal, bad in law, unsustainable and not in accordance with the provisions of law." The assessee contended that the accounts were mandatorily audited by the Registrar of Co-operative Society, and only after this could the tax audit under Section 44AB be conducted. The delay in the tax audit was due to the government auditors, who were not under the control of the assessee, completing their audit and issuing the certificate on 09.02.2010, well after the due date. The AO did not find this explanation satisfactory and imposed a penalty of Rs. 1,00,000/- under Section 271B. 2. Confirmation of Penalty by the Commissioner of Income Tax (Appeals): The CIT(A) upheld the AO's penalty, stating that the turnover of the assessee exceeded the limit laid down by Section 44AB, mandating a tax audit. The CIT(A) rejected the argument that the delay was due to the audit by the Department of Cooperative Societies, asserting that the assessee was required to get the accounts audited by a Chartered Accountant as per the Income Tax Act. The CIT(A) found no infirmity in the penalty imposed by the AO. 3. Validity and Timing of the Notice for Penalty under Section 271B: The assessee argued that there was no finding of default in the assessment order dated 31.12.2011, and no notice was issued until 16.06.2014, which was deemed vague and non-specific. The Tribunal noted that the penalty notice was issued after an abnormal delay of more than 30 months from the completion of the assessment. The Tribunal relied on judicial precedents, including the case of CIT Vs. E.C.C Project (P.) Ltd., where it was held that no penalty is leviable under Section 271B if the AO fails to record satisfaction in the assessment order. The Tribunal also cited the case of Amit Sabharwal, where it was held that penalty proceedings initiated after a significant delay were barred by limitation. 4. Applicability of Judicial Precedents in Favor of the Assessee: The Tribunal considered several judicial precedents favoring the assessee. In the case of Amit Sabharwal, it was held that penalty proceedings initiated after more than 4.5 years from the original assessment order were barred by limitation. Similarly, in the case of Sibonarayan Patro & Bros., it was held that penalty proceedings initiated after an abnormal delay were invalid. The Tribunal found these precedents applicable and concluded that the penalty proceedings in the present case were barred by limitation. Conclusion: The Tribunal concluded that the penalty proceedings initiated after an abnormal delay of 30 months were barred by limitation and could not be sustained. Consequently, the penalty of Rs. 1,00,000/- levied under Section 271B was deleted. The appeal of the assessee was allowed, and the order was pronounced in open court on 2nd June, 2022.
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