2023 (2) TMI 853 - AT - Income Tax

Penalty u/s 271B - failure to file audit report on due date - HELD THAT - When the assessee has voluntarily complied the law, the revenue has not substantiated by placing anything on record that the explanation given by the assessee are not genuine. The assessee has filed the return has paid the taxes and the returned income is accepted by the revenue. Therefore, based on these facts and voluntary compliance made by the assessee the lower authorities should have exercised the discretion available with him in not penalizing the assessee as there is no direct or indirect loss of delay in submission of the audit report and there is no malafide intention and the assessee has voluntarily complied though belatedly. The reasons based on upon it the audit report was filed belated is explained by the assessee by filling a correct fact on record and the assessee immediately filed the audit report after getting rewriting the books of account and the reason placed on record are the genuine and it may happen to anyone and has to face technical bugs in the system and the delay based on that technical bug in filling the audit report is based on genuine reasons. Therefore, she has sufficient reason to file the audit report delayed. We find that this is a reasonable cause which has resulted into failure of the assessee to comply with the law. We find that penalty levied u/s 271B cannot be levied for the reason that there was a failure on the part of the assessee to obtain tax audit report was on account of a bona fide reason of crashing the compute data and thus has to rewrite the same. The revenue could not show that the belief of the assessee was mala fide. There are various judicial precedents of not levying the penalty under such circumstances. In view of this, we reverse the orders of the lower authorities and direct the learned assessing officer to delete the penalty levied u/s 271B of the Act. Appeal of the assessee is allowed.

Summary

Issues:
1. Confirmation of penalty under Section 271B of the Income Tax Act, 1961.

Detailed Analysis:
The appeal was filed by the assessee against the order of the National Faceless Appeal Centre, Delhi, confirming a penalty under Section 271B of the Income Tax Act, 1961. The case originated from an order passed by the National Faceless Assessment Centre in Delhi. The penalty was imposed for the failure to file an audit report on time. The assessee contended that the penalty was unjustified and should be deleted.

The facts revealed that the assessee e-filed the income tax return, declaring total income, which was selected for scrutiny assessment. The penalty was initiated for the failure to file the audit report on the due date. The assessee provided explanations, stating that the accounts got corrupted at the last minute, causing a delay in finalizing the audit report. However, the authorities found the reasons provided by the assessee unacceptable, stating that no reasonable cause was found for the delay in filing the audit report.

Upon receiving the penalty order, the assessee appealed to the CIT(A)/NFAC, but the appeal was dismissed. The assessee then appealed to the tribunal, presenting arguments supported by documentary evidence, including the audit report, an affidavit, and past compliance history. The revenue authorities, on the other hand, emphasized the absence of independent evidence to support the technical glitch claim.

After hearing both parties, the tribunal found that the assessee had voluntarily filed the audit report, paid taxes, and the returned income was accepted by the revenue. The tribunal concluded that there was no direct or indirect loss due to the delay in filing the audit report, and the assessee had shown genuine reasons for the delay. The tribunal held that the penalty under Section 271B could not be justified as the failure to obtain the tax audit report was due to a bona fide reason of computer data crash, leading to rewriting the accounts. The tribunal, therefore, directed the assessing officer to delete the penalty of Rs. 1,50,000 levied under Section 271B of the Act.

In conclusion, the tribunal allowed the appeal of the assessee, emphasizing the voluntary compliance, absence of malafide intent, and genuine reasons for the delay in filing the audit report. The tribunal overturned the lower authorities' decision and ordered the deletion of the imposed penalty.