2023 (4) TMI 131 - AT - Income Tax

Penalty u/s 271B - failure to get the accounts audited and furnished the audit report within the prescribed time - HELD THAT - Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Admittedly, the income declared by the assessee in the return of income was accepted by the revenue without making any addition and disallowance. Likewise, the assessee has also furnished the tax audit report before the completion of the assessment. It appears that the book results shown by the assessee were substantially accepted by the revenue as genuine and the compliance was made by the assessee with some delay. The delay has also been explained by the assessee that it was the 1st year of the business. We are not inclined to uphold the findings of the authorities below. Accordingly, we set-aside the finding of the learned CIT-A and direct the AO to delete the penalty by him. Hence, the ground of appeal of the assessee is hereby allowed.

Summary

Issues Involved:
Penalty under section 271B of the Income Tax Act, 1961 for failure to get accounts audited and furnish the tax audit report within the prescribed time.

Detailed Analysis:

Issue 1: Penalty under section 271B
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the penalty under section 271B of the Income Tax Act, 1961 for the Assessment Year 2015-16. The assessee contended that the penalty order was bad in law and disputed the penalty amount of Rs. 1,50,000 levied by the Assessing Officer. The main issue raised was the confirmation of the penalty by the CIT-A.

Issue 2: Compliance and Explanation
The assessee, engaged in the business of dairy products, obtained agency from a well-known entity and dealt in various dairy products. The Assessing Officer observed that the turnover for the relevant assessment year was significant and required the accounts to be audited under section 44AB of the Act. The penalty proceedings were initiated due to the failure to furnish the Tax Audit Report by the specified date. The assessee argued that it was the first year of business, the tax was paid, and the audit report was submitted albeit with a delay.

Issue 3: CIT-A Decision
The CIT-A upheld the penalty, stating that being a semi-literate individual was not a valid reason for non-compliance with tax laws. The minimum penalty was imposed for non-compliance, not for concealment of income. The CIT-A emphasized that a business of such scale necessitated consulting experts for statutory compliance. The CIT-A found the assessee's contentions unpersuasive and upheld the AO's decision.

Issue 4: Appellate Tribunal Decision
The Appellate Tribunal considered the arguments presented by both parties. It highlighted that penalty under the Income Tax Act is punitive and should be imposed for deliberate non-compliance. Referring to the Hindustan Steel Ltd case, the Tribunal emphasized that penalty should not be imposed for technical or venial breaches or when the offender acted based on a bona fide belief. The Tribunal noted that the assessee's income was accepted without additions, and the tax audit report was eventually furnished. Considering these factors and the delay explained due to being the first year of business, the Tribunal set aside the CIT-A's decision and directed the AO to delete the penalty.

Conclusion
The Appellate Tribunal allowed the assessee's appeal, concluding that the penalty under section 271B should be deleted considering the substantial compliance by the assessee and the genuine nature of the delay in furnishing the tax audit report.