2023 (6) TMI 272 - AT - Income Tax

Penalty u/s. 271B - penalty imposed for failure to get accounts audited and to furnish a report of such audit as required u/s. 44AB - Scope of reasonable cause for the failure as provided u/s. 273B - HELD THAT - As submitted that assessee is dealing in retail trading of building material on commission basis. The impugned year is the first year wherein his gross receipts/turnover exceeded the threshold prescribed u/s. 44AB of the Act and was under a bonafide belief that there was no requirement of any audit in this respect. Subsequently, assessee got the accounts audited in respect of his share transaction and obtained the report as required u/s. 44AB - assessee has furnished an affidavit to state that he was not in the knowledge of the share transactions in his name as the same was done by his broker. Considering a reasonable cause as envisaged u/s. 273B of the Act, we hold that impugned penalty is not sustainable and is hereby deleted. Grounds taken by the assessee are allowed.

Summary

Issues Involved:
The appeal against the penalty order imposed under section 271B of the Income Tax Act, 1961 for Assessment Year 2015-16.

Details of the Judgment:

Issue 1: Penalty Imposed for Failure to Get Accounts Audited
The assessee, engaged in retail dealings in building material, filed income tax return reporting total income. The Assessing Officer noted share transactions resulting in a loss. As the income from share trading was below 8% of total turnover, the AO required the accounts to be audited under section 44AB. The penalty proceedings were initiated under section 271B due to failure to comply.

Issue 2: Assessee's Submission and Appeal
During the penalty proceedings, the assessee claimed unawareness of the share dealings conducted by the broker. The assessee argued that insufficient time was given to conduct the audit and submit the report. Despite explanations, the penalty was imposed and upheld by the CIT(A). The assessee appealed to the Tribunal.

Issue 3: Tribunal's Decision
The Tribunal considered the submissions and the circumstances leading to the failure to audit the accounts. The assessee, in the first year of exceeding the turnover threshold, believed no audit was required. Subsequently, the accounts were audited, and a report was obtained. The Tribunal found the assessee's explanation to be a reasonable cause under section 273B, leading to the deletion of the penalty. The appeal was allowed, and the penalty was deemed unsustainable.

In conclusion, the Tribunal held that the penalty imposed under section 271B was not justified due to the assessee's reasonable cause for failing to get the accounts audited. The appeal of the assessee was allowed, and the penalty was deleted.