2023 (6) TMI 479 - AT - Income Tax

Penalty u/s 271B - non filing / delayed filing of audit report - bonafide reasons - delay due to expiry of digital signature and due to technical glitch in the system - assessee has been regularly filing audit report for years previous to A.Y.2017-18 and also for the future assessment years - HELD THAT - In the present case, the non filing Tax Audit Report before the due date has been a technical glitch and admittedly, the assessee filed the Audit Report u/s 44AB. During the course of assessment proceedings and the assessment was framed by the Assessing Officer after considering the Audit Report and statement of account. In our view the explanation filed by the assessee can be accepted as a reasonable cause for his failure to file Audit Report with in time and it is not a fit case for imposing penalty u/s 271B of the Act. Accordingly, the penalty levied under section 271B of the Act is deleted. Penalty u/s 272A(1)(d) - non compliance to notices u/s 142(1) - As argued notices were not being received by the assessee personally - HELD THAT - Penalty under section 272A(1)(d) may not be imposed for each and every default to the notices issued under section 142(1) which remained non complied on the part of the assessee. The provisions of Section 272A(1)(d) is of deterrent in nature and not for earning revenue. The remedy available with the Assessing Officer lies in framing of best judgment assessment under the provisions of Section 144 of the Act, as he did and not to impose multiple penalties under section 272A(1)(d) of the Act again and again. We therefore restrict the penalty levied under section 272A(1)(d) of the Act to one default as against multiple defaults of non compliance with these notices under section 142(1) of the Act. Accordingly, penalty imposed is restricted to Rs. 10,000/-.

Summary

Issues involved:
The judgment involves issues related to penalty under sections 271B and 272A(1)(d) of the Income Tax Act, 1961 for non-filing of audit report and non-compliance with notices respectively.

Issue 1 - Penalty under section 271B for non-filing of audit report:
The appellant challenged the penalty order under section 271B for late filing of audit report, citing reasons like technical glitch due to expired digital signature. The Assessing Officer had imposed a penalty of Rs. 1,50,000 for the violation. The appellant argued that the audit report was submitted before completion of assessment proceedings, and the delay was due to genuine reasons. The Tribunal noted that the Assessing Officer accepted the return of income subject to minor disallowance, indicating that the audit report was considered. Relying on precedents, the Tribunal held that the explanation provided by the appellant constituted reasonable cause for the delay, and thus, the penalty under section 271B was deleted.

Issue 2 - Penalty under section 272A(1)(d) for non-compliance with notices:
In the second appeal, the appellant contested the penalty imposed under section 272A(1)(d) for non-compliance with multiple notices issued under section 142(1) of the Act. The Assessing Officer levied penalties of Rs. 50,000 for each default, totaling Rs. 250,000. The appellant argued that penalties cannot be imposed for each default and cited a judgment supporting this stance. The Tribunal agreed with the appellant, stating that the penalty under section 272A(1)(d) is deterrent in nature and not meant for multiple impositions. Therefore, the penalty was restricted to Rs. 10,000 for one default instead of multiple defaults, in line with the purpose of the provision.

Conclusion:
The Tribunal ruled in favor of the appellant in both appeals, deleting the penalty under section 271B for non-filing of the audit report and restricting the penalty under section 272A(1)(d) for non-compliance with notices to Rs. 10,000 for one default. The judgments were pronounced on 09/06/2023.