2023 (9) TMI 146 - AT - Income Tax

Levy of penalty u/s. 271B - default in furnishing of Tax Audit Report - As submitted tax Audit Report is physically filed before the AO during the course of assessment proceedings - As submitted that once the assessment has been completed and the assessee had paid due taxes and immunity has been granted u/s 271AA(2) then penalty u/s 271B should not be imposed - HELD THAT - Undoubtedly, in the order passed by the Assessing Officer, there is no reference of the provision u/s 271B of the Act and penalty proceedings were initiated without recording the satisfaction by issuing show cause notice. AO, at the time of passing the assessment order, was in possession of the Audit Report which was duly mentioned by him. In section 271B of the Act, the only requirement is to get the accounts of assessee audited or furnish the report of audit as required under section 44AB of the Act. There is no requirement either to file or supply at the time of filing of return of income. The only requirement is to get accounts audited. In the present case, the assessee had filed the proof of furnishing the audit report before Assessing Officer, which had not been disputed by the Assessing Officer in his order. Thus the order of imposing the penalty by CIT(A) s order are without any basis as assessee had satisfactorily proved audit of accounts and report thereof. The above said is also supported by the reasoning given by the Hon'ble Supreme Court in the case of M/s. US Technologies International Pvt. Ltd. 2023 (4) TMI 418 - SUPREME COURT - Appeal of assessee allowed.

Summary

Issues involved:
The appeal arises from the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre invoking proceedings under section 271B of the Income Tax Act, 1961.

Summary:

Issue 1: Levy of penalty under section 271B for default in furnishing Tax Audit Report
The appellant challenged the order dismissing the appeal, arguing that the penalty under section 271B was erroneously imposed. The appellant contended that the Tax Audit Report was physically filed before the Assessing Officer during assessment proceedings, despite technical issues with the Income Tax Website. The appellant asserted that the Assessing Officer had the report for consideration, thus the penalty was unjustified.

Issue 2: Assessment and Penalty Proceedings
The appellant, an individual, made cash deposits during demonetization but did not file the return of income for A.Y. 2017-18. Assessment proceedings were initiated under section 144 of the Income Tax Act, resulting in an ex-parte assessment. Penalty proceedings under section 271B were initiated for failure to furnish the Audit Report in Form No.3CD as required by section 44AB. The Assessing Officer imposed a penalty, which the appellant contested.

Judgment:
The appellant argued that no satisfaction was recorded in the assessment order, and penalty under section 271B could not be imposed. The appellant contended that the Audit Report was provided during assessment, satisfying the requirement. The appellant relied on a decision of the Allahabad High Court to support their case.

Counter-argument and Decision:
The Revenue argued that penalty under section 271B was justified due to the failure to maintain books of accounts and furnish the audit report. The Revenue contended that the Audit Report should have been filed along with the return of income as per section 44AB. The Tribunal noted that the Audit Report was provided during assessment and upheld the appellant's arguments. The Tribunal referred to a Supreme Court decision to support the deletion of the penalty.

Conclusion:
The Tribunal found in favor of the appellant, deleting the penalty imposed under section 271B. The appeal of the assessee was allowed based on the satisfactory proof of audit of accounts and report thereof, in line with legal interpretations provided by higher courts.