No penalty to be levied in case of delay in furnishing Tax Audit Report
Extract of Order is given below:
The assessee has filed this appeal challenging the order dated 15-05-2017 passed by Ld CIT(A)-12, Bengaluru confirming the penalty levied by the AO u/s 271B of the Act for assessment year 2014-15 for not furnishing the tax audit report as required u/s 44AB of the Income Tax Act, i.e., within the due date prescribed u/s 139(1) of the Act for filing return of income.
2. We heard the parties and perused the record. The assessee filed its return of income for AY 2014-15 on 30-03-2015. Even though the tax audit report as required u/s 44AB of the Act was obtained 02-09-2014, the assessee furnished the tax audit report along with return of income on 30-03-2015. As per the provisions of sec.44AB of the Act, the tax audit report should have been furnished to the AO before the due date for filing return of income prescribed u/s 139(1) of the Act. In the instant year, the due date was 30.11.2014. In view of the above said failure, the AO initiated penalty proceedings u/s 271B of the Act.
3. The assessee submitted before the AO that it was under the impression that the tax audit report could be filed any time before 31.3.2015 and accordingly submitted that the same was filed along with return of income. Not satisfied with the explanations of the assessee, the AO levied a penalty of Rs.1.50 lakhs u/s 271B of the Act.
4. Before Ld CIT(A), the assessee submitted one more explanation, i.e., it was submitted that the major source of income of the assessee was rental income and the TDS deducted by the tenants were not fully reflected in Form No.26AS, which resulted in delay in filing return of income as well as tax audit report. However, the assessee did not substantiate the above said explanation before Ld CIT(A) with any material. The Ld CIT(A) further noticed that the assessee had filed tax audit report within due dates in the earlier years. Accordingly the Ld CIT(A) held that the explanations furnished by the assessee do not constitute reasonable cause and accordingly confirmed the penalty.
5. We heard rival contentions and perused the record. There is no dispute with regard to the fact that the tax audit report was filed along with the return of income, i.e., it was available with the assessing officer before the completion of assessment. Though the Ld CIT(A) has given a finding that the assessee has furnished tax audit reports within the due date in the earlier years, it was not examined as to whether they were furnished along with return of income or separately. There is also no dispute with regard to the fact that the assessee had obtained tax audit report within the due date prescribed u/s 44AB of the Act. The explanation of the assessee was that it was under the impression that the tax audit report could be filed before 31.3.2015 and further the return of income could not be filed for want of reconciliation of TDS amounts with Form no.26AS. It appears that the assessee was under the impression that the return of income could be filed anytime before 31.3.2015 and the tax audit report could also be filed along with return of income. According to Ld A.R, the assessee was under such bonafide belief and accordingly the explanations furnished by the assessee would constitute reasonable cause within the meaning of sec.273B of the Act.
6. Be that as it may, we notice that the Cochin bench of Tribunal has considered an identical issue in the case of Attinkara Electronics vs. ITO (ITA No.601/Coch/2018 dated 01-03-2019) and the penalty levied u/s 271B of the Act was deleted with the following observations:-
“8. We have heard the rival contentions and perused the record. The assessee was required to get his books of account audited as per the provisions of section 44AB of the Act before 30/09/2012 for the A.Y. 2012-13. The assessee got the books audited on 24/03/2014 and the same was furnished before the Assessing Officer on 27/03/2014. The assessment order was passed by the Assessing Officer on 26/03/2015. However, there was delay in furnishing the audit report in compliance with section 44AB of the Act. The contention of the Ld. AR is that the reason for delay in furnishing the audit report belatedly was due to the ill health of the partner Shri Naushad S. from 20.09.2012 to 19.10.2012 coupled with malfunctioning of the computer and loss of entire data due to hardware damage. For this purpose, the Ld. AR relied on the decision of the co-ordinate Bench of this Tribunal in the case of Star Agencies vs. ITO (23 CCH 646) wherein I.T.A. No.601/Coch/2018 it was held that even though assessee could not get the accounts audited within time but having filed the audit report along with the return, no penalty u/s. 271B was attracted. Further, illness of one of the partners constituted reasonable cause for the delay. He also relied on the recent decision of this Tribunal in the case of Johns Biwheelers vs. ACIT in ITA No.411/Coch/2018 dated 05/02/2019 wherein it was held as under:
“7. We have heard the rival submissions and perused the record. In this case, the assessee was required to get his books of account audited and filed along with the return of income u/s. 44AB within the due date of 30/09/2012 for the assessment year 2012-13.. However, the audit report was furnished only on 28/03/2014. The contention of the Ld. AR was that the delay in filing the return of income was due to damage to computer system due to virus infection which is a reasonable cause as prescribed u/s. 273B of the I.T. Act. The Ld. AR relied on the following judgments in support of his contentions:
i) CIT vs. Malayalam Plantations Ltd. (1976) (103 ITR 835) (Ker.)
ii) ACIT vs. Amar Chand Raj Kumar (2004) (89 ITD 96)(ITAT, Chandigarh)
iii) Prem Prakash Senapati vs. ITO (ITA No.459&185/CTK/2017 dated 17/04/2018) (ITAT, Cuttack).
7.1 From the material available on record, we are of the view that the assessee got his books of accounts audited on 28/03/2014 which was made available to the Assessing Officer and no prejudice has been caused to the Revenue. Now the short question that arises is whether in this scenario, penalty u/s. 271B of the Act can be levied or not. In our considered opinion, the assessee had only committed technical venial breach which does not create any loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings. The Madras High Court in the case of CIT vs. A.N. Arunachalam (208 ITR 481) in the context of filing of audit report for claiming deduction u/s. 80J of the Act, observed that once audit report has been made available before the Ld. Assessing Officer before the completion of assessment proceedings, the assessee should be granted deduction u/s. 80J of the Act. We observe that this judgment was rendered in the context of adjudication of quantum of deduction claimed by the assessee. Hence, the said analogy can very well be drawn and used in the penalty proceedings like that of the assessee. To sum up, we hold that the assessee had committed only technical venial breach for which he cannot be penalized. In view of the above, we are inclined to delete the penalty made by the assessee u/s. 271B of the Act.
8. In the result, the appeal of the assessee is allowed.
8.1 In our opinion, the case of the assessee will squarely fit into the ratio laid down in the above cases cited supra. The assessee has comitted only technical venial breach which does not create any loss to the exchequer. The audit report was filed before the Assessing Officer before the completion of the assessment. The ill health of the partner Shri Naushad S and the malfunctioning of the computer due to hardware damage are reasonable causes for not furnishing the audit report before the Assessing Officer within the stipulated time. Hence, we are inclined to hold that this is not a fit case for levying penalty u/s. 271B.
9. In the result, the appeal of the assessee is allowed.”
7. In the instant case, unlike in the case cited above, the audit report was obtained within the due date prescribed u/s 44AB of the Act. The delay has occurred due to delay in filing return of income. The assessee has stated that it was under bonafide belief that the audit report could also be filed before 31.3.2015. There is also no dispute with regard to the fact that the audit report was available with the assessing officer before he completed the assessment. Hence the view taken by the Cochin bench of Tribunal that the delay in furnishing audit report has resulted only in technical venial breach which does not cause any loss to exchequer could be applied here also. Accordingly, following the above said decision of Cochin bench of Tribunal, we set aside the order passed by Ld CIT(A) and direct the AO to delete the penalty levied u/s 271B of the Act for the year under consideration.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 13th December, 2019.
For Regular Professional Updates Join : https://t.me/Studycafe
For Regular Student Updates (CA Final) Join : https://t.me/Studycafe_cafinal
For Regular Student Updates (CA IPCC) Join : https://t.me/Studycafe_Cainter