ITAT quashes levy of Penalty for not Auditing Books of Accounts & furnishing TAR

ITAT quashes levy of Penalty for not Auditing Books of Accounts & furnishing TAR

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follows : 5.8 In the instant case before us, the assessee did not file return of income for the year under consideration on or before the due date of the filing of the return of income (i.e. 30/09/2010). The assessee filed return of income for the first time on 06.11.2017 in response to notice under section 148 of the Act issued by the Assessing Officer. During reassessment proceeding, the assessee furnished the tax Audit Report dated 2/09/2010. 5.9 The contention of the assessee is that the Tax Audit Report was obtained prior to the due date of filing of the return of income, but not furnished on the before the due date as there was no separate requirement of filing the said Audit Report and assessee has produced the said report on being asked by the Assessing Officer during reassessment proceeding and therefore there is no default on the part of the assessee and the penalty can be levied for alleged violation of section 44AB of the Act.

5.10 But in the instant case, we find that the assessee was required to get his books of accounts audited on or before the due date of filing of the return of income. There was no relaxation in getting the books of account audited by a Chartered Accountant and relaxation was given only for furnishing the Tax Audit Report.

[caption id="attachment_90739" align="aligncenter" width="414"] ITAT quashes levy of Penalty by AO for not Auditing Books of Accounts & furnishing Report of Audit of Books of Accounts on due date of filing ITR[/caption] The penalty u/s 271B can be levied for either not getting books of account audited before the specified date or for not furnishing the audit report before the specified date. The requirement of furnishing the audit report before the specified date has been dispensed with for the relevant assessment year. But, the Assessing Officer emphasized only the fact Audit Report was not furnished on or before the due date of filing of return of income. He did not examine whether the books of account were audited before the due date of return of Income. He has even not verified the authenticity of the Audit Report from the Chartered Accountant, whose name is appearing on the Audit Report. The AO has not verified the records of the Chartered Accountant like, register of dispatch of Audit Report or team member engaged in Audit, records on the basis of which report was prepared, correspondence, or comment of the assessee on the deficiencies pointed out by the team, etc. In the Audit Report in clause 28(a), detail of opening stock, closing stock, purchase & sales has been given by the Tax Auditor.

The AO has even not verified whether these details have been incorporated by the assessee in the return of Income filed by the assessee on 06.11.2017. As the AO has failed in his duty in verifying whether books of account were audited before the specified date. He only emphasized the fact of furnishing the audit before the specified date. We do not find any reason for confirming the penalty levied u/s 271B of the Act. The Ld CIT(A) has insisted on obtaining the Audit report before the specified.

We find that word obtain before has been substituted in section 44AB by the word furnish by w.e.f 1-7-1995. Therefore for the relevant obtaining the report before the specified date is not relevant. In view of the above discussion, we set aside the order of the learned CIT(A) and delete the penalty of Rs. 1.00 lakh levied by the AO u/s 271B of the Act for violation of the provisions of sec 44AB. The grounds raised by the assessee are allowed. 6. As a result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 11th August 2020.