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2024 (12) TMI 198 - AT - Income TaxPenalty levied u/s 271B - non furnish of audit report as required u/s 44AB - Consideration of reasonable cause - HELD THAT - Reasonable cause as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. The cause shown has to be considered and only if it is found to be frivolous without substance or foundation the prescribed consequences will follow. Taking into cumulative effect of the explanations offered by the assessee and from a reading of the relevant provisions of Section 271B read with Section 44AB of the Act we are of the considered opinion that assessee demonstrated that there was a reasonable cause for the said failure as per the provisions contained in section 273B of the Act. From the conduct behavior and attitude of the assessee it is clear that as soon as the accountant joined in September 2018 after a higher remuneration was offered to him the audit report and the return of income were immediately filed manually. Before us the accountant submitted an affidavit by way of additional evidence stating that he was responsible for maintaining and finalizing accounts of the firm and during September 2017 he decided to leave his job due to the dis-satisfaction with the salary being offered and consequently he chooses to resign from his position. Further he stated that at the time of resignation the accounts of the firm had not been finalized during the year ending 31.3.2017. Further he confirmed to have rejoined again in September 2018 after the request of the Managing Partner offering a revised and reasonable salary. Upon rejoining the firm he completed the finalization of accounts and these accounts were subsequently audited by the CA in compliance with the relevant statutory requirement. The Managing Partner has also filed an affidavit stating that firm was required to get its accounts audited u/s 44AB of the Act and to file the audit report within the extended due date as on 7th November 2017. The accountant who was responsible for maintaining accounts of the firm abruptly left his employment without finalizing the accounts. This unexpected departure left the firm without a qualified person to manage the accounts and he being unfamiliar with the accounting software and procedure faced significant difficulties in finding a replacement promptly. There is nothing contrary that has been brought on record by the Ld. DR at the time of the hearing. Further the assessee has only committed a technical breach without any loss to the exchequer of the Government as there was no addition made by the Ld.AO during the assessment proceeding. CIT(A)/NFAC s non-consideration of the plea raised by the assessee about the existence of reasonable cause vitiate the order. Appeal filed by the assessee is allowed.
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