2019 (3) TMI 1682 - AT - Income Tax

Levy of penalty u/s. 271B - assessee had failed to get the accounts audited u/s. 44AB - CIT(A) confirmed penalty levied by the AO by observing that the assessee was liable to get his accounts audited as per the provisions of the section 44AB and failure to comply with the provisions of section 44AB of the Act would attract penalty under section 271B - HELD THAT - Assessee has committed 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 AO within the stipulated time. Hence we are inclined to hold that this is not a fit case for levying penalty u/s. 271B. - Appeal of the assessee is allowed.

Summary

Issues:
Levy of penalty under section 271B of the Income Tax Act, 1961.

Detailed Analysis:

Issue: Levy of Penalty under Section 271B

The case involves the appeal against the order of the CIT(A) regarding the levy of penalty under section 271B of the Income Tax Act, 1961 for the assessment year 2012-13. The Assessing Officer imposed a penalty of Rs. 1,50,000 on the assessee for failure to get the accounts audited before the specified date as required under section 44AB of the Act. The Assessing Officer found that the delay in audit completion was not adequately justified by the reasons provided by the assessee, leading to the imposition of the penalty.

Before the CIT(A), the assessee presented reasons for the delay, citing the ill health of a partner and hardware damage resulting in the loss of data. The CIT(A) upheld the penalty, stating that failure to comply with section 44AB attracts penalty under section 271B, subject to the assessee proving reasonable cause for the delay. The CIT(A) found the reasons provided by the assessee insufficient to justify the delay, as the loss of data due to hardware damage was not adequately substantiated.

Upon appeal to the ITAT Cochin, the tribunal considered the assessee's contentions regarding the delay in audit submission. The tribunal referred to previous judgments where technical breaches without causing loss to the revenue did not warrant penalties. Relying on these precedents, the tribunal held that the delay in audit submission in this case was a technical venial breach, and the audit report was available to the Assessing Officer before the completion of assessment proceedings, thus not causing any prejudice to the revenue.

The tribunal concluded that the reasons provided by the assessee, including the partner's ill health and hardware damage, constituted reasonable causes for the delay in submitting the audit report. Therefore, the tribunal allowed the appeal, stating that the case did not warrant the imposition of a penalty under section 271B of the Income Tax Act, 1961.

In summary, the ITAT Cochin allowed the appeal, emphasizing that the delay in audit submission was a technical venial breach, and the reasons provided by the assessee were reasonable causes for the delay, ultimately leading to the deletion of the penalty imposed under section 271B.

---