2025 (7) TMI 27 - AT - Income Tax

Levy of penalty u/s. 271B - assessee failed to submit the audit report within the time prescribed by the CBDT - What were reasonable cause for the delay in filing the audit report? - HELD THAT - This is a case where audit report has been submitted before the completion of assessment and hence in our view the penalty cannot be levied in such cases. The second aspect of the matter is that the assessee was not able to file the audit report as he was busy with the illness of his son which constituted a reasonable cause and hence no penalty is leviable on this count also. It is pertinent to refer here to the decision of this bench on the same set of facts in the case of Attinkara Electronics 2019 (3) TMI 1682 - ITAT COCHIN wherein it has been held that ill health of a partner was a reasonable cause within the meaning of sec.273B of the Act. Therefore we delete the penalty and allow the appeal of the assessee.

Summary

The Appellate Tribunal (ITAT Cochin) allowed the assessee's appeal against the penalty levied under section 271B of the Income-tax Act for delay in submitting the audit report for AY 2018-19. The penalty of Rs. 1,50,000 was imposed as the audit report was not filed within the prescribed time. The assessee contended (a) reasonable cause for delay due to illness of his son, (b) audit report was filed before completion of assessment on 1st July 2020, and (c) penalty was barred by limitation if calculated from assessment date. The CIT(A) rejected these submissions.The ITAT held that since the audit report was submitted before completion of assessment, "the penalty cannot be levied in such cases." Further, the illness of the son constituted a "reasonable cause" under section 273B, referencing a precedent in Attinkara Electronics (ITA No.601/Coch/2018), where ill health of a partner was held to be reasonable cause. Accordingly, the penalty was deleted and the appeal allowed.