GURUVAIAH REDDIAR RAJAMANI,NAGERCOIL vs. THE INCOME TAX OFFICER, WARD - 1, NAGERCOIL, NAGERCOIL

Since the issues raised in both these appeals are similar and based on the same identical facts, with the consent of both the parties, we proceed to hear both the appeals together and pass a consolidated order for the sake of convenience.

At the outset, it is noted that the AO initiated penalty proceedings under section 271B of the Income-tax Act, 1961 (for short, "the Act") for delay in filing the audit report. The ld. CIT(A) confirmed the penalty imposed by the AO. Ld. AR, Mr. Bagavathy Perumal Kamalahasan, Advocate, contended that the tax audit report was filed on 16.04.2022, which was available before the AO before completion of the assessment order on 23.12.2024.

Ld. DR, Mr. Pilli Premkumar, Sr. AR, did not dispute the same.

Having heard both the parties, it is noted that the AO imposed a penalty of ₹1,33,412 vide his order dated 12.06.2025 for delayed filing of the audit report.

The assessee filed the return of income in response to the notice under section 148 of the Act dated 20.02.2024 and the audit report was filed well before, on 16.04.2022. Admittedly, the assessment order, which is on record, is dated 23.12.2024, which clearly establishes that the tax audit report was before the AO for his consideration before passing the assessment order. It is a settled principle by various orders of this Tribunal, wherein the Tribunal held that there shall not be any penalty under section 271B of the Act in case the audit report is on record before completion of the assessment proceedings. Therefore, there is no dispute with regard to the filing of the audit report before completion of the assessment proceedings and, thus, we are of the considered opinion that the penalty imposed by the AO under section 271B, which was confirmed

In the result, the appeal of the assessee is allowed.

At the outset, it is noted that the AO imposed penalty under section 270A of the Act vide his order dated 12.06.2025, which is on record, and on perusal of the same, we note that the AO primarily initiated the penalty proceedings under section 270A by observing that the assessee had failed to furnish his original return of income under section 139 of the Act and, therefore, the income declared in the return of income filed in response to the notice under section 148 of the Act exceeded the maximum amount which is not chargeable to tax, which is evident from page No. 2 of the penalty order. We find the assessment order dated 23.12.2024, which is on record, wherein no return of income was filed by the assessee under the provisions under Section 139 of the Act, but however, the return of income was filed in response to the notice under section 148 of the Act declaring total income of ₹11,47,500. Further, the AO accepted the same without making any addition, which is evident from the computation of taxable income at page No. 6 of the assessment order. Therefore, we find force in the arguments of the ld. AR that when there is no addition made by the AO, the question of under-reporting does not arise at all. The ld. DR opposed the same and argued that clause (b) of sub-section (2) of section 270A is clearly applicable in the present case and the submissions of the ld. AR are liable to be rejected.

In the result, appeal of the assessee is allowed.