NARENDRAN LATHA ,COIMBATORE vs. INCOME TAX OFFICER , CHENNAI

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ITA 468/CHNY/2026Status: DisposedITAT Chennai16 July 2026AY 2020-219 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the tax audit report was available to the AO before the completion of reassessment proceedings and no addition was made, the delay in furnishing the report constituted a technical or venial breach. Therefore, the penalty was not justified.

What were the facts?

The assessee filed her return of income belatedly and subsequently an updated return. During reassessment proceedings, the tax audit report was furnished, and the reassessment was completed without any additions. However, the Assessing Officer (AO) imposed a penalty for not furnishing the tax audit report within the due date.

What were the issues?

Whether penalty under Section 271B is leviable when the tax audit report is furnished belatedly but before the completion of assessment proceedings and no addition is made.

Which sections of the Income-tax Act were involved?

Section 271B,Section 44AB,Section 139(4),Section 139(8A),Section 148,Section 147,Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & MS PADMAVATHY S

Hearing: 14.07.2026Pronounced: 16.07.2026

आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 06.11.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The order of CIT(A)-NFAC arises out of the order of the AO imposing penalty

ITA No.468/CHNY/2026 - 2 - Narendran Latha u/s.271B of the Act amounting to Rs.1,50,000/-. The relevant Assessment Year is 2020-21.

2.

Brief facts of the case are as follows: The assessee is an individual. For the assessment year 2020-21, the assessee filed her return of income belatedly u/s. 139(4) of the Act on 09.02.2021. Subsequently, she filed an updated return u/s. 139(8A) of the Act on 14.10.2022 declaring a total income of Rs.5,81,741/-. Based on information that the assessee had made cash deposits aggregating to Rs.3,58,43,600/- in her current account maintained with The Karur Vysya Bank Ltd. during the relevant previous year, the assessment was reopened by issuing notice u/s. 148 of the Act on 30.03.2024. In response, the assessee filed a return of income on 29.06.2024 declaring the same total income of Rs.5,81,741/- and also furnished the tax audit report along with the return of income. The reassessment was completed u/s. 147 r.w.s 144B of the Act vide order dated 13.08.2025 accepting the returned income without making any addition. However, the AO observed that the assessee had failed to furnish the tax audit report within the due date prescribed u/s. 44AB of the Act. Accordingly, penalty proceedings u/s. 271B were initiated by issuing notice u/s. 274 r.w.s. 271B of

ITA No.468/CHNY/2026 - 3 - Narendran Latha the Act dated 16.02.2025. Though the assessee filed her explanation in response thereto, the AO was not convinced and, vide order dated 13.08.2025, levied a penalty of Rs.1,50,000/- u/s. 271B of the Act.

3.

Aggrieved by the said order, the assessee preferred an appeal before the First Appellate Authority (FAA). However, the FAA upheld the action of the AO and confirmed the levy of penalty, thereby dismissing the appeal.

4.

Aggrieved by the order of the First Appellate Authority confirming the levy of penalty u/s. 271B of the Act, the assessee has preferred the present appeal before the Tribunal. The Ld. AR submitted that the assessee in response to notice u/s.148 of the Act, has submitted the audit report along with the return of income and that the reassessment was completed only on 16.02.2025 by the Assessment Unit. It was contended that the audit report was very much available on record at the time of completion of the reassessment proceedings and that the Assessing Officer had, in fact, taken note of the audit report at para 3.3, while passing the reassessment order. According to the Ld. AR, the delay in furnishing

ITA No.468/CHNY/2026 - 4 - Narendran Latha the audit report was merely a technical and venial breach which did not result in any loss to the Revenue or prejudice to the assessment proceedings. The Ld.AR contended that there was no addition in the reassessment proceedings. Therefore, it was submitted that the levy of penalty u/s. 271B was not justified and deserved to be deleted. In support of the above contention, the Ld. AR placed reliance on the decision of the Chennai Bench of the Tribunal in the case of Shri Annakodiraj v. ITO in ITA No. 4122/CHNY/2025 (order dated 04.03.2026).

5.

The Ld.DR supported the order of the AO and the FAA.

6.

We have heard rival submissions and perused the material on record. The undisputed fact is that though the assessee failed to furnish the tax audit report within the due date prescribed u/s. 44AB of the Act, the same was furnished during the reassessment proceedings initiated u/s.148 of the Act. The reassessment was completed on 16.02.2025, and the reassessment order itself records in para 3.3 that the tax audit report was available and had been considered by the Assessing Officer while completing the reassessment. It is also an admitted position that no addition was

ITA No.468/CHNY/2026 - 5 - Narendran Latha made in the reassessment proceedings. Thus, the tax audit report was before the AO at the time of completion of the reassessment, and the delay in furnishing the report constitute only a technical or venial breach. We find that the issue arising in the present appeal is squarely covered by the decision of the Chennai Bench of the Tribunal in the case of Shri Annakodiraj v. ITO (supra), wherein, on identical facts, the Tribunal deleted the penalty levied u/s.271B of the Act. The Tribunal held that where the tax audit report was already available on record at the time of completion of the reassessment and the AO had completed the reassessment after taking note of the said audit report, the belated furnishing of the audit report constituted only a technical or venial breach. Since the facts of the present case are identical, the ratio laid down in the said decision squarely applies. The relevant findings of the Tribunal read as under:– 7. We have heard rival submissions and perused the material on record. The objection filed by the assessee in response to notice issued u/s.274 r.w.s.271D of the Act for the proposed penalty are as follows:-

“I am uneducated farmer. Nature of my business is milk sales on commission basis. I procured milk from the farmers and sold the same to M/s.Jaya Milk Products on commission basis. I am ignorant about the income tax procedures therefore the return of income for the assessment year 2017-18 was not filed within due date. In response to Notice u/s.148, I filed my return of income for the AY 2017-18 on 27-12-2024 and filed the audit report on 26-12-2024. Copy of the audit report acknowledgement attached for your kind consideration. Delay in filing of audit report is not intentional.”

ITA No.468/CHNY/2026 - 6 - Narendran Latha

8.

In the instant case, admittedly audit report has been filed on 26.12.2024 i.e., a day prior to filing of return of income. The reassessment was completed on 31.01.2025. Therefore, it is clear that while completing the reassessment, the AO has taken note of the audit report and accordingly completed the reassessment order. Non-filing of audit report had not resulted in loss to exchequer but it is only a technical and venial breach, as the audit report was available to the AO before the completion of assessment proceedings. The Chennai Bench of the Tribunal in the case of Ramunaicker Raja vs. ACIT in ITA No.603/CHNY/2022 (order dated 15.02.2023) by following judicial pronouncement had held that when audit report was available at the time of assessment and AO has completed the assessment after taking note of the same, belated filing of audit report is only technical venial breach which does not call for the imposition of penalty. The relevant finding of the Chennai Bench of the Tribunal read as follows:- “6.1 Similar issue on an identical fact was subject matter in appeal before this Tribunal in the case of Balaji Logistics v. ACIT in I.T.A. No. 2248/Chny/2019 dated 07.09.2022 for the assessment year 2015-16, wherein, the Tribunal has observed as under:

“6. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. It is an admitted fact that although the assessee has filed Tax Audit Report in Form 3CB as required u/s.44AB of the Act, beyond due date specified u/s.139(1) of the Act, but such Tax Audit Report was made available to the AO before completion of assessment proceedings u/s.143(3) of the Act, on 22.11.2017. It is evident from the fact that the assessee has obtained Tax Audit Report from an Accountant on 28.03.2016 and furnished before the AO during the course of assessment proceedings. Therefore, we are of the considered view that when the Tax Audit Report was made available to the AO before completion of assessment proceedings, then for venial technical breach without any mala fide intention, penalty cannot be levied u/s.271B of the Act. Further, a similar issue has been considered by the co-ordinate Bench of the Tribunal in the case of M/s. T P D 101 Uthangarai Milk Producers Co-operative Society Ltd.(supra), where on identical set of facts, penalty levied u/s.271B of the Act, has been deleted. The relevant findings of the Tribunal are as under:

“…7. We have heard both the parties and perused the materials available on record and gone through the orders of the

ITA No.468/CHNY/2026 - 7 - Narendran Latha authorities below. The assessee supposed to have been filed audit report as required u/s.44AB of the Act, on or before 31.10.2015. However, such audit report has been filed on 05.03.2016, which is before the date of completion of assessment proceedings u/s.143(3) of the Act. In other words, although the assessee has filed tax audit report beyond the stipulated period, but such tax audit report was made available to the AO before he completes assessment proceedings. The assessee has given reasons for delay in filing tax audit report. As per which, the audit of accounts of society done by the Dept. of Cooperative Audit, could not be completed on or before 31.10.2015 and said delay was not in the hands of the assessee. Therefore, there is a reasonable cause for not filing the tax audit report within prescribed time limit ad thus, penalty cannot be levied. We find merits in the submission of the assessee for the simple reason that non-filing of audit report within the due date is a venial technical breach without any mala fide intention on the part of the assessee. Because, completion of audit of books of accounts of the society is under the control of Dept. of Cooperative Audit and thus, unless the Dept. of Cooperative Audit completes audit, the assessee cannot file return of income along with tax audit report. Therefore, we are of the considered view that reasons given by the assessee for not filing tax audit report prescribed u/s.44AB of the Act, is neither intention nor any mala fide intention, but it is venial technical breach and for this reason, penalty u/s.271B of the Act, cannot be levied. This principle is supported by the decision of the Hon’ble jurisdictional High Court in the case of P.Senthil Kumar v. PCIT reported in 416 ITR 336, where an identical issue had been considered by the Court and held that for venial technical breach without any mala fide intention, penalty cannot be levied. The ITAT Cochin Bench in ITA No.411/Cochin/2018 vide order dated 05.02.2019 had held that once audit report has been made available before the AO, when the assessment proceedings were completed, then, there is no reason for levy of penalty.

8.

In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that reasons given by the assessee for not filing tax audit report within due date comes under reasonable cause as provided u/s.271B of the Act, and thus, the AO is erred in levying penalty u/s.271B of the Act. Hence, we direct the AO to delete penalty levied u/s.271B of Act.”

7.

In this view of the matter and by following the decision of the coordinate Bench of the Tribunal in the case of M/s.T P D 101 Uthangarai Milk Producers

ITA No.468/CHNY/2026 - 8 - Narendran Latha Co-operative Society Ltd.(supra), we direct the AO to delete penalty levied u/s.271B of the Act.

8.

In the result, the appeal filed by the assessee is allowed.”

6.2 Respectfully following the above decision of the Coordinate Benches of the Tribunal in the case of Balaji Logistics v. ACIT (supra) for the assessment year 2015-16, we are of the considered opinion that it is not a fit case for the levy of penalty u/s. 271B of the Act and accordingly, the penalty levied stands deleted.”

9.

Similar view has been taken by the Cochin Bench of the Tribunal in the case of M/s. Johns Biwheelers (supra). The relevant finding of the Cochin Bench of the Tribunal reads as follows:- “7.1 From the material available on record, we are of the view that the assessee got his books of accounts audited on 28/03/2014 which was made available to the Assessing Officer and no prejudice has been caused to the Revenue. Now the short question that arises is whether in this scenario, penalty u/s. 271B of the Act can be levied or not. In our considered opinion, the assessee had only committed technical venial breach which does not create any loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings. The Madras High Court in the case of CIT vs. A.N. Arunachalam (208 ITR 481) in the context of filing of audit report for claiming deduction u/s. 80J of the Act, observed that once audit report has been made available before the Ld. Assessing Officer before the completion of assessment proceedings, the assessee should be granted deduction u/s. 80J of the Act. We observe that this judgment was rendered in the context of adjudication of quantum of deduction claimed by the assessee. Hence, the said analogy can very well be drawn and used in the penalty proceedings like that of the assessee. To sum up, we hold that the assessee had committed only technical venial breach for which he cannot be penalized. In view of the above, we are inclined to delete the penalty made by the assessee u/s. 271B of the Act.”

10.

In light of the aforesaid judicial pronouncements, in the instant case since the audit report was available prior to the completion of assessment proceedings and the AO had taken note of the same, we are of the view that penalty imposed u/s.271B of the Act needs to be deleted and we do so. It is ordered accordingly.”

ITA No.468/CHNY/2026 - 9 - Narendran Latha 7. In light of the Co-ordinate Bench order of the Tribunal, since the audit report was available prior to the completion of reassessment proceedings and AO had taken note of the same, we are of the view that penalty imposed u/s.271B of the Act needs to be deleted and we do so. It is ordered accordingly.

8.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 16th July,2026 at Chennai.

Sd/- Sd/- (प�मावती एस) (जॉज� जॉज� के) (PADMAVATHY S) (GEORGE GEORGE K) लेखा सद�य/ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT चे�नई/Chennai, �दनांक/Dated, the 16th July, 2026 RSR, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त /CIT, Coimbatore 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF. By Order Digitally signed by REKHA REKHA SENTHIL RAJ SENTHIL RAJ Date: 2026.07.17 13:20:39 +05'30'

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