DHANALAKSHMI JEWELLERS,SHIMOGA vs. INCOME TAX OFFICER, CENTRAL CIRCLE, HASSAN

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ITA 1383/BANG/2025Status: DisposedITAT Bangalore18 May 2026AY 2017-20185 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal condoned the delay in filing the appeal, finding sufficient cause due to the assessee's business closure and lack of awareness of the order. On merits, the Tribunal held that there was a reasonable cause for the delayed filing of the tax audit report, and since the returned income matched the assessed income, the penalty under Section 271B was not sustainable.

What were the facts?

The assessee filed its tax audit report and return of income for AY 2017-18 late. The Assessing Officer levied a penalty under Section 271B for this delay. The CIT(A) dismissed the assessee's appeal against the penalty.

What were the issues?

Whether the delay in filing the appeal to the Tribunal was justifiable, and whether a penalty under Section 271B is leviable for delayed filing of a tax audit report when there is a reasonable cause and no difference in returned and assessed income.

Which sections of the Income-tax Act were involved?

Section 271B,Section 44AB,Section 273B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’BENCH: BANGALORE

Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.

For Appellant: Shri Balusamy N – JCIT

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No. 1383/Bang/2025 Assessment Year:2017-18 M/s. Dhanalakshmi Jewellers, Dhanalakshmi, Nehru Road, The Income Tax Officer, Shivamogga, Central Circle, Vs. Karnataka – 577 201. Hassan. PAN: AACFD1913H APPELLANT RESPONDENT : Shri Narendra Sharma, Assessee by Advocate : Shri Balusamy N – JCIT Revenue by

Date of Hearing : 26-02-2026 Date of Pronouncement : 18-05-2026

ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT 1. ITA No. 1383/Bang/2025 is filed by M/s. Dhanalakshmi Jewellers (the Assessee/Appellant) for Assessment Year 2017-18 against the Appellate Order passed by the Ld. CIT(A) – 2, Panaji dated 16.12.2024 wherein Appeal filed by the Assessee against the penalty order dated 14.07.2021 passed u/s. 271B of the Income Tax Act, 1961 (the Act) by the Income Tax Department, levying penalty of Rs. 72,938/- was dismissed. The Assessee is aggrieved with the same and is in Appeal before us.

2.

According to form no. 36, the date of order of the First Appellate Authority is 16.12.2024. However, the Appeal is filed before us on 18.06.2025 wherein the order is received by the Assessee as per form no. 36 is to be stated on 21.12.2024. Thus, the Appeal is late by 110 days.

ITA No. 1383/Bang/2025 Page 2 of 5

3.

The Assessee has filed an application for condonation of delay stating that the business of Assessee is ceased and therefore the Assessee was not aware about passing of any of the Appellate Orders. The business was closed from 31.03.2021 due to adverse difficulties. However, on 11.04.2025 the Assessee was served a demand notice issued by the Ld. Assessing Officer which is placed on record to show that the Ld. CIT(A) order was passed on 16.12.2024 for which the recovery on demand was made on 11.04.2025 of Rs. 72,938/- being the penalty u/s. 271B and on that date, the Assessee became aware of the First Appellate Order passed and after that the Assessee contacted the Advocate at Bengaluru and consequently the Appeal was filed which has caused delay of 110 days. In the condonation petition, several judicial precedents were cited.

4.

The Ld. Authorized Representative also vehemently reiterated the same. The Ld. Departmental Representative was also heard who vehemently objected to the delay in filing of the Appeal stating that the delay of 110 days is not for sufficient cause.

5.

We have carefully considered the contentions and we find that indeed there is a delay in filing of the Appeal by 110 days which is not disputed by either of the parties. But the claim of the Assessee is that though the Appellate Order was passed on 16.12.2024, however, the Assessee came to know about the same only on 11.04.2025 and subsequent to that the Appeal was filed on 18.06.2025.

6.

It is only when the Assessee came to know about the Appellate Order, the Assessee could have filed the Appeal and the limitation should run from that date. Even otherwise, the business of the Assessee has stated to have ceased from 31.03.2021. The First Appellate Order was also received after that date; therefore we find that there is a sufficient cause which has caused the delay in filing of the Appeal by 110 days. We condone the same and admit the Appeal of the Assessee.

ITA No. 1383/Bang/2025 Page 3 of 5 7. Coming to the merits of the issue, we have heard Shri Narendra Sharma, Advocate on behalf of the Assessee and the Ld. Senior Departmental Representative Shri Balusamy N. The brief facts of the case shows that penalty u/s. 271B of the Act was passed by the Ld. Assessing Officer levying a penalty of Rs. 72,938/-. The Assessee has a firm dealing in jewellery. It filed its return of income for Assessment Year 2017-18 and has got its accounts audited as required u/s. 44AB of the Income Tax Act only on 12.03.2018. Undoubtedly, the same accompanied with the return of income filed on the date. However, the due date of filing of such return of income was 07.11.2017 and thus the Assessee did not file and not complied with the provisions of section 44AB of the Act by obtaining the tax audit report on or before the due date of filing o the return of income. Therefore, the provisions of section 271B were initiated and penalty was levied of Rs. 72,938/-.

8.

In this case, the Assessee filed return of income at a loss of Rs. 3,34,630/- which was assessed u/s. 143(3) vide order dated 26.12.2019 at the same figure.

9.

During the penalty proceedings, no reply was filed and as the turnover of the Assessee is Rs. 1,45,87,732/- the above penalty was levied. On Appeal before the Ld. CIT(A), a detailed submission of facts were made relying on several judicial precedents. However, the Ld. CIT(A) did not accept the explanation of the Assessee and levied the penalty.

10.

On perusal of the statement of facts and the reasons given by the Assessee it was submitted that the firm did not have any full time accountant and as the business of the Assessee was not doing well and on verge of closure, there was delay in getting the tax audited. The Assessee has a meager loss and because of the same, the return of income as well as the audit report could not be filed in time. The audit report is prepared on 23.02.2018 whereas the return of income was filed on 12.03.2018. Undoubtedly, there is a delay in furnishing the tax audit report but according to the provisions of section 273B, if there is a reasonable cause, the penalty could not have been levied. The Assessee also submitted before the Ld. CIT(A) of the Coordinate Bench in 78

ITA No. 1383/Bang/2025 Page 4 of 5 ITD 228 wherein it has been held that where there was no difference between the returned income and finally assessed income, keeping in view the fact that there is merely a technical or merely breach of the provisions of the law, the penalty u/s. 271B cannot be sustained. Even otherwise, in 320 ITR 498, Hon’ble Madras High Court has held that delayed filing in audit report does not warrant penalty because of the delay in filing of the return of income. The Ld. CIT(A) did not refer to the provisions of section 273B and stated that law does not provide exemption for compliance due to late closing of books of accounts as the statutory timelines are prescribed in the Income Tax Act. The order of the Ld. CIT(A) is not sustainable for the reason that though the timelines are prescribed under the Income Tax Act, but whether the penalty can be levied on the Assessee for not complying with those timelines and if such non-compliance is due to reasonable cause, such penalty cannot be levied. In this case, we find that the judicial precedents set before him also support the case of the Assessee. Accordingly, we held that there is a reasonable cause in delayed filing of tax audit report, the Assessed income and the returned income in 143(3) Assessment Order is same and further the several judicial precedents set before us as well as before the Ld. CIT(A) supports the case of the Assessee and we find no merit in levy of penalty of Rs. 72,938/- u/s. 271B of the Act. Thus, we direct the Ld. Assessing Officer to delete the above penalty.

11.

In the result, Appeal filed by the Assessee is allowed.

Order pronounced in the open court on 18th May, 2026.

Sd/- Sd/- (SOUNDARARAJAN K.) (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE-PRESIDENT Bangalore, Dated, the 18th May, 2026. *TNTS*

ITA No. 1383/Bang/2025 Page 5 of 5 Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. CIT(A) By order

Assistant Registrar, ITAT, Bangalore

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