SAMUEL DURAISWAMY,CHENNAI vs. ITO, NCW-7(5), CHENNAI

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ITA 1511/CHNY/2026Status: DisposedITAT Chennai26 October 2026AY 2017-184 pages
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What did the Tribunal hold?

The Tribunal noted that the figures of turnover and the liability to get accounts audited under Section 44AB were not under challenge. The sole issue was the applicability of Section 273B, which provides that no penalty shall be imposed if the assessee proves there was a reasonable cause for the failure. The Tribunal referred to judicial decisions, including the jurisdictional High Court's ruling in P. Senthil Kumar v. PCIT, which held that penalty can be waived if reasonable cause is demonstrated. The Tribunal observed that the assessee's submissions formed a reasonable cause for the purposes of Section 273B, but these submissions were not supported by any evidence. Therefore, the matter was restored to the AO with a direction to examine the assessee's case in light of Section 273B, providing an opportunity of being heard. The assessee was directed to be vigilant and cooperative, providing relevant evidence to establish a bonafide and reasonable cause. The grounds raised by the assessee were allowed for statistical purposes.

What were the facts?

The assessee, Samuel Duraiswamy, filed his return of income for Assessment Year 2017-18 on March 28, 2018, declaring a total income of Rs. 12,31,650. The case was selected for scrutiny, and the Assessing Officer (AO) passed an assessment order on December 16, 2019, assessing the total income at Rs. 1,44,70,020. The assessee's turnover was Rs. 13,60,10,984, making him liable for audit under Section 44AB of the Income Tax Act, 1961, and a penalty under Section 271B for non-compliance. A penalty of Rs. 1.5 Lacs was levied under Section 271B on May 26, 2020. The assessee appealed to the Commissioner of Income Tax (Appeals) / NFAC, Delhi, with a delay of 217 days. The CIT(A) dismissed the appeal. The assessee has now filed a further appeal before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the penalty levied under Section 271B of the Income Tax Act, 1961, is sustainable in the facts and circumstances of the case, particularly concerning the assessee's claim of reasonable cause for not obtaining the tax audit report. The assessee's contentions are that the penalty under Section 271B is erroneous. The assessee claims ignorance of the law and reliance on his accountant, Mr. Joseph, for getting the accounts audited and filing the return. The assessee argues that he failed to discharge the statutory burden of proving reasonable cause due to this ignorance and reliance. The revenue's contentions are not explicitly recorded in the judgment regarding the specific arguments against the assessee's claim of reasonable cause. However, the revenue opposed the appeal before the Tribunal.

Which sections of the Income-tax Act were involved?

Section 44AB,Section 271B,Section 273B,Section 139(4),Section 143(3),Section 282

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: HONOURABLE SHRI ABY T. VARKEY & SHRI GAGAN GOYAL

Hearing: 07.09.2026Pronounced: 26.10.2026

आयकर अपीलीय अधिकरण ‘बी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI माननीय श्री एबी टी. वर्की, न्याययक सदस्य एवं श्री गगन गोयल लेखा सदस्य के समक्ष BEFORE HONOURABLE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 1511/Chny/2026 ननिाारण वर्ा /Assessment Years: 2017-18 Samuel Duraiswamy v. Income Tax Officer, Plot No.12, Door No.25/11, Jayaplaza, Non-Corp Ward-7(5), 60 Feet Railway Station Road, Chennai. Siva Sakthi Nagar, Annanur, Chennai-600 109. [PAN: AHNPD1435G] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Ms. S. Vidhya, C.A., Ld. AR प्रत्यर्थी की ओर से /Revenue by : Ms. N. Abhinaya, JCIT Ld. DR सुनवाईकीतारीख/Date of Hearing : 07.09.2026 घोषणाकीतारीख /Date of Pronouncement : 26.10.2026 आदेश / O R D E R PER GAGAN GOYAL, AM: This is an appeal preferred by the assessee against the order of Ld. Commissioner of Income Tax (A) / NFAC, (hereinafter referred as the ‘Ld. CIT(A)’), Delhi dated 25.02.2026, for the Assessment Year (hereinafter referred as the ‘AY’) 2017-18.

GROUDS OF APPEAL 1. The Order of the Learned Assessing Officer is without jurisdiction, is contrary to law, facts and circumstances of the case. 2. The Learned Assessing Officer erred in levying penalty u/s 271B of the Income Tax Act, 1961 3. The Learned AO, without appreciating the fact that the appellant was ignorant of the provisions of the law and believed his accountant Mr. Joseph to get the accounts audited and

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ITA No.1511/Chny/2026 SAMUEL DURAISWAMY file the return of income, concluded that the appellant has failed to discharge the statutory burden of proving such reasonable cause by credible material. For these grounds and such other grounds that may be adduced at or before the time of hearing, it is humbly prayed that your goodselves shall be pleased to, delete the addition made in the assessment or, pass such other orders as may deem fit and appropriate and render justice.

2.

The brief facts of the case are that the assessee filed his return of income on 28.03.2018 u/s. 139(4) of the Act declaring total income at Rs. 12,31,650/-. Case of the assessee was selected for complete scrutiny under CASS and the assessment order was passed on 16.12.2019 assessing the total income at Rs. 1,44,70,020/-. The assessee’s total turnover as per the assessment order was Rs. 13,60,10,984/-, i.e. liable to get the accounts audited u/s. 44AB of the Act otherwise liable to penalty u/s. 271B of the Act amounting to Rs. 1.5 Lacs. Penalty was initiated during the assessment proceedings itself and thereafter order levying penalty of Rs. 1.5 Lacs was passed u/s. 271B of the Act vide order dated: 26.05.2020. The assessee being aggrieved with the same preferred an appeal before the Ld. CIT(A) with a delay of 217 days, who in turn dismissed the appeal of the assessee. The assessee being further aggrieved preferred the present appeal before us. 3. We have gone through the order of the AO, order of the Ld. CIT(A) and submissions of the assessee alongwith grounds taken before us. It is observed that the figures of turnover and liability to get the accounts audited u/s. 44AB of the Act are not under challenge by the assessee. The only issue before us for adjudication pertains to applicability of section 273B of the Act in the present case, reproduced below: Penalty not to be imposed in certain cases. 273B. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C, section 271CA, section 271D, section 271E, section 271F, section 271FA, section 271FAA, section 271FAB, section 271FB, section 271G, section 271GA, section 271GB, section 271GC, section 271H, section 271-I, section 271J, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or section 272B or sub-section (1) or sub-section (1A) of section 272BB or sub-section (1) of section 272BBB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.

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ITA No.1511/Chny/2026 SAMUEL DURAISWAMY 4. We have gone through the submissions of the assessee alongwith the judicial decisions relied upon by the assessee and the Revenue, Law on the issue is no more res-integra and over the period the Hon’ble Courts had categorically held that if the assessee is able to demonstrate reasonable cause, certainly penalty can be waived/dropped. Onus is on the assessee to establish existence of reasonable cause. On identical issue the Hon’ble Jurisdictional High Court in the case of [2018] 100 taxmann.com 534 (Mad.) P. Senthil Kumar v. PCIT, held as under:

Admittedly, under section 273B there is power to condone the delay in filing the audit report provided the assessee shows reasonable cause for the failure to file the audit report. [Para 6] ■ The assessee is an individual carrying on business of dealing in granites. His case was that the accountant suddenly resigned and left without notice in the month of August 2012, that the assessee had to engage a new accountant and compile all the accounting data and that many files were in disarray, which led to the delay in filing the audit report. [Para 7] ■ The revenue opposed the appeal before the Tribunal by contending that the assessee was habitual in filing the tax audit reports belatedly and referred to the proceedings for the assessment year 2011-12. [Para 8] ■ The assessee would submit that during the said assessment year namely 2011-12, the assessee's father and mother passed away, as a result of which, the audit report could not be filed and ultimately, the explanation given by the assessee was accepted and the Tribunal deleted the penalty by order dated 23-11-2016. [Para 9] ■ Admittedly, the reasons assigned by the assessee have not been found to be false nor with any mala fide intention, the reasons were assigned. Therefore, it is viewed that the explanation offered by the assessee can be taken as a reasonable cause for his failure to file the audit report within time. It is also known that the assessment was completed under section 143(3) only on 29-3-2015 and on that date, the audit report was very much available with the Assessing Officer. [Para 10]

5.

Similar views taken by the Hon’ble Jurisdictional High Court in the case of [2013] 35 taxmann.com 235 (Mad.) Lakshmi Card Clothing Manufacturing Co. (P.) Ltd. v. DCIT. It is observed that the submissions before us filed by the assessee certainly forms a reasonable cause for the purposes of section 273B of the Act, but the same are without any evidence to corroborate the same. In view of this, matter is restored back to the AO with a direction to examine the matter of the assessee in the light of section 273B of the Act after giving a proper opportunity of being heard u/s. 282 of the Act. The assessee is also directed to be vigilant and cooperative enough during the proceedings before the AO and must come forward with relevant evidence to establish his bonafide and reasonable cause as provided in section 273B of the

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ITA No.1511/Chny/2026 SAMUEL DURAISWAMY Act. Resultantly, grounds raised by the assessee are allowed for statistical purposes only. 6. In the result, the appeal of the assessee is allowed for statistical purposes only. Order pronounced on the 26th day of October 2026, in Chennai.

Sd/- Sd/- (एबी टी. वर्की) (गगन गोयल) (ABY T. VARKEY) (GAGAN GOYAL) न्याययक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनाांक/Dated: 26th October 2026. KB आदेश की प्रयतललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रयतयनधि/DR 5. गार्ड फाईल/GF Digitally signed K BABU by K BABU Date: 2026.10.29 10:13:28 +05'30'

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