POONAM GUPTA,CHENNAI vs. INCOME TAX OFFICER N C C 3(1), CHENNAI

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ITA 2551/CHNY/2026Status: DisposedITAT Chennai04 November 2026AY 2017-188 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the levy of penalty under Section 271B is not justified. The Tribunal clarified that the date of an audit report is when the auditor signs it, not the date of the acknowledgement generated by the e-filing portal. The observation of the CIT(A) that the acknowledgement date is the audit date was found to be incorrect. The Tribunal also found that the assessee did not take a different stand, as the explanation offered to the AO was consistent with the claim of obtaining the report on October 30, 2017. Even if the report date of November 30, 2017, was considered correct, the audit was completed shortly after the extended due date and before the return filing. The delay in uploading was explained by the auditor's personal circumstances, which constituted reasonable cause under Section 273B. The Tribunal noted that the audit report was available during the assessment, which was completed without additions, and no loss was caused to the revenue. Citing CIT v. Apex Laboratories Pvt. Ltd., the Tribunal held that penalty under Section 271B is not for belated filing but for failure to get accounts audited and obtain the report. In this case, accounts were audited and the report obtained before filing. The default was technical and venial, with reasonable cause shown. Therefore, the penalty was deleted.

What were the facts?

The assessee, Ms. Poonam Gupta, is appealing against a penalty of Rs. 1,50,000/- levied under Section 271B of the Income-tax Act, 1961, for Assessment Year 2017-18. The penalty was imposed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee had declared gross sales of Rs. 5,37,70,005/-, necessitating a tax audit under Section 44AB. The due date for furnishing the audit report was extended to November 7, 2017. The audit report in Form No. 3CB and 3CD, dated November 30, 2017, was uploaded online on January 2, 2018, along with the return of income. The AO initiated penalty proceedings after the assessment u/s 143(3) was completed without additions.

What were the issues?

1. Whether the levy of penalty under Section 271B of the Income-tax Act, 1961, is sustainable when the audit report was obtained before the due date but uploaded after the due date, and the delay is attributed to the auditor's personal circumstances, constituting a technical breach without loss to the exchequer. Assessee's contentions: The assessee argued that the audit report was obtained on October 30, 2017, well before the due date. The late submission was a technical and venial breach with no loss to the exchequer, especially since the assessment was completed without additions. The delay was due to the auditor's personal difficulties (son's marriage cancellation) and mental disturbance. The assessee, who had filed returns for over two decades, should not be penalized for the auditor's lapse. Penalty proceedings were initiated after an unreasonable delay. Reliance was placed on CIT v. Apex Laboratories Pvt. Ltd. and other cases. Revenue's contentions: The revenue, through the AO and CIT(A), contended that the audit report uploaded on January 2, 2018, was a violation of Section 44AB. The CIT(A) rejected the explanation of inadvertent selection of the month, stating no human interface is allowed during uploading and the date of audit is the acknowledgement date. The CIT(A) also noted there is no time limit for initiating penalty under Section 271B and distinguished the case laws relied upon by the assessee.

Which sections of the Income-tax Act were involved?

Section 44AB,Section 271B,Section 273B,Section 143(3),Section 274

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: SHRI MANU KUMAR GIRI & SHRI S. R. RAGHUNATHA

Hearing: 30.09.2026Pronounced: 04.11.2026

आदेश /O R D E R

PER S. R. RAGHUNATHA, AM :

The present appeal has been preferred by the assessee against the order dated 03.03.2026 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld.CIT(A)”], arising out of the order dated 15.03.2022 passed by the Assessing Officer, National Faceless Assessment Centre, Delhi [hereinafter referred to as “the AO”], u/s.271B of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), levying a penalty of Rs.1,50,000/- for the Assessment Year (AY) 2017-18.

:-2-: ITA. No.2551/Chny/2026

2.

The brief facts of the case are that the assessee, an individual, filed her return of income for the AY 2017-18 electronically on 02.01.2018, declaring a gross total income of Rs.17,27,970/-. The return was selected for complete scrutiny and the assessment u/s.143(3) of the Act was completed on 19.11.2019, accepting the income returned by the assessee. The assessee had declared gross sales of Rs.5,37,70,005/- for the previous year and was, therefore, required u/s.44AB of the Act to get her accounts audited and furnish the report of such audit on or before the specified date, which, for the year under consideration, was extended by the CBDT up to 07.11.2017. The audit report in Form No.3CB and 3CD, bearing the date 30.11.2017, was uploaded online on 02.01.2018 along with the return of income.

3.

Subsequently, on 24.11.2021, the AO issued a show cause notice u/s.274 r.w.s.271B of the Act. In response to a further opportunity given on 31.01.2022, the assessee submitted on 04.02.2022 that, at the time of online preparation and filing of Form No.3CB and 3CD, the month of November had been inadvertently selected in place of October, and that the mistake was not highlighted at the time of validating the form and went unnoticed. The AO did not accept this contention, since the audit report bore the date 30.11.2017 and was uploaded on 02.01.2018 along with the return. Holding that the assessee had failed to furnish the audit report within the due date and had not furnished a satisfactory explanation, the AO, with the prior approval of the Range Joint/Additional Commissioner, levied a penalty of Rs.1,50,000/- u/s.271B of the Act, being the lower of 0.5% of the gross turnover (Rs.2,68,850/-) and Rs.1,50,000/-, vide order dated 15.03.2022.

4.

Aggrieved, the assessee preferred an appeal before the Ld.CIT(A), contending that the audit report had been obtained on 30.10.2017, well before the due date, and that the only lapse was its late submission, which was a technical and venial breach causing no loss to the exchequer, the audit report having been available to the AO in the scrutiny assessment, which was

:-3-: ITA. No.2551/Chny/2026

completed without any addition and without any reference to penalty; that the auditor could not upload the report in time on account of a personal difficulty, namely that his son’s marriage, scheduled for January 2018, had been called off, which left him mentally disturbed for some time; that the assessee, who had relied entirely on the auditor and had been filing her returns regularly for over two decades, could not be penalised for the auditor’s lapse; and that the penalty proceedings were initiated after an unreasonable delay of over two years from the completion of the assessment. Reliance was placed, among others, on the decisions in CIT v. Apex Laboratories Pvt. Ltd. [2010] 320 ITR 498 (Mad), Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC), CIT v. Vikas Promoters P. Ltd. [2005] 277 ITR 337 (Delhi), CIT v. E.C.C. Project Pvt. Ltd. [2015] 374 ITR 44 (All), K.P. Narayanappa Setty & Co. v. CIT (1975) 100 ITR 17 (AP) and CIT v. L.S. Lakshmanaswamy [2008] 296 ITR 591 (Madras). The Ld.CIT(A), however, confirmed the penalty, holding as under:

“… On perusal of the written submission submitted by the appellant, it is observed that the appellant has taken a different stand before me and stated she had obtained tax audit report dated 30th October 2017 and the only technical error was not submitting the same before the due date of filing. … I find no merit in the said submission for the reason that the audit report uploaded on 2.1.2018 is violation of section 44AB of the Act. The reason put forward before the ld AO that the CA inadvertently clicked the month November instead of October does not hold good for the simple reason no human interface is allowed while uploading the said report. The date of audit is considered as when the acknowledgement is generated which is automatic. Further, the Act does specify initiation of penalty proceedings u/s 271B of the Act while assessing the income unlike penalty for concealment of income. Moreover, there is no time limit for initiating penalty u/s 271B of the Act which the appellant has also admitted. The case laws relied upon by the appellant does not come in rescue of the appellant as they are distinguishable on fact and circumstances. Thus, considering the discussion made above, I hold the action of the ld AO as justified and accordingly confirm the penalty of Rs.1,50,000/- imposed u/s 271B of the Act. …”

5.

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal:

“1. That the Assessing Officer as well as the learned CIT(A) erred in completing the penalty proceeding and the appeal with out considering the merit of the case and by imposing a penalty amount of Rs. 1,50,000 is a grave injustice to the Assessee.

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2.

That the Assessing Officer as well as the learned CIT(A) erred in imposing the penalty without considering the fact that the there was an assessment proceeding and the assessment proceeding was completed without any addition to the income offered and no penalty proceeding was initiated in the assessment Order. 3. That the Assessing Officer as well as the learned CIT(A) erred by not taking into consideration that the Assessee had obtained her Audit Report well before the due date of filing ie on 30th October 2017 and late submission of the audit Report is only a technical venial breach which does not create any loss to the exchequer and for this the Assessee cannot be penalised. 4. That the Assessing Officer as well as the learned CIT(A) erred in imposing penalty ignoring the fact that by imposing a penalty under section 271B would cause untold misery to a honest assessee who has been filing her Return of Income over two decade. 5. That the Assessee prays that, after obtaining the Audit Report before the due date but filed after the due date by the Auditor for which the assessee should not be penalised for the technical breach. 6. That the Auditors was not able to file the report well before the due date is because his sons marriage was stopped which was supposed to be happened during January 2018 and he was mentally disturbed for some time. 7. The learned CIT(A) erred in assuming that my ground of appeal is only for obtaining audit report belatedly. Whereas this was not my grounds of appeal. 8. The learned CIT(A) erred in stating that the date of audit is the date when the acknowledgement is generated at the time of uploading the audit report. 9. The learned CIT(A) erred in assuming that the date of audit and the date of furnishing the audit report will be same which is again contrary to the law and against the fact of the case. 10. The learned CIT(A) failed to understand that obtaining the audit report and the furnishing the audit report are two different function and they are not one single function. 11. The learned CIT(A) erred in assuming that the assessee taking a different stand before him which is again contrary to fact of the case as the assessee was not given enough opportunity the explain before the assessing officer. 12. The learned CIT(A) erred in stating that the assessee should not take a different stand before him which is contrary to law. 13. The learned CIT(A) erred in dismissing the jurisdictional court ruling in CIT v Apex Laboratories Pvt Ltd [2010] 320 ITR 498 (Mad) and host of other cases without discussing the merit of each cases which is against the principles of natural justice.”

6.

At the time of hearing, the ld.AR for the assessee reiterated the submissions made before the Ld.CIT(A) and submitted that the accounts of the assessee had been audited and the audit report obtained before the due date,

:-5-: ITA. No.2551/Chny/2026 the report having been signed on 30.10.2017, and that the month of November was inadvertently selected while preparing the online form. It was submitted that the Ld.CIT(A) erred in treating the date of generation of the acknowledgement on uploading as the date of the audit, and in failing to appreciate that getting the accounts audited and furnishing the report are two distinct acts. It was further submitted that the delay in uploading the report was occasioned by the auditor’s personal circumstances, that the audit report was on record and was accepted in the scrutiny assessment completed u/s.143(3) without any addition, and that the default, if any, was only technical and venial, which did not warrant the levy of penalty in view of s.273B of the Act and the decisions relied upon.

7.

Per contra, the ld.DR relied on the orders of the authorities below and submitted that the audit report, as uploaded, bore the date 30.11.2017, which was beyond the extended due date of 07.11.2017, and that the penalty had rightly been levied and confirmed.

8.

We have heard the rival submissions, perused the orders of the authorities below and carefully examined the material available on record. The issue for our consideration is whether the levy of penalty of Rs.1,50,000/- u/s.271B of the Act for the AY 2017-18, as confirmed by the Ld.CIT(A), is sustainable.

9.

Section 271B of the Act provides that if any person required to comply with section 44AB of the Act fails to get his accounts audited in respect of any previous year or to furnish a report of such audit as required under that section, the AO may impose a penalty of a sum equal to one-half per cent of the total sales, turnover or gross receipts, or Rs.1,50,000/-, whichever is less. The provision is, however, subject to section 273B of the Act, which mandates that no penalty shall be imposable u/s.271B of the Act for any failure if the person proves that there was reasonable cause for the failure. The levy of penalty

:-6-: ITA. No.2551/Chny/2026 u/s.271B of the Act is thus not automatic, and the AO is required to consider whether the explanation offered by the assessee constitutes reasonable cause.

10.

It is not in dispute that the assessee did get her accounts audited, that the report of such audit in Form No.3CB and 3CD was furnished along with the return of income on 02.01.2018, and that the return so filed, together with the audited accounts and the audit report, was subjected to scrutiny and accepted by the AO in the assessment completed u/s.143(3) on 19.11.2019 without any addition. The case of the Revenue is, therefore, not one where the accounts were not audited at all, but one of delay. The only dispute is whether the audit was completed on 30.10.2017, as claimed by the assessee, or on 30.11.2017, being the date reflected in the uploaded form.

11.

On this aspect, we find that the reasoning of the Ld.CIT(A) proceeds on an incorrect premise. The date of an audit report is the date on which the auditor signs and issues the report, which is stated by the auditor in the form, whereas the date of the acknowledgement generated by the e-filing portal is only the date on which the report is uploaded. The two dates are distinct, as is evident in the present case itself, where the report bears the date 30.11.2017 while the acknowledgement was generated on 02.01.2018. The observation of the Ld.CIT(A) that the date of audit is the date on which the acknowledgement is automatically generated, and that no human interface is involved, is thus contrary to the record, since the date in the report is an entry made by the auditor while preparing the form. Nor can the assessee be said to have taken a different stand before the Ld. CIT(A), since the very explanation offered before the AO on 04.02.2022 was that the month of November had been inadvertently entered in place of October, which is the same as the claim that the report was obtained on 30.10.2017. The AO has not brought any material on record, such as an enquiry with the auditor, to rebut this explanation, and has rejected it merely by reference to the date appearing in the form.

:-7-: ITA. No.2551/Chny/2026 12. In any event, even if the date of 30.11.2017 appearing in the report is taken as correct, the accounts were audited and the report obtained within a short period after the extended due date of 07.11.2017, and well before the return was filed. The delay in uploading the report thereafter has been explained by the assessee as having been caused by the personal circumstances of the auditor, on whom the assessee, an individual, had relied for the purpose, and this explanation has not been found to be false by either of the authorities below. The audit report was available to the AO when the assessment was framed, and the returned income, which was supported by the audited accounts, was accepted in scrutiny without any addition. The object of section 44AB of the Act, namely to ensure that the accounts are properly maintained and audited so as to facilitate the assessment, was thus fully served, and no loss whatsoever has been caused to the Revenue. The Hon’ble jurisdictional High Court in CIT v. Apex Laboratories Pvt. Ltd. [2010] 320 ITR 498 (Mad) has held that penalty u/s.271B of the Act is not imposable for non-compliance with section 44AB of the Act merely on the ground that the return was filed belatedly, and that the penalty is attracted where the assessee fails to get the accounts audited and obtain the report. In the present case, the accounts were audited and the report was obtained before the return was filed.

13.

In the facts of the present case, where the accounts were duly audited, the report was filed along with the return, the returned income was accepted in scrutiny, and the delay has been explained by reference to the circumstances of the auditor, the default, if any, is at best technical and venial, and the explanation offered by the assessee constitutes reasonable cause within the meaning of section 273B of the Act.

14.

In view of the above, we hold that the levy of penalty u/s.271B of the Act is not justified on the facts of the case. Accordingly, we set aside the order of the Ld.CIT(A) and direct the AO to delete the penalty of Rs.1,50,000/- levied u/s.271B of the Act for the AY 2017-18. Since the penalty is deleted on merits, the other contentions of the assessee, including those relating to the delay in

:-8-: ITA. No.2551/Chny/2026 initiation of the penalty proceedings, are rendered academic and are not adjudicated. The grounds of appeal of the assessee are allowed.

15.

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 04th November, 2026 at Chennai.

Sd/- Sd/- (मनु कुमार �ग�र) (एस. आर. रघुनाथा) (MANU KUMAR GIRI) (S. R. RAGHUNATHA) �या�यक सद�य/Judicial Member लेखा सद�य/Accountant Member

चे�ई/Chennai, िदनांक/Dated, the 04th November, 2026 EJTADA Digitally signed by EJTADA DURGA NARESH DURGA Devadas Date: 2026.11.09 NARESH 14:50:11 +05'30' आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ)/Appellant 2. *+यथ)/Respondent 3.आयकर आयु@त/CIT– Chennai/Coimbatore/Madurai/Salem 4. Nवभागीय *�त�न�ध/DR 5. गाड' फाईल/GF

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