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Facts
The assessee, a co-operative society, filed its return declaring Nil income. The AO levied penalty under Section 271B for failure to get accounts audited within the time prescribed under Section 44AB. The CIT(A) confirmed the penalty, holding that the delay was not a reasonable cause.
Held
The Tribunal held that the assessee had a reasonable cause for the delay in obtaining the audit report, as the audit process was dependent on the Co-operative Department and the auditor appointed by them, over which the assessee had no control. Therefore, the penalty levied under Section 271B was cancelled.
Key Issues
Whether the delay in obtaining the statutory audit report due to the auditor's process constitutes a reasonable cause for cancellation of penalty under Section 271B.
Sections Cited
271B, 44AB, 143(3), 143(3A), 143(3B)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
आदेश / O R D E R PER JAGADISH, A.M: Aforesaid appeal filed by the assessee for Assessment Year (A.Y) 2018-19 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 27.02.2025 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s 143(3A) & 143(3B) of the Income-tax Act, 1961 (hereinafter “the Act”) dated 18.03.2021.
The assessee is a co-operative society registered under Tamil Nadu Co-operative Societies Act and filed its return of income on 09.03.2019 declaring total income at Nil. During assessment proceedings, the A.O levied penalty u/s.271B of the Act for failure to get accounts audited within the time prescribed u/s. 44AB of the Act.
On appeal, the Ld. CIT(A) rejected the explanation of the assessee holding that the delay in obtaining the statutory audit report could not be considered a reasonable cause, as the completion of the audit and the receipt of the statutory report were not beyond the control of the assessee. Consequently, the Ld. CIT(A) confirmed the penalty levied u/s. 271B of the Act.
Before us, the Ld. Authorized Representative (AR) of the assessee submitted that the statutory Auditor is appointed by the Tamil Nadu Co-operative Department, and the assessee has no authority to independently appoint an Auditor or expedite the process of obtaining the audit report. The Ld. A.R further stated that the statutory audit was conducted in October 2018, and after necessary approvals, the report was released by the Assistant Director of Co- operative Audit in February 2019. Upon receipt of the report, the assessee promptly filed the same. It was, therefore, submitted that there was a reasonable cause for the delay, and reliance was placed on the decision of the ITAT, Chennai in the case of Kanakkampalayam PACCS vs. ITO (ITA No. 3148/Chny/2022) dated 12.04.2023.
On the other hand, the Ld. Departmental Representative (DR), relied on the orders of lower authorities and submitted that penalty was rightly levied as the assessee failed to comply with statutory timelines
We have heard the rival submissions and perused the materials available on record. The A.O levied the penalty u/s. 271B of the Act for failure to get accounts audited within the time prescribed u/s. 44AB of the Act. However, assessee has offered explanation which appears bonafide, as the audit process and report issuance were dependent on the functioning and timeline of the statutory Auditor appointed by the Co-operative Department in which assessee had no control.
Considering the facts and circumstances of the case, and in light of the decision of the coordinate bench, in the cases relied upon by the assessee, supra, we are of the considered view that there was reasonable cause for the delay in obtaining the audit report. Hence, the penalty levied u/s. 271B of the Act is hereby cancelled.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 26th day of June, 2025 at Chennai.