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Facts
The assessee, Guru Nanak Agencies, filed its Income Tax Return for A.Y. 2017-18, and the case was selected for scrutiny due to a large turnover without an audit report. The Assessing Officer imposed a penalty of Rs. 1,50,000 under Section 271B for non-filing of the audit report under Section 44AB, which was subsequently sustained by the CIT(A).
Held
The Tribunal held that the penalty order was time-barred, having been passed beyond the statutory limitation period. It further found that the penalty notice issued by the AO did not disclose any specific charge and that the AO's additions were minor and ad-hoc. Consequently, the Tribunal directed the deletion of the penalty.
Key Issues
1. Whether the penalty imposed under Section 271B for non-filing of the audit report was time-barred. 2. Whether the penalty notice was valid despite lacking specific charges and if there was a reasonable cause for non-compliance.
Sections Cited
271B, 44AB, 143(2), 273B, 275
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI NIKHIL CHOUDHARY
PER KUL BHARAT, VICE PRESIDENT.:
This appeal, by the assessee, is directed against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), New Delhi dated 22.07.2024, pertaining to the assessment year 2017-18. The assessee has raised the following grounds of appeal: -
1. Because the CIT(A)/NFAC has erred on facts and in law in upholding the levy of penalty of Rs.1,50,000/- u/s 271B of the Act, 1961, which penalty is bad in law, be deleted.
2. Because there being no default as contemplated u/s 271B the penalty imposed by the AO and upheld by the CIT(A)/NFAC being bad in law be deleted.
3. Because the CIT(A)/NFAC has failed to appreciate that the assessee was prevented by sufficient and reasonable cause, totally dependent upon his tax advisors and auditors, being under bonafide belief that necessary compliance must be done by them, the penalty imposed is bad in law be deleted.
Page 2 of 5 4. Because the entire facts when read with the provisions of section 273B, the assessee being prevented by reasonable cause the penalty imposed be deleted.”
Briefly stated, facts are that in this case, the assessee filed its return of income declaring total income at Rs.1,14,040/- through electronic mode on 29.10.2017. The case was taken up for scrutiny assessment on the basis of “large turnover shown in ITR but audit report not filed”. Thereafter, the Assessing Officer issued statutory notices u/s 143(2) of the Income Tax Act, 1961 (“the Act”, for short) and after considering the material assessed income at Rs.1,71,730/- against returned income of Rs.1,14,040/- after making additions on ad hoc basis.
The Assessing Officer had also initiated penalty proceedings u/s 271B of the Act for non-filing of the audit report u/s 44AB of the Act. Thereafter, the Assessing Officer imposed penalty of Rs.1,50,000/- u/s 271B of the Act vide order dated 09.06.2021. Aggrieved against this, the assessee preferred an appeal before the Ld. CIT(A) who sustained the penalty. Now, the assessee is in appeal before this Tribunal.
At the outset, the Ld. Counsel for the assessee reiterated the submissions as made before the Ld. CIT(A) and also submitted that the Ld.CIT(A) failed to consider the submissions of the assessee. Further, he submitted that the penalty order is ex-facie illegal on account of the facts that notice issued by AO does not disclose any specific charge. He took us through the contents of penalty notice and the penalty order. He submitted that even otherwise also the impugned penalty is barred by time. He prayed that impugned penalty order may be quashed.
Heard the Ld. Representatives of the parties. Undisputedly, the case relates to the A.Y. 2017-18. The Income Tax Return was required to be filed on 31.10.2017. The assessee filed ITR on 29.10.2017 and accounts were audited on 28.09.2017. The assessment was completed 21.12.2019. The penalty proceedings u/s 271B of the Act was initiated on 31.12.2019 and impugned penalty order was passed on 09.06.2021, thereby imposing penalty at Rs.1,50,000/-. It is pointed out that the penalty should have been levied by on 31.03.2020 or 30.06.2020. It is seen from the order of the Ld. CIT(A) that the objection regarding absence of specific charge and limitation was not taken before him. However, both the issues being on law point are taken up for consideration. It is noted by the Assessing Officer that the first notice was issued on 21.12.2019 and penalty order was passed on 09.06.2021. Section 275 of the Act prescribed bar on account of limitation for imposing penalty is reproduced as under for the sake of clarity: - “(1) No order imposing a penalty under this Chapter shall be passed after the expiry of six months from the end of the quarter in which,— (a) the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, if the relevant assessment or other order is not the subject matter of an appeal under section 246 or section 246A or section 253; (b) the order of revision under section 263 or section 264 is passed, if the relevant assessment or other order is the subject matter of revision under the said sections; (c) the order of appeal under section 246 or section 246A is received by the jurisdictional Principal Commissioner or Commissioner, if the relevant assessment or other order is the subject matter of an appeal under the said sections and no further appeal has been filed under section 253; (d) the order of appeal under section 253 is received by the jurisdictional Principal Commissioner or Commissioner, if the relevant assessment or other order is the subject matter of an appeal under the said section; (e) notice for imposition of penalty is issued, in any other case.
(2) The order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be revised on the basis of assessment as revised by giving effect to the order passed under section 246 or section 246A or section 253 or section 260A or section 261 or revision under section 263 or section 264, where the relevant assessment or other order is the subject matter of an appeal or a revision under the said sections. (3) No order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty under sub-section (2) shall be passed— (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; (b) after the expiry of six months from the end of the quarter in which the order passed under section 246 or section 246A or section 253 or section 260A or section 261 is received by the jurisdictional Principal Commissioner or Commissioner, or the order of revision under section 263 or section 264 is passed.
(4) The provisions of sub-section (2) of section 274 shall apply to the order imposing or enhancing or reducing penalty under sub-section (2). (5) In computing the period of limitation for the purposes of this section, the following period shall be excluded:— the time taken in giving an opportunity to the assessee to be reheard (a) under the proviso to section 129; the period commencing on the date on which stay on proceeding for levy of (b) penalty was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by the jurisdictional Principal Commissioner or Commissioner.]
Thus, we find force into the contention of Ld. Counsel that the impugned order suffers from delay and deserves to be quashed. Further, the Revenue has also not rebutted the fact that the notice does not disclose any specific charge. Moreover, it is noted that the AO has made minor addition on ad hoc basis only. No defects in accounts have been pointed out. Therefore, considering the fact that the impugned order does not disclose specific charge of default and barred by time. The impugned
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 11/06/2025.