M/S. R.R.KAPOOR,AHMEDNAGAR vs. INCOME-TAX OFFICER, WARD 2, AHMEDNAGAR

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ITA 592/PUN/2020Status: DisposedITAT Pune15 June 2022AY 2015-165 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 delay in conducting the audit and filing the report constituted a reasonable cause, considering the change of auditor and the resolution of objections. Therefore, the penalty imposed under Section 271B should not be sustained.

What were the facts?

The assessee's tax audit report was filed late for the assessment year 2015-16 due to a change in auditor and subsequent objections raised by the previous auditor. The Assessing Officer imposed a penalty under Section 271B for this delay.

What were the issues?

Whether the delay in obtaining a tax audit report due to a change of auditor and resolving objections constitutes a reasonable cause for waiving the penalty under Section 271B.

Which sections of the Income-tax Act were involved?

Section 271B,Section 273B

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

  • 438 ITR 296
    438 ITR 296 · 2021 · SC
    196 citing
  • 432 ITR 206
    432 ITR 206 · 2020 · SC
    182 citing
  • 421 ITR 314
    421 ITR 314 · SC
    172 citing

Income Tax Appellate Tribunal, PUNE BENCH, ‘B’ PUNE

Before: SHRI R.S. SYAL & SHRI PARTHA SARATHI CHAUDHURY

For Appellant: Shri Pramod Shingte
For Respondent: Shri M.G. Jasnani

आदेश / ORDER

PER R.S. SYAL, VP :

1.

This appeal by the assessee is directed against the order passed by the CIT(A)-2, Pune on 30-07-2020 confirming the penalty of Rs.1,50,000/- imposed by the Assessing Officer (AO) u/s.271B of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2015-16.

2.

This appeal is time barred by 06 days. The ld. AR has attributed the reason of delay due to Covid-19 pandemic.

Therefore, the said delay is condoned and the instant appeal is admitted for disposal on merits by virtue of judgment of the Hon’ble Supreme Court in Cognizance for Extension of Limitation, In re 438 ITR 296 (SC) read with judgment in Cognizance for Extension of Limitation, In re 432 ITR 206 (SC) dated 08-03-2021 and 421 ITR 314.

3.

Briefly stated, the facts of the case are that the assessee furnished his return on 30-03-2016 declaring total income of Rs.8,56,050/-. Such return was accompanied by the tax audit report. The AO observed that the audit u/s.44AB was not carried out before the “specified date”, namely, 31-10-2015 and hence, the assessee was liable to be visited with penalty u/s.271B of the Act. On being called upon to explain the reasons for the delay, the assessee submitted that audit of the books of account for the immediately preceding year was carried out by M/s. S.M.R. For the year under consideration, the new auditor was appointed for conducting the audit on 22-08-2015. The new auditor called for objections, if any, to its appointment from the earlier auditor, who raised certain issues. Eventually, the issues were resolved and immediately thereafter the incumbent auditor undertook the audit work and completed the same, followed by the filing of the return along with the tax audit report. Not convinced, the AO imposed penalty of Rs.1,50,000/- u/s.271B of the Act. The ld. CIT(A) echoed the penalty, against which the assessee has come up in appeal before the Tribunal.

4.

After considering the rival submissions and going through the relevant material on record, it is observed that the assessee admittedly got the accounts audited beyond the due date u/s 139(1) of the Act, which was the reason for late filing of the audit report with the Department. Section 271B in such circumstances calls for imposition of the penalty. However, it is pertinent to note that section 271B is subject to section 273B, and the latter section emphasizes that if a “reasonable cause” is established for non-compliance of the requirements which led to imposition of penalty under certain sections, including 271B, then no penalty should be imposed. We are confronted with a situation in which there was a change of the auditor from the preceding year. The new auditor, as per the established procedure, sought a no objection from the earlier auditor, who raised certain objections.

Those issues were resolved later on, which led to the delay in the audit of the accounts of the assessee. As and when the issues got resolved, the audit work was taken up and completed followed by the filing of tax audit report and the income-tax return. In our considered opinion, such reasons for the delay constitute a reasonable cause for the late auditing of the accounts and of furnishing the audit report belatedly. In the hue of section 273B r.w.s.271B, we hold that the ld. CIT(A) ought not to have confirmed the penalty. We, therefore, set aside the impugned order and direct to delete the penalty.

5.

In the result, the appeal is allowed. Order pronounced in the Open Court on 15th June, 2022.

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