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Facts
The assessee, a cooperative bank, claimed deduction under section 80P(2)(a). The tax audit report (TAR) was due by 07/11/2017 but was filed on 06/02/2018. The Assessing Officer initiated penalty proceedings under section 271B for non-filing of the TAR within the due date and imposed a penalty of Rs. 1,50,000/-. The CIT(A) upheld the penalty.
Held
The Tribunal referred to the Kerala High Court's decision in Chavakkad Service Co-Operative Bank Ltd. v. ITO, which held that if audit reports are made available before the Assessing Authority at the time of assessment finalization and the delay in obtaining them from statutory auditors under the Kerala Co-operative Societies Act and Rules is a reasonable cause, then no penalty under section 271B should be imposed.
Key Issues
Whether the penalty imposed under Section 271B for delayed filing of the Tax Audit Report is sustainable when the report was submitted before the finalization of assessment and there was a reasonable cause for the delay.
Sections Cited
250, 271B, 139(1), 80P(2)(a), 143(3), 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI ANIKESH BANERJEE, JM
& 605/Coch/2025 Kollam District Police Deptt. Employees Co.op. Society & Porkulam SCB O R D E R Per: Anikesh Banerjee, JM The instant appeal of both the assessee was filed against the order of the Learned National Faceless Appeal Centre, Delhi [for brevity, ‘Ld. CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, the Act’) for Assessment Year 2017-18, date of order 10/07/2025 for petitioner-1 & for Assessment year 2013-14, date of order 25/06/2025 for petitioner-2.The impugned orders were emanated from the order of the Assessment Unit, Income Tax Department (in short, ‘Ld. AO’) order passed under section 271B of the Act, date of order 12/07/2023 for AY petritioner-1 &19/09/2022 for petitioner-2.
The assessee is a cooperative bank and filed the return U/s 139(1) of the Act. The assessee claimed deduction under section 80P(2)(a) of the Act in its return filed on dated 19/02/2018. The assessee’s case was selected for scrutiny and the assessment was completed under section 143(3) of the Act on 13/12/2019. During the assessment proceeding the Ld. AO found that the assessee is liable to audit its books of accounts under section 44AB of the Act. But the assessee was in delay to file the Tax Audit Report (in short & 605/Coch/2025 Kollam District Police Deptt. Employees Co.op. Society & Porkulam SCB “TAR”) under section 44AB of the Act. Due date for filing TAR was 30/09/2017 which was further extended up to 07/11/2017. But the TAR was filed on dated 06/02/2018. After completion of assessment proceeding, the Ld. AO initiated penalty proceeding for non-filing of TAR within due date under section 271B of the Act and issued notice accordingly. The assessee comply the notices related to penalty proceeding but finally the penalty was imposed amount to Rs.1,50,000/- under section 271B of the Act. The aggrieved assessee filed an appeal before the Ld. CIT(A). But the Ld. CIT(A) upheld the impugned penalty order. Being aggrieved the assessee filed an appeal before us.
During the hearing before the beach the Ld. AR argued & stated that the assessment was completed on 19/12/2019 but the TAR was filed belatedly on 06/02/2018. The Ld. AR explained that Audit Report from Co-operative department was received by the assessee on 29/01/2018. But at the time of assessment proceeding the said report was available before the Ld. AO.
The Ld. AR respectfully relied on the order of Hon’ble High Court of Kerala in Chavakkad Service Co-Operative Bank Ltd. v. ITO, [2024] 169 taxmann.com 45 (Kerala). Held where assessee co-operative societies did not file audit report as mandated under section 44AB within time limit specified thereunder, however, audit reports were made available before Assessing Authority at time of & 605/Coch/2025 Kollam District Police Deptt. Employees Co.op. Society & Porkulam SCB finalization of assessments, since delay in obtaining audit reports from statutory auditors under Kerala Co-operative Societies Act and Rules could be seen as a reasonable cause for delayed submission of audit reports, no penalty under section 271B was to be imposed on assessee
The Ld. DR argued and stood in favour of the orders of revenue authorities. But unable to bring any contrary judgment against the submission of the Ld. AR.
We have heard the rival submissions and perused the material available on record. We find that the issue in dispute is squarely covered by the decision of the Hon’ble Kerala High Court in the case of Chavakkad Service Co-operative Bank Ltd. (supra). Respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court, we hold that the penalty levied under section 271B of the Act amounting to Rs.1,50,000/- is unsustainable in law and on facts. Accordingly, the penalty imposed under section 271B of the Act is hereby quashed.
In the result, the appeal filed by the assessee bearing &639/Coch/2025 is allowed.
Order pronounced in the open court on 30th October, 2025.