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Facts
The assessee, a cooperative bank, filed its return of income belatedly. Subsequently, the Assessing Officer (AO) initiated penalty proceedings under Section 271B of the Income Tax Act, 1961, for failure to furnish the Tax Audit Report (TAR) within the due date.
Held
The Tribunal held that the penalty levied under Section 271B is unsustainable in law and on facts. The Tribunal followed the ratio laid down by the Hon'ble Kerala High Court in the case of Chavakkad Service Co-operative Bank Ltd., where it was held that delay in obtaining audit reports from statutory auditors can be a reasonable cause for delayed submission.
Key Issues
Whether penalty under section 271B is leviable for delayed filing of Tax Audit Report when the report was available at the time of assessment and there was a reasonable cause for the delay.
Sections Cited
271B, 44AB, 139(1), 143(3), 250, 80P(2)(a)
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
O R D E R Per: Anikesh Banerjee, JM The instant appeal of 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 08/07/2025. The impugned order was emanated from the order of the National Faceless Assessment Centre, Delhi (in short, ‘Ld. AO’) order passed under section 271B of the Act, date of order 10/02/2022.
Ananthavoor Service Co-op. Bank Ltd.
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 26/01/2018. The assessee’s case was selected for scrutiny and the assessment was completed under section 143(3) of the Act on 19/12/2019. 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 “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 with its return of income on dated 26/01/2018. 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 26/01/2018. At the time of assessment proceeding the said report was available before the Ld. AO.
Ananthavoor Service Co-op. Bank Ltd.
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 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. The relevant part of the appellate order is reproduced as below:-
2.2 During the assessment proceedings, it was found by the assessing officer that the appellant has furnished Audit report u/s.44AB of the I.T.Act,1961 in Form No. 3CA &3CD online on 26/01/2018. Therefore, the appellant has failed to furnish the audit report as required under the provisions of Section 44AB within the due date of furnishing the return of income as provided u/s.139(1) which attracts penalty provisions u/s. 271B of the Income Tax Act, 1961. During the penalty proceedings u/s 271B of the Act, the AO issued show cause notice u/s 271B dated 20/12/2019 in response to which the appellant filed response on Ananthavoor Service Co-op. Bank Ltd. 27/01/2022. The AO did not accept the reply of the appellant. Since the appellant failed to furnish the audit report within the prescribed due date, penalty u/s. 271B of the Act of Rs.1,50,000/- (0.5% of gross turnover of Rs.3,84,74,764/- worked out to Rs.1,92,374/-, or Rs. 1,50,000/- whichever is less). The AO passed order u/s 271B of the Act dated 10.02.2022 imposing penalty of Rs.1,50,000/- on the appellant.
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.
Order pronounced in the open court on 29th October, 2025.