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Facts
The assessee, a private limited company engaged in jewellery business, filed its return for AY 2016-17 declaring a total income of Rs.23,46,520/-. The case was selected for scrutiny, and the assessment was completed on 30.12.2019 determining the total income at Rs.5,07,30,510/-. The assessee furnished its audit report u/s.44AB on 11.01.2017, beyond the extended due date of 17.10.2016, leading to a penalty of Rs.1,50,000/- u/s.271B.
Held
The Tribunal held that the Managing Director of the assessee company, aged about 68 years, was bedridden during the period from 10.10.2016 to 05.01.2017. This medical exigency constituted a reasonable cause for the delay in filing the audit report, as per Section 273B of the Act. The penalty provisions are quasi-criminal in nature and cannot be mechanically invoked when a reasonable cause is demonstrated.
Key Issues
Whether the penalty levied u/s.271B for delayed filing of audit report can be deleted on grounds of reasonable cause due to the Managing Director's illness.
Sections Cited
271B, 44AB, 273B, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI ABY T VARKEY & SHRI S. R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM:
The present appeal of the assessee is directed against the order dated 28.08.2025 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the Ld. CIT(A)”], arising out of the penalty order dated 28.08.2021 passed u/s.271B of the Income-tax Act, 1961 [hereinafter referred to as “the Act”] by the :-2-: ITA. No:3474/Chny/2025 Assessment Unit, National Faceless Assessment Centre [hereinafter referred to as “the AO”], for the Assessment Year 2016-17.
At the outset, it is observed that there is a delay of 26 days in filing the present appeal by the assessee. In support thereof, the assessee has filed an affidavit explaining the reasons for such delay along with an application seeking condonation thereof. The Ld.DR did not raise any serious objection to the prayer for condonation. Having considered the submissions and the reasons stated in the affidavit, we are satisfied that sufficient cause has been shown. Accordingly, the delay of 86 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.
The brief facts of the case are that the assessee, a private limited company engaged in the business of jewellery, filed its return of income for A.Y.2016-17 on 11.01.2017 declaring a total income of Rs.23,46,520/-. The case was selected for scrutiny and assessment was completed u/s.143(3) of the Act vide order dated 30.12.2019 determining the total income at Rs.5,07,30,510/-.
The assessee furnished its audit report u/s.44AB of the Act on 11.01.2017, which was beyond the extended due date of 17.10.2016. In view of the said delay, penalty proceedings u/s.271B of the Act were initiated by issuance of show cause notice u/s.274 r.w.s 271B of the Act on 25.06.2021. Thereafter, the AO levied a penalty of Rs.1,50,000/- u/s.271B of the Act vide order dated 26.08.2021.
Aggrieved by the said penalty order, the assessee preferred an appeal before the Ld.CIT(A). The Ld.CIT(A) vide impugned order dated 28.08.2025, confirmed the levy of penalty.
Aggrieved of the order of the Ld.CIT(A) in confirming the levy of penalty u/s.271B of the Act, the assessee is in appeal before this Tribunal.
:-3-: ITA. No:3474/Chny/2025
The Ld.AR appearing on behalf of the assessee submitted that the Managing Director of the assessee company, aged about 68 years, was bedridden during the period from 10.10.2016 to 05.01.2017, and due to the said medical exigency, he was unable to effectively supervise and coordinate the statutory compliances, including timely filing of the return of income and submission of the audit report u/s.44AB of the Act. In support of the aforesaid contention, the Ld.AR placed on record a medical certificate evidencing the illness of the Managing Director. It was further contended that the assessee was prevented by reasonable cause, within the meaning of section 273B of the Act, from filing the audit report within the prescribed time. Accordingly, the Ld.AR prayed for deletion of the penalty levied by the AO u/s.271B of the Act.
The Ld.DR placed reliance on the orders of the lower authorities and vehemently supported the impugned order of the Ld.CIT(A), praying for its confirmation.
We have carefully considered the rival submissions and perused the material available on record. It is an undisputed fact that the assessee furnished its audit report u/s.44AB of the Act on 11.01.2017, which was beyond the extended due date of 17.10.2016, leading to levy of penalty u/s.271B of the Act. However, the assessee has explained the delay by placing on record a medical certificate evidencing that its Managing Director, aged about 68 years, was bedridden during the period from 10.10.2016 to 05.01.2017. The assessee being a closely held private limited company, the day-to-day statutory compliances were admittedly supervised by the Managing Director, and his sudden illness constituted an unforeseen circumstance beyond the control of the assessee. In our considered view, the said medical exigency clearly falls within the ambit of “reasonable cause” as contemplated u/s.273B of the Act. The explanation furnished by the assessee remains uncontroverted by the Revenue and there is nothing on record to suggest any deliberate or contumacious conduct on the part of the assessee. It is also noted that the audit
:-4-: ITA. No:3474/Chny/2025 report was ultimately furnished, though with delay, and there is no allegation of suppression of income on this account. Penalty provisions being quasi-criminal in nature, the same cannot be mechanically invoked where reasonable cause is duly demonstrated.
In view of the above facts and circumstances, we hold that the assessee was prevented by reasonable cause from furnishing the audit report within the prescribed time. Accordingly, the penalty of Rs.1,50,000/- levied u/s.271B of the Act is directed to be deleted. The order of the Ld.CIT(A) is set aside and the grounds of appeal of the assessee is allowed.
In the result, the appeal of the assessee stands allowed.
Order pronounced in the open court on 02nd February, 2026 at Chennai.