Loading judgment…
Facts
The assessee, M/s. Shark Dyeing Mills, engaged in textile dye and processing, failed to file the audit report under section 44AD for AY 2018-19 within the prescribed time. Consequently, the AO imposed a penalty of Rs. 1,50,000 under section 271B. The FAA confirmed this penalty. The assessee appealed to the Tribunal, citing NCLT proceedings, the death of a partner managing accounts, and GST returns showing business slowdown as reasons for the delay.
Held
The Tribunal considered the reasons for the delay in filing the audit report, including NCLT proceedings and the death of a partner. It was noted that the audit report was filed before the assessment order was completed and that there was no loss to the exchequer. The Tribunal found 'reasonable cause' for the delay.
Key Issues
Whether there was a reasonable cause for the delay in filing the audit report, which led to the imposition of penalty under Section 271B of the Income Tax Act.
Sections Cited
271B, 44AD, 273B, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE KAND MS PADMAVATHY S
आदेश/ O R D E R
PER GEORGE GEORGE K, VICE PRESIDENT:
This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 01.08.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.
The order of the First Appellate Authority (FAA) is emanating from the order of the AO imposing penalty u/s.271B of the Act amounting to Rs.1,50,000/-.
Brief facts of the case are as follows: The assessee is a firm. It is engaged in the business of textile dye and processing. For the assessment year 2018-19, assessee’s turnover exceeded the prescribed limit. Therefore, the assessee firm, was required to file the audit report u/s.44AD of the Act. Since the assessee did not file the audit report within the time prescribed, the AO imposed penalty u/s.271B of the Act vide order dated 27.06.2024 amounting to Rs.1,50,000/-.
Aggrieved by the order imposing penalty, assessee filed appeal before the FAA. The FAA confirmed the penalty imposed.
Aggrieved by the order of the FAA, assessee filed the present appeal before the Tribunal. The Ld.AR had placed on record the NCLT proceedings disrupting operations of the firm, death certificate of partner indicating illness of the partner who is looking after the accounts of the assessee firm, GST returns showing slowdown of assessee’s business, etc. It was stated that the above documents were furnished before the AO and the FAA. It was contended that there is ‘reasonable cause’ as mandated u/s.273B of the Act for late filing of audit report, hence, on fact of the instant case, penalty u/s.271B of the Act needs to be deleted.
The Ld.DR supported the orders of the AO and the FAA.
We have heard rival submissions and perused the material on record. It is an admitted fact that liquidation proceedings were initiated against the assessee firm under the NCLT. The proceedings before the NCLT has been placed on record. The assessee’s partner who is looking after the assessee’s accounts had also expired after a prolonged illness, copy of death certificate of the said partner is also filed. Taking into account the totality of facts of the instant case, we are of the view that there is reasonable cause as mandated u/s.273B of the Act for not furnishing the audit report within the prescribed time. Further, we also note that the audit report was filed much prior to the assessment order being completed. The AO had the :- 4 -: benefit of audit report while completing the assessment order. Hence, it is only a venial breach which has not resulted in any loss to the exchequer. Therefore, on the facts of the instant case, we are of the view that penalty needs to be deleted and we do so. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed.