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Facts
The assessee, Sreedevi Voram, operated a petrol bunk but leased it out due to her husband's illness and subsequent death. She did not file an income tax return initially, claiming no taxable income, but later filed one in response to a notice. The Assessing Officer initiated penalty proceedings under sections 272A(1)(d) and 271B for non-compliance with notices and late filing of the audit report.
Held
The Tribunal held that the penalty under section 272A(1)(d) was not justified because the assessee did eventually file the required documents and the Assessing Officer accepted the return. For the penalty under section 271B, the Tribunal found that the delay in filing the audit report was due to bonafide and reasonable circumstances arising from the personal tragedy of the assessee, thus warranting deletion of the penalty. However, regarding the penalty under Section 271B related to the audit report filing, the matter was remanded for re-examination by the AO due to contradictions in the filing dates.
Key Issues
The appeals concern the validity of penalties levied under section 272A(1)(d) for non-compliance with notices and section 271B for alleged delay in filing the audit report, with the assessee citing personal hardship and subsequent compliance.
Sections Cited
272A(1)(d), 271B, 148A(b), 148A(d), 148, 143(2), 142(1), 139, 147, 144B, 44AB, 274, 273B
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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA.
PER VIJAY PAL RAO, VICE PRESIDENT :
These two appeals by the Assessee are directed against the two separate Orders dated 22.08.2025 and 27.08.2025 of the learned Commissioner of Income Tax- (Appeals)-National Faceless Appeal Centre [in short “NFAC], Delhi arising from penalty orders passed by the Assessing Officer u/sec.272A(1)(d) as well as 271B of the Income Tax
2 ITA.Nos.1473 and 1474/Hyd./2025 Act [in short "the Act"], 1961 respectively, for the assessment year 2018-2019.
In the appeal against the penalty levied u/sec.272A(1)(d) the assessee has raised the following grounds of appeal:
“The order of learned CIT (A) is erroneous both on facts and in law;
The learned CIT (A) erred in confirming the penalty levied u/s 272A(1)(d) of the 1.T.Act of Rs.20,000/- against the appellant;
The order of assessment is not valid as the notice issued u/s 148A(b), order passed u/s 148A(d) and the notice issued u/s 148 were issued by the Income Tax Officer, Ward-1, Warangal who has no jurisdiction to do so;
The learned CIT (A) ought to have considered the facts submitted before him and allowed the appeal filed by the appellant herein:
The learned CIT (A) ought to have considered the fact that the husband of the appellant suffered serious illness and she stopped the business activity which prevented her from appearing before the Assessing Officer and responding to the notices:
In the circumstances, the learned CIT (A) ought to have allowed the appeal filed by the appellant herein;
Any other ground/grounds that may be urged at the time of hearing.”
3 ITA.Nos.1473 and 1474/Hyd./2025 3. The learned Authorised Representative of the Assessee has submitted that the assessee commenced her business activity of running a petrol bunk allotted by the Hindustan Petroleum Corporation Limited [in short “HPCL”] in the year 2016. The husband of the assessee was looking after the operation of the petrol pump and assessee was totally depending upon her husband viz., Sri Voram Bhaskara Rao in carrying out the business activity. In the month of January, 2017, the husband of the assessee fell seriously ill and ultimately passed away in the year 2020. As the assessee was not in a position to carrying on the business of running the petrol bunk independently without the assistance of her husband who was sick, she leased out the entire business activity and, therefore, the income of the assessee was only leased rentals during the assessment year under consideration. The learned Authorised Representative of the Assessee has further submitted that as there was no taxable income, the assessee did not file the return of income for the year under consideration. However, in response to notice u/sec.148 of the Act, the assessee filed her return of 4 ITA.Nos.1473 and 1474/Hyd./2025 income and also produced all relevant records including the audit report. The assessment was completed by the Assessing Officer u/sec.147 r.w.s.144B of the Act accepting the return of income. The Assessing Officer has initiated the penalty u/sec.272A(1)(d) for non-compliance of the notice. However, when the assessee has filed all the relevant record and Assessing Officer has accepted the return of income, then there is no default on the part of the assessee in compliance of the notice issued by the Assessing Officer. He has thus, submitted that due to the facts and circumstances which were beyond the control of the assessee, the assessee could not file the return of income u/sec.139 of the Act. However, in response to notice u/sec.148 of the Act and the other notices issued by the Assessing Officer, the assessee has duly complied with and furnished all the relevant details and documents. Thus, the learned Authorised Representative of the Assessee has submitted that the penalty levied by the Assessing Officer is not justified and liable to be deleted.
5 ITA.Nos.1473 and 1474/Hyd./2025 4. On the other hand, the learned DR has submitted that the Assessing Officer has issued various notices as per the details given in the penalty order. However, there were no response on behalf of the assessee to the notices issued u/sec.143(2) and 142(1) of the Act. Therefore, there was a default on the part of the assessee in compliance to the notices issued by the Assessing Officer. The Assessing Officer has accordingly levied the penalty for non-compliance of the notices issued u/sec.143(2) and 142(1) of the Act @ Rs.10,000/- for each default. He has relied upon the Orders of the authorities below.
We have considered the rival submissions as well as carefully perused the Orders of the authorities below. The Assessing Officer has given the reasoning for initiating the penalty u/sec.272A(1)(d) of the Act in the impugned order as under :
“During the course of assessment proceedings notice u/s 143(2) of the Act was issued on 23.06.2023 and notice u/s 142(1) of the Act was issued on 26.10.2023 but the assessee did not file any reply. The assessment order was passed u/s 147 r.w.s. 1448 of the Act on 14.03.2024 on a total income of Rs.7.59.250/-.
6 ITA.Nos.1473 and 1474/Hyd./2025 Penalty proceedings u/s 272A(1)(d) of the Act was initiated for non- compliance of notice u/s 143(2) of the Act dated 23.06.2023 and notice u/s 142(1) of the Act dated 26.10.2023. Subsequently, a notice u/s 274 r.w.s. 272A(1)(d) of the Act was issued to the assessee on 14.03.2024.”
5.1. Thus, the Assessing Officer has given the reasons for issuing the show cause notice that the assessee did not file any reply to the notice issued u/sec.143(2) dated 23.06.2023 and notice u/sec.142(1) dated 26.10.2023. It is pertinent to note that though initially the assessee did not file any reply to the notices issued by the Assessing Officer, however, thereafter, the assessee filed reply on 23.12.2024 in response to notice issued u/sec.143(2) and 142(1) of the Act which is reproduced by the Assessing Officer in paras 3.2 and 3.3 of the assessment order. The relevant part of Paras-3.2 and 3.3 are as under:
“3.2. The assessee filed reply on the issues on 23.01.2024 along with documentary evidences Le. Copies of Bank Accounts Statements, Audit Report Balance Sheet, Profit and Loss Account, stating, ….. ….. ….. …..
7 ITA.Nos.1473 and 1474/Hyd./2025 3.3. She further filed reply on 14.02.2024 along with Purchase Ledger Account, HPCL Ledger Account, Vat sales, Cash Book, details of GST sales, details of cash back entries Form No. 26AS the relevant part of which is reproduced as under. ….. ….. ….. …..”
5.2. Thus, it is manifest from the assessment order itself that the assessee filed the reply in compliance to the notice issued by the Assessing Officer and furnished all the documentary evidence including bank account statement, audit report, balance-sheet, profit and loss account, purchase ledger account, VAT sales, cash book details, GST details etc. Once there is a compliance on the part of the assessee by producing all the relevant documents and details, then a mere delay in filing the reply much before the conclusion of the assessment cannot be ipso facto lead to the conclusion that the assessee has defaulted in compliance of the notices. Further the Assessing Officer has accepted the reply filed by the assessee and also accepted the income as per return of income filed by the assessee which itself shows that there was a complete compliance on behalf of the assessee to the notices issued by the Assessing Officer.
8 ITA.Nos.1473 and 1474/Hyd./2025 Accordingly, in the facts and circumstances of the case, the penalty levied by the Assessing Officer u/sec.272A(1)(d) for non-compliance of the notices u/sec.143(2) and 142(1) is not justified and the same is deleted.
In the result, appeal ITA.No.1473/Hyd./2025 of the Assessee is allowed.
ITA.No.1474/Hyd./2025 – A.Y. 2018-2019:
In appeal against the penalty levied u/sec.271B of the Act, the assessee has raised the following grounds:
“The order of learned CIT (A) is erroneous both on facts and in law.
The learned CIT (A) ought to have considered the fact that the appellant did not carried on the business activity and leased out the entire business activity and, therefore, the provisions of Sec.271B have no application.
The learned CIT (A) erred in confirming the penalty levied u/s 271B of the I.T. Act of Rs.1,50,000/- by the Assessing Officer.
The order of assessment is not valid as the notice issued u/s 148A(b). order passed u/s 148A(d) and the notice issued u/s 148 were issued by the Income Tax Officer, Ward-1, Warangal who has no jurisdiction to do so. 5. Any other ground/grounds that may be urged at the time of hearing.”
9 ITA.Nos.1473 and 1474/Hyd./2025 8. The learned Authorised Representative of the Assessee has submitted that since the assessee has filed the return of income in response to notice u/sec.148 and also filed the audit report during the course of assessment proceedings, therefore, there is no default on the part of the assessee to the extent of filing the audit report. As far as the delay in filing the audit report is concerned, the learned Authorised Representative of the Assessee has submitted that the assessee was totally depending upon her husband for carrying out the business activity of running the petrol bunk. However, due to the illness of the husband and ultimately the death of the husband of the assessee, the assessee could not continue with the business activity and leased out the same. He has further submitted that this is the first year where the assessee was required to get its accounts audited u/sec.44AB of the Ac as in the first year of the operation of business the turnover of the assessee was less than the threshold limit for getting the accounts audited and thereafter, the assessee stopped the business of running the petrol bunk and leased out the same, that’s why the 10 ITA.Nos.1473 and 1474/Hyd./2025 assessee could not get the accounts audited. Since on record the entire financial transactions of purchase and sales are in the name of the assessee, the assessee then declared the income by filing the return of income, in response to notice u/sec.148 of the Act and also filed the audit report. He has referred to the assessment order and submitted that the Assessing Officer has recorded this fact of filing the audit report, therefore, in view of the facts and circumstances, the assessee was having bonafide and reasonable cause for the delay in filing the audit report before the Assessing Officer. In support of his contention, he has relied upon the Order of ITAT, Hyderabad Bench, dated 07.11.2025 in the case of Vivimed Labs Limited, Bidar vs. The DCIT, Central Circle- 3(4), Hyderabad in ITA.No.601/Hyd./2025 for the assessment year 2018-2019. Thus, the learned Authorised Representative of the Assessee has submitted that the penalty levied by the Assessing Officer u/sec.271B of the Act is not sustainable and liable to be deleted.
On the other hand, the learned DR has submitted that it is an undisputed fact that the assessee did not file the 11 ITA.Nos.1473 and 1474/Hyd./2025 audit report as per the time limit prescribed u/sec.44AB of the Act. Though the assessee has filed the audit report during the re-assessment proceedings, but after a gap of 06 years. Therefore, there is a non-compliance on behalf of the assessee in filing the audit report as per the specific date prescribed u/sec.44AB of the Act. The learned DR has relied upon the Orders of the authorities below.
We have considered the rival submissions as well as the relevant material on record. In the case in hand, the assessee did not file any return of income u/sec.139 of the Act and, therefore, no audit report was filed before the notice u/sec.148 was issued by the Assessing Officer on 26.04.2022. Only in response to the notice issued u/sec.148 of the Act, the assessee filed the return of income and also filed the audit report which is undisputedly not within he time limit as prescribed u/sec.44AB of the Act. However, the assessee has explained the circumstances and the reasons for the delay in filing the audit report. The assessee has explained that this is the first year where the assessee was required to get the accounts audited and also due to the 12 ITA.Nos.1473 and 1474/Hyd./2025 illness and death of her husband who are looking after the business affairs of the running the petrol pump, the assessee could not continue with the business activity and leased out the same which has resulted non-filing of the return of income as well as audit report. Therefore, in the facts and circumstances of the case, we are satisfied that the assessee was having a bonafide reason for the delay in furnishing the audit report. Accordingly, we find that the reasons explained by the assessee are bonafide and reasonable falling in the ambit of provisions of sec.273B of the Act and hence, no penalty u/sec.271B of the is liable to be levied. This Tribunal in the case of Vivimed Labs Limited, Bidar vs. The DCIT, Central Circle-3(4), Hyderabad (supra) has decided the issue of levy of penalty u/sec.271B of the Act in Para-10 as under:
“10. Having said so, let us come back to the explanation of the assessee for not filing the audit report on or before the due date provided under the Act. Admittedly, the assessee claims to have filed the audit report on 30.11.2018 and claimed that, the due date for furnishing the audit report for A.Y. 2018-19 was extended up to 30.11.2018. The assessee has furnished its return of income for A.Y. 2018-19 on 31.03.2019. The A.O. completed the assessment for the assessment year under consideration under Section 143(3) of the Act on 30.07. 2022. In other words, the audit report as 13 ITA.Nos.1473 and 1474/Hyd./2025 required to be furnished under Section 44AB of the Act, has been furnished, before the A.O. completed the assessment under Section 143(3) of the Income Tax Act. If the audit report required to be furnished under Section 44AB of the Act is made available to the A.O. at the time of assessment proceedings, and further, if the assessee explains the reasons for not furnishing the relevant audit report within the due date provided under the Act, in our considered view, if the explanation of the assessee is bona fide and reasonable, then the A.O. ought to have not levied the penalty under Section 271B of the Income Tax Act, 1961. In the present case, although the assessee claims to have furnished the audit report on 30.11.2018, and in fact, the date of audit report as per Form No. 3CA and 3CD was also 30.11. 2018, but fact remains that when the assessee had furnished the return of income on 31- 03-2019, then how it had furnished the audit report on 30-11-2018 was not explained. Further, it was the case of the A.O. that the assessee has not furnished the relevant audit report during the course of assessment proceedings. Since there are contradictions in the facts in respect of filing of audit report, in our considered view, the matter needs re-examination from the end of the A.O. Therefore, we set aside the order passed by the Ld. CIT(A) and restore the issue back to the file of the A.O. The A.O. is directed to verify the claim of the assessee with regard to the due date of filing of Return of Income for the relevant assessment year, the actual date of filing of Return of Income, and the actual date of filing of audit report under Section 44AB of the Income Tax Act. In case, the assessee is able to prove that the audit report was filed on 30-11- 2018 or along with the Return of Income filed on 31-03-2019, then in our considered view, once the audit report was made available to the A.O., at the time of assessment then there is no question of 14 ITA.Nos.1473 and 1474/Hyd./2025 levying penalty under Section 271B of the Income Tax Act. The A.O. is directed to verify the facts and decide the issue accordingly.”
Accordingly, in the facts and circumstances of the case when the assessee has explained the reasons for delay in filing the audit report which are found to be bonafide and reasonable, then, the penalty levied u/sec.271B is not sustainable and liable to be deleted. We Order accordingly.
In the result, ITA.No.1474/Hyd./2025 of the Assessee is allowed.
To sum-up, ITA.Nos.1473 and 1474/Hyd./2025 of the Assessee are allowed. A copy of this common order be placed in the respective case files.
Order pronounced in the open Court on 09.01.2026.
Sd/- Sd/- [MADHUSUDAN SAWDIA] [VIJAY PAL RAO] ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated 09th January, 2026. VBP
15 ITA.Nos.1473 and 1474/Hyd./2025