USHASHREE KUNJULEKSHMI AMMA RAGHAVAN PILLAI,KOLLAM vs. ACIT CIRCLE 1, KOLLAM

This is an appeal filed by the assessee challenging the orders of the NFAC dated 03/08/2022 in respect of the assessment year 2014-15.

The brief facts of the case are that the assessee filed their return of income on 16/05/2015 as against the due date for filing the same on 30/11/2014. The assessee along with the return of income filed the audit report in form no. 3CB of the act. The return was processed and assessment was completed u/s. 143(3) of the act by accepting the returned income of the assessee. The Ld.AO levied penalty u/s. 271B of the act for the reason that the audit report was filed beyond the due date for filing the return of income. The assessee explained the reasons for filing the return belatedly and submitted that the audit report was filed before the assessment has been completed and also pointed out that there was no loss of revenue to the department. Inspite of the above facts, the AO confirmed the levy of penalty and therefore the assessee filed an appeal before the Ld.CIT(A) and also relied on the various orders of the Tribunal and prayed to allow the appeal since the delay was properly explained. The Ld.CIT(A) dismissed the appeal on the ground that there is no sufficient cause for filing the return belatedly. As against the above said order, the assessee filed this appeal before the Tribunal with the following grounds . “A. The Annexure B order to the extent objected to herein is illegal, arbitrary and unauthorized. B. The Appellant Authority went wrong inholding that the imposition of penalty under section 271B of the Income Tax Act, 1961 is against law and facts and circumstances of the case. C. The ld. CIT(A) had failed to note that the delay in getting the accounts audited and filing the audit report has occurred due to circumstances beyond the appellant's control and there was no deliberate or willful intention on the appellant's part to obtain and file the report beyond the due date. Though the appellant had filed the audit report along with the return of income belatedly, but the above proceedings were done with the due intention of enabling the revenue authorities to complete the assessment. D. The ld. CIT(A) had failed to relay on the judgements made by the Hon. Income Tax Appellate Tribunal in the case of Karthika Enterprises v. ITO,(1993)

The appeal was filed by the assessee with a delay of 57 days and for which the assessee filed an application to condone the same and explained that the delay has been occurred because of the delay in getting the legal opinion. We find that the delay of 57 days is not an inordinate delay and also the appeal could not be dismissed on the ground of limitation when there is a reasonable cause. We therefore condone the above said delay of 57 days in filing the present appeal.

At the time of hearing, the Ld.AR submitted that the assessee had explained the reasons for filing the return as well as the audit report beyond the prescribed time for filing the return of income and further contended that the issue to be decided is whether penalty can be imposed u/s. 271B of the act when there is a technical breach in filing the audit report. The Ld.AR also relied on the various orders cited before the Ld.CIT(A) in support of his arguments and prayed to allow the appeal. The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeal.

We have heard the arguments of both the sides and perused the records.

It is the contention of the assessee right from the beginning that the delay has not been occurred voluntarily and the reply filed before the Ld.AO clearly explained the reasons for the delay in filing the audit report which is as follows: “The firm Sai Export Enterprises, Kollam in which I am a partner, is having factories and depots over Kerala and Tamilnadu and separate books of accounts are kept at all these places. The consolidation of those books and incorporation of entries in to the Head Office books, takes considerable amount of time. The accounts are computerized and consolidated at the Head Office at Kollam. There was delay in completing the accounts of Tamilnadu factories during the year, which lead to the Head office in Kollam. The accounts were finally completed by February,2015 and the books of accounts were submitted for audit immediately thereafter. There was also consequential delay due to delay in completing the accounts of the previous year. The accounts of the firm got audited and audit report obtained on 14-05-2015 and I filed my return of income immediately on 16-05-2014. There was a delay of only 5 1/2 months in filing the audit report. Under the circumstances, it is prayed that the delay in getting the accounts audited and filing the audit report has occurred due to circumstances beyond my control and there was no deliberate or willful intention on my part to obtain and file the report beyond the due date. It is humbly submitted that I had not acted deliberately in defiance of law nor had I acted in conscious disregard of my obligation to file the report and the return of income.”

As seen from the reply filed by the assessee, the assessee had fully explained the reasons for the delay in filing the audit report. We have also perused the assessment record and found that the Ld.AO had not made any addition to the returned income and also the audit report along with the return of income was filed well before the Ld.AO had passed the assessment order on 21/12/2016. Therefore the delay in the above said facts and circumstances are properly explained and there is a valid reason for not filing the audit report in time. In view of the fact that the Ld.AO had not made any additions to the returned income and also by considering the fact that the audit report was filed well before the assessment order has been passed by the Ld.AO u/s. 143(3) of the act, we have no hesitation in deleting the penalty levied u/s. 271B of the Act.

Further in similar circumstances, the Coordinate Bench of this Tribunal in case of Udapi Narayana Rao Padmanabh Rao vs. ACIT in vide order dated 20.04.2023 held that “we are of the considered view that when the tax audit report was made available to the AO before completion of assessment proceedings, then for venial technological breach without any malafide intention, penalty cannot be levied u/s 271B of the Act.”

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 18th September, 2024.