ITAT Deletes Penalty since Delay in filing Audit Report was due to Dispute with Auditor [Read Order]

Form 10B - Tax Audit Report

Kolkata bench of Income Tax Appellate Tribunal (ITAT) deleted the penalty imposed by the Assessing Officer (AO) on ground that the delay in the submission of audit report was due to dispute with the auditor.

In the instant case assessee is a private hospital has filed its return of income for the relevant assessment year and declared total income as nil.

A special survey was conducted at the business premises of the assessee under Section 133A of the Income Tax Act 1961. It was found that the assessee has received a sum of Rs.79,63,087 under consideration for the assessment year and accordingly notice under section 148 Of the Act was issued by the AO.

In response to the said notice the assessee produced books of account and other relevant documents in support of the return as filed. Thereafter the AO assessed a total loss of Rs. 5,05,850 and allowed to carry forward the same. After that the AO initiated penalty proceedings under section 271B of the Act for non-submission of audited books of accounts, for not furnishing the same in prescribed pro-forma and for not filing the same along with Return of Income under the Act and imposed penalty of Rs.42,887.

On appeal the CIT(A) also confirmed the penalty imposed by the AO.

Aggrieved by the assessee was on appeal before the tribunal and the assessee contended before them that it has failed to get its audited books of accounts due to disputes with the auditor and resignation of the first appointed auditor was also one of the reasons for the delay. And the assessee appointed a new auditor and he started its audit thereafter.

after considering the facts on record the tribunal bench comprising of Judicial Member S.S. Viswanethra Ravi and Accountant Member Arjun Lal Saini observed that the assessee has failed to submit the books of accounts at the stipulated time period before the AO for the relevant assessment year, but the assessee also submitted a reasonable cause for the delay which the AO did not accepted.

The bench further observed that the assessee was on dispute with the auditor and it was the main reason for the delay of submission of the books of accounts and delay in obtaining the audit report under Section 44AB of the Income Tax Act because of the aforementioned reason which is beyond the control of assessee. Moreover, the assessee does not have any intention to conceal any income to avoid its tax liability. However, in such circumstances it is impossible to impose penalty.

While deleting the penalty imposed, the division bench held the fact that there was a reasonable cause in not getting the accounts audited and filing the same before the AO in time.

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