In a recent ruling, the Hyderabad ITAT ruled that non- enclosure of audit report to the return of income would not attract penalty under section 271B of the Income Tax Act.
During the course of assessment proceedings under Sections 15A/153C of the Income Tax Act, the assess-Firm disclosed that it had not filed its IT return and offered their undisclosed income to the Department. AO also initiated penalty proceedings against the assessee on ground that while filing the return of income for the assessment year and as per the provisions of the Section 44AB of the Act, assessee failed to enclose/furnish a copy of the Report to the Income Tax Authorities within the prescribed date of filing of return of income for the relevant assessment year.
The bench noted that on perusal of the order of assessment, it is very clear that AO has initiated penalty proceedings for not enclosing the audit report, but not for completing the audit before the due date. “Board Circular No. 5 of 2007 clearly states that while uploading the return, no audit report should be attached to the return and also further states that it should not be furnished separately also before or after due date. Non-enclosure of audit report to the return of income does not attract any penalty u/s. 271B, as specified in the Board Circular extracted above. Since AO has initiated the penalty proceedings only for non-enclosure of audit report along with the Return, we are of the opinion that the same is not attracting penalty, on the facts of the case, as assessee has complied with the Board Circular. If the audit report was not enclosed to the return of income filed by assessee subsequently in response to proceedings u/s. 153C, AO should have treated the return as defective return. No such action was taken by the AO, which indicates that the return is complete in all respects. Since prior approval of the Addl. CIT u/s. 153D was also taken by the AO before completion of assessment, we are of the opinion that non enclosure of audit report to the return of income does not attract penalty proceedings u/s. 271B.”
Read the full text of the Order below.
