The Income Tax Appellate Tribunal (ITAT), Pune Bench, has quashed the penalty imposed under Section 271B of the Income Tax Act on a cardiologist, for the assessment year 2018-19. The Tribunal ruled that there was a “reasonable cause” behind the delay in getting the tax audit done for the relevant assessment year, which justified the cancellation of the penalty.
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The case stems from a penalty of Rs.1,50,000 imposed by the Assessing Officer (AO) on Dr. Murugesh Shantveerya,appellant-assessee for failing to file the tax audit report on time, as per Section 44AB of the Income Tax Act. Dr. Shantveerya had filed his return of income on March 27, 2019, declaring an income of Rs. 4.4 crore, but did not upload the audit report within the prescribed time limit.
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The issue arose after a survey operation was conducted at the appellant’s premises on September 7, 2017, during which key books of accounts, including receipt books and various papers, were impounded by the Department. Dr. Shantveerya’s counsel argued that this action led to a delay in completing the audit for the financial year 2016-17, which in turn delayed the audit for the subsequent year, 2017-18.
The delay was further exacerbated by the sudden cessation of the services of the Chartered Accountant (CA) handling the audit, necessitating the appointment of a new CA. The new CA first completed the audit of the financial year 2016-17 and then proceeded to complete the audit for the financial year 2017-18. The tax audit report for 2017-18 was subsequently filed along with the return of income on March 27, 2019, a few months after the statutory due date.
In defense, the appellant’s counsel M R Bhagwat argued that the delay was due to the impounded documents and the unavailability of the previous CA, which were reasonable and genuine causes beyond the taxpayer’s control. The appellant highlighted that tax audits for the two consecutive years could not be completed on time due to these circumstances.
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After hearing both sides, the ITAT Bench comprising of R K Panda(Vice-President) and Vinay Bhamore(Judicial Member), observed that the appellant had provided sufficient evidence to prove the reasonable cause for the delay. It referred to the decision in the case of APL (India) Pvt. Ltd. vs. JCIT where similar circumstances had led to the deletion of the penalty.
In Conclusion, the ITAT held that the penalty under Section 271B should be deleted due to the reasonable cause shown by the appellant.
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