Audit Report not Filed within Stipulated Time Limit as Books not Given to Qualified CA:ITAT Upholds Penalty u/s 271B [Read Order]

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has upheld the penalty under Section 271B of the Income Tax Act 1961 because the audit report was not filed within the stipulated time limit as the books were not given to a qualified Chartered Accountant.

The assessee Santosh Swarupchand Bhandari, had not filed return of income for AY 2017-18. During the assessment proceedings, the assessee filed a copy of the profit and loss account.

The Assessing Officer issued notice to the assessee under Section 271B of the Income Tax Act as the assessee had not filed an audit report.

The assessee submitted before the AO that assessee had submitted its books to his Chartered Accountant (CA), but CA failed to audit the books, then there was some dispute with the CA.

The AO held that the assessee had defaulted by not filing the audit report within the stipulated time limit. The reason given by the assessee was not sufficient and valid and levied penalty under Section 271B of the Income Tax Act.

The assessee in his written submissions, pleaded that all books were given to CA, who failed to audit the books and file the audit report. In the affidavit, Mahesh Ashok Kadam had accepted that books were given to CA but due to some reasons, he could not complete the accounting and could not file the audit report within the statutory time limit.

Jasnani,who appeared on behalf of the revenue, relied on the orders of the lower authorities.

The two-member Bench of S.S.Godra, (Judicial  Member) and Dipak P. RipoteI (Accountant T Member) dismissed the appeal filed by the assessee observing that  as per the affidavit of Mahesh Kadam, he was not a Chartered Accountant, as he had mentioned in the affidavit that he had not given data to Chartered Accountant.

As per the Income Tax Act, the Audit could be done only by a qualified Chartered Accountant and the assessee had not submitted the same.

Section 288 of the Income Tax Act Explanation states that In this section, "accountant" means a chartered accountant as defined in clause (b) of ITA No.336/PUN/2023 Santosh Swarupchand Bhandari 4 sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate of practice under sub-section (1) of section 6 of that Income Tax Act”

The Bench held that in the affidavit it was claimed by Kadam, that he had not given data to CA. Thus, in the affidavit he was not referring to books. However, for audit, books of account were also required. Therefore, the bench observed that  the claims made in the affidavit were contradictory and hence not reliable.

To Read the full text of the Order CLICK HERE

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