Audit Report u/s 44B furnished along with ITR before Completion of Assessment: ITAT deletes Penalty u/s 271B of Income Tax Act [Read Order]

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The Chennai bench of Income Tax Appellate Tribunal ( ITAT ) has recently held that no penalty would be levied if the audit report under section 44B of Income Tax Act 1961 was furnished along with Income Tax Return before completion of assessment.

Section 44B of Income Tax Act 1961 states that in case of an assessee who is a non -resident engaged in the business of operation of ships a sum specified in sub clause 2 of the above section shall be deemed to be the profit and gain of such business and calculated under the heads of profit and gain of business or profession.

Assesee Ramunaicker Raja has filed his return of income on 03.04.2016 for the assessment year 2011-12. The assessee has not filed the return of income for the assessment year 2011-12 within the time allowed under section 139(1) of the Act. The assessee bas also not filed the return of income before the end of the assessment year.

Thereafter assessing officer reason to believe that incomes chargeable to tax of more than Rupees.1 lakh has escaped assessment within the meaning of clause (b) to explanation 2 of section 147 of the Income Tax Act 1961 .Assessing officer Issue notice to assessee and the assessing officer completing the assessment and initiated penalty proceedings under section 271B of the Income Tax Act 1961  for late filing of audit report under section 44AB of the Income Tax Act 1961.Against the order assessee filed an appeal before the ITAT.

 S. Sridhar counsel for the assessee contended that audit reports under section 44AB of the Income Tax Act 1961 were furnished along with return of income before the completion of assessment.

AR V Sreenivasan counsel for the assessee confirmed the decision of the assessing officer.

After considering the contentions of the both side the division bench of the ITAT comprising V. Durga Rao, Judicial (Member) and   G.Manjunatha, (Accountant Member) allowed the appeal filed by the assessee  and observed that,

Assessee was required to get his accounts audited under section 44AB of the Act and filed within the due date. Since the assessee has not filed the tax audit report under section 44AB of the Act before the due date, the Assessing Officer levied penalty of Rupees 83,680/- under section 271B of the Income Tax Act 1961, But the present case audit report under section 44AB of the Income Tax Act 1961 were furnished along with return of income before the completion of assessment. Hence it was not a fit case for the levy of penalty under section 271B of the Income Tax Act 1961.

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