Belated Filing of Tax Audit as Accountant Expired and New Accountant not Well Versed with Accounting is a Reasonable Cause: ITAT Deletes Penalty u/s 271B of Income Tax Act [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has deleted the penalty under Section 271B of the Income Tax Act holding that the belated filing of tax audit as accountant had expired and new accountant was not well versed with the accounting was a reasonable cause.

For the year under consideration, the assessee, Revanta Hometex India Pvt. Ltd e-filed its return of income on 30/03/2019 declaring a total loss. The return filed by the assessee was selected for scrutiny and statutory notices under Section 143(2) as well as Section 142(1) of the Income Tax Act were issued and served on the assessee. In response to the notice, the assessee filed its submissions.

On the basis of material available on record, the Assessing Officer (AO) vide order dated 16/03/2021 passed under Section 143(3) read with Sections 143(3A) 143(3B) of the Income Tax Act accepted the explanation provided by the assessee and assessed the total income at Rs. Nil. Since the assessee had filed the return belatedly, the losses claimed were not allowed to be carried forward.

Meanwhile, the penalty proceedings vide notice issued under Section 271B Section 274 of the Income Tax Act were initiated for the failure to get accounts audited or failure to furnish the audit report as per the provisions of Section 44AB of the Income Tax Act. The said notice was responded to by the assessee. The AO imposed penalty order dated passed under Section 271B of the Income Tax Act.

R. Anantha Krishnan, on behalf of the assessee submitted that the assessee company only had two directors and out of them one of the directors expired, while the other director was not active in the business. He further submitted that the director who expired was also an accountant and was well-versed with all the aspects of the company and therefore due to the demise of the said director not only the tax audit report was filed belatedly but the return of income was also filed late.

On the other hand, Mahita Nair on behalf of the revenue vehemently relied upon the order passed by the lower authorities.

The two-member Bench of G.S. Pannu, (President) and Sandeep Singh Karhail, (Judicial Member) allowed the appeal filed by the assessee and deleted the penalty imposed under section 271B of the Act observing that, “The director, who was also an accountant and was looking after the affairs of the company, had expired on 03/10/2017, and therefore not only the return of income but also the tax audit report could not be filed on time. We find that the learned AR is the other director of the assessee company, who had also signed Form no.36 of the present appeal and had claimed to be not well-versed with the daily affairs of the company and other accounting aspects.”

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates