Delay in Filing Audit Report due to Dispute Between Director of Company is Mere Technical Breach and not Malafide Intention: ITAT Deletes Penalty u/s 271 B of Income Tax Act [Read Order]

The Chennai Bench of Income Tax Appellate Tribunal (ITAT) held that the Tax Audit Report was made available to Assessing Officer before completion of assessment proceedings.

Therefore, delay in Filing Audit Report due to Dispute Between Director of Company is just a technical breach without any malafide intention of the assessee, consequently, the penalty under Section 271B of the Income Tax Act, cannot be levied.

The assessee  M/s.Encore ConstructionConsortium Pvt. Ltd. is a Private Limited Company filed its return of income which was assessed under Section 143(3) r.w.s.143(3A) & 143(3B) of the Income Tax Act, 1961 wherein returned income of the assessee was accepted without any further addition.

Subsequently, the  order under Section 271B of the Income Tax Act was passed on the assessee imposing penalty of Rs.1,50,000 stating the assessee has not been able to furnish any reasonable cause for such delay and non-compliance to statutory provisions, hence, the assessee is liable to be penalized under Section 271 B of the Income Tax Act.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which confirmed the order of the AO.

Further, the assessee filed an appeal before ITAT. The Authorised Representative of the Assessee  N.Arjun Raj, contended that the delay was on account of dispute between Directors of the company, there was no intentional delay on the part of assessee.

The assessee was stopped by reasonable cause which was beyond the control of the assessee and since the Audit Report was furnished before completion of assessment proceedings therefore, the penalty levied under Section 271B of the Income Tax Act, may kindly be deleted.

The Departmental Representative P. Sajit Kumar, contended that the reason stated for delay in preparation of submission of Audit Report by the assessee is not tenable and reasonable, hence it is a clear cut case of failure on the part of the assessee to get audit under Section 44AB of the Income Tax Act, completed within the prescribed time limit.

The Bench comprising of Durga Rao, Judicial Member and Arun Khodpia, Accountant Member relied on the case of Puducherry Tourism Development Corporation Ltd. v. ITO where it was observed that for the audit report under Section 44AB of the Income Tax Act were furnished during the course of assessment proceedings under Section 143(3) of the Income Tax Act, which was also considered by the Assessing Officer before concluding the assessment.

Thus for venial technical breach without any mala fide intention, penalty cannot be levied under Section 271B of the Income Tax Act.

Hence, the Tribunal set aside the order of CIT (A) and directed the AO to delete the penalty levied under Section 271B of the Income Tax Act.

To Read the full text of the Order CLICK HERE

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