Delay of One Day in Filing Audit Report Due to Technical Glitches of Income Tax Portal: ITAT sets aside Penalty u/s 271B [Read Order]

The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has recently, on finding that the delay of one day in filing audit report was due to technical glitches on the Income Tax Portal, set aside the penalty imposed under Section 271B of the Income Tax Act, 1961.

The aforesaid observation was made by the Jaipur ITAT, when an appeal was preferred before it by the Assessee, arising out of the order of the National Faceless Appeal Centre, Delhi, for assessment year 2017-18, which in turn arose from the order of the penalty passed under Section. 271B of the Income Tax Act, by the National Faceless Assessment Centre, Delhi.

The issue involved in the Assessee’s appeal being that the CIT(A), NFAC has erred on facts and in confirming the levy of penalty of Rs. 1,50,000/- under Section 271B of the Income Tax Act, 1961, only for the delay of 1 day in filing the tax audit report, the brief facts of the case were that the Assessee, who dealt in retail sale of Petrol & Diesel, had filed her return of income for AY 2017-18 on 20.01.2018 declaring an income of Rs. 22,11,260/-.

The case was selected for complete scrutiny under CASS and assessment was completed under Section 143(3) of the Income Tax Act at an assessed income of Rs. 23,11,260/- on 21.12.2019. However, as per the assessment order, the total turnover of the Assessee was Rs. 20,88,24,297/-, and therefore, she was under an obligation to get her books of accounts audited as per provisions of Section 44AB of the Income Tax Act as well as to submit the audit report within stipulated time.

The Assessee furnished the said audit report on 08.11.2018 i.e., after the due date, thereby, failing to comply with the provisions of Section 44AB of the Income Tax Act. And accordingly, a notice under Section 271B was issued to the Assessee on 21.12.2019 for not complying with the statutory provisions of the Income Tax Act.

The AO while levying the penalty under Section 271B, noted that the reason offered by the Assessee is not correct and just, but afterthought and merely an excuse to escape the penal proceedings. He added that she was not prevented by any reasonable cause to comply with the mandatory provision of the Income Tax Act, and that as such the reply of the Assessee is not tenable.

Based on these observations, subsequently, an order of levying penalty under Section 271B for an amount of Rs. 1,50,000/- was passed by the NeFAC. And being aggrieved by this order of the National Faceless Assessment Centre, the Assessee preferred and appeal before the CIT(A).

However, the CIT(A) confirmed the levy of the penalty holding that the Assessee is not covered under any reasonable clause and that since the Assessee has not complied with the statutory provisions, the action of levy of penalty by the AO is correct. And it is being aggrieved from the said order of the CIT(A), that the Assessee has preferred the present appeal before the Jaipur ITAT.

It was submitted by Shri P. C. Parwal (C.A.), on behalf of the Assessee, that there is only one day delay in submission of the audit report, which occurred as a result of technical letches on the portal. However, on the other hand, Smt Monisha Choudhary, the Addl. CIT, on behalf of the Revenue, supported the orders of the lower authority and stated that once there is delay it is delayed.

Hearing the opposing contentions of both the sides as well as perusing the materials available on record, the Jaipur ITAT observed, “The word may contemplate as to whether the explanation sought from the Assessee in not complying the provision of the penal in nature is required to be read with the facts and circumstances of each case. Here in this case the bench noted that there is only one day delay in submission of the audit report and that too only the technical glitches and latches on the portal which can be a reasonable cause for not complying the law. The similar view has been taken by the Hon’ble Madhya Pradesh Court in the case of Staywell Hotels Private Limited Vs. CIT, where in the court has condone the delay in filling the audit report by two months”.

Thus, the ITAT coram of Sandeep Gosain, the Judicial Member and Rathod Kamlesh Jayantbhai, the Accountant Member, finally held:

“The delay if any is on account the reasons on the technical letches on the portal and the same is venial in nature based on the provision of the Act as reiterated here in below. Based on these deliberation of the facts as well as provision of the law and judicial precedence cited, we hold that the penalty levied under Section 271B is not justified and thus vacated.”

To Read the full text of the Order CLICK HERE

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