Failure to produce Audit Report in Form No. 3CEB required u/s 92E of Income Tax Act due to opinion of CA of Assessee Company: ITAT deletes Penalty [Read Order]

The Income Tax Appellate Tribunal (ITAT) Pune bench when deleting penalty imposed under Section 271AA of the Income Tax Act, 1961 held that the failure to produce the audit report by assessee in Form No.3CEB required under Section 92E Income Tax Act, 1961 occurred due to the opinion of Chartered Accountant (CA) of the assessee company.

Assessee,  Jyoti Paper Udyog Ltd filed the appeal against the penalty imposed under Section  271AA of the Income Tax Act, 1961 for non-compliance of requirements under Section 92D of the Income Tax Act before the tribunal.

Facts of the case are that, during the assessment proceedings AO verified the Audit report of the assessee company and it was observed that assessee had reported transactions qualifying the amount exceeding Rs. 5 crores under the provisions of Section 40A(2)(b) of the Income Tax Act.

Subsequently the assessee was asked to furnish Form No.3CEB report. The assessee was unable to produce audit report in Form No.3CEB as required under the provisions of Section 92E of the Income Tax Act.

However, assessee did not file the report and argued that the opinion of the CA of the assessee company said provisions would not be applicable to the assessee.

AO held that since the assessee had specified domestic transactions above Rs. 5 crores  it was mandatory to file an audit report in Form No.3CEB . If the assessee has not complied with the provisions of Section 92E of the Income Tax Act, penalty under Section  271AA of the Income Tax Act will be  levied on the assessee.

During the appeal proceedings before the tribunal Sanket M. Joshi, counsel for the assessee submitted that non-compliance of the provisions of Section 92D and 92E had occurred because of the opinion given by the CA of the assessee and being bonafide, the assessee had complied with the opinion of its CA which ultimately resulted in the said violation.

Ramnath P Murkunde, Counsel for the revenue supported the decision of the lower authorities.

The tribunal observed that on the basis of a genuine belief, the assessee sought the CA’s opinion as is customary, and after the CA responded that these rules were not relevant, the assessee acted as a result.

Thus assessee falls within the definition of “reasonable cause” as enshrined under Section  273B of the Income Tax Act.

After considering the facts submitted and circumstances, the two member bench of Padmavathy S (Accountant Member) and  Vikas Awasthy (Judicial Member) held that Failure to produce audit report in form No.3CEB  required under Section 92E of Income Tax Act occurs due to  opinion of  CA of assessee company. Therefore, the bench deleted the penalty imposed under Section 271AA of the Income Tax Act.

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