The Income Tax Appellate Tribunal ( ITAT ) has held that, Late action by new auditor is reasonable cause for non-imposition of penalty under Section 271B of the Income Tax Act.
The assessee, M/s. R.R. Kapoor furnished his return declaring total income of Rs.8,56,050/-. Such return was accompanied by the tax audit report. The Assessing Officer (AO) observed that the audit u/s.44AB was not carried out before the “specified date”, and hence, the assessee was liable to be visited with penalty u/s.271B of the Act. On being called upon to explain the reasons for the delay, the assessee submitted that audit of the books of account for the immediately preceding year was carried out by M/s. S.M.R.
For the year under consideration, the new auditor was appointed for conducting the audit. The new auditor called for objections, to its appointment from the earlier auditor, who raised certain issues. Eventually, the issues were resolved and immediately thereafter the incumbent auditor undertook the audit work and completed the same, followed by the filing of the return along with the tax audit report. Not convinced, the AO imposed penalty of Rs.1,50,000/- u/s.271B of the Act. The Commissioner of Income Tax (CIT) upheld the penalty, against which the assessee has come up in appeal before the Tribunal.
The bench consisting of R.S. Syal, Vice President and Partha Sarathi Chaudhury, Judicial Member observed that “The assessee admittedly got the accounts audited beyond the due date u/s 139(1) of the Act, which was the reason for late filing of the audit report with the Department.However, it is pertinent to note that section 271B is subject to section 273B, and the latter section emphasizes that if a “reasonable cause” is established for non-compliance of the requirements which led to imposition of penalty under certain sections, including 271B, then no penalty should be imposed.
The new auditor, as per the established procedure, sought a no objection from the earlier auditor, who raised certain objections. Those issues were resolved later on, which led to the delay in the audit of the accounts of the assessee. In our considered opinion, such reasons for the delay constitute a reasonable cause for the late auditing of the accounts and of furnishing the audit report belatedly.”
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