Penalty u/s 271B can’t be initiated for non-furnishing of Tax Audit Report within Due Date: ITAT [Read Order]

In Mr. Prem Prakash Senapati vs. ITO, the Cuttack bench of Income Tax Appellate Tribunal (ITAT) held that penalty under Section 271B of the Income Tax Act, 1961 cannot be initiated for failure of the assessee in furnishing the Tax Audit Report to the Revenue department on or before the due date.

The assessee, Mr. Prem Prakash Senapati, filed return of income upon receiving a notice issued under section 148 of the IT Act. The total income was shown to the tune of Rs.2.53 lakhs. The Assessing Officer (A.O) found that the turnover of the assessee during the assessment year to be Rs.1.26 crores. Therefore, the assessee was required to get its account audited under section 44AB and file the audit report within the time stipulated under section 139(1) of the IT Act. On observing that the assessee had failed to file tax audit report before the due date, a show cause notice was send. The assessee submitted the tax audit report on 28th June 2013 and declared that the audit of the accounts was done within the due date and that the audit report was not furnished to the department. The A.O found the arguments of the assessee as unconvincing and charged penalty of Rs. 63,216/- on the assessee under section 271B of the Act. On appeal CIT(A) confirmed the order of the A.O. Thereafter appeal was preferred before the ITAT.

The Bench comprising of Judicial Member Pavan Kumar Gadale & Accountant Member N.S. Saini relied on the CBDT Circular No.03/2009 dated 21.5.2009 wherein it was provided as follows:

“7. Following clarifications are also issued in respect of certain issues arising from furnishing the returns in the above-mentioned forms: (i) An assessee should obtain the report of audit from an accountant under section 44AB of the Act on or before the due date of the furnishing of the return and should fill out the relevant columns of the returns forms on the basis of such report. However, the report of audit should not be attached with the return or furnished separately any time before or after the due date. The assessee should retain the report with himself. If called for any income tax authority during any proceeding under the Act, it shall be incumbent upon the assessee to furnish/produce the same in original. No penalty under section 271B shall be initiated or levied for not furnishing the tax audit report on or before the due date. However, if the audit report has not been obtained before the due date, provisions of section 271B shall continue to be attracted.”

While answering the question in favour of the assessee, he bench held that “We find that the audit report was obtained within section 139(1) time limit is not in dispute. It is also not in dispute that the copy of audit report was furnished to the Assessing Officer as and when the Assessing Officer called for the same. The revenue has not brought no material on record to show that the assessee has violated the above quoted circular of CBDT. In these circumstances, following the above quoted circular of the CBDT, in our considered view, penalty levied u/s.271B of the Act in the instant case is untenable. Therefore, we delete the penalty of 63216/- levied u/s.271B of the Act and allow the appeal of the assessee.”