The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the penalty under Section 271B of the Income Tax Act 1961 would not be applicable when reasonable cause for failure to comply with provisions has been explained.
The assessee, Rasik Nemchand Pethad was an individual engaged in the business of retail and wholesale trading of food grains, grocery items, dry fruits and masala items under the name and style of R. N. Trading.
The assessee’s case was selected for scrutiny and the assessment order dated 19.12.2019 was passed under Section 143(3) of the Income Tax Act where the Assessing Officer accepted the returned income and determined the total income.
The AO observed that the assessee had filed tax audit report on 19.02.2018 and, therefore, levied penalty under Section 271B of the Income Tax Act for failure to comply with the provision of Section 44AB of the Income Tax Act which mandated that tax audit report to be filed within the specified time as per section 139(1) of the Income Tax Act vide order dated 06.07.2021.
Shashank Mehta, on behalf the assessee contended that the assessee had always been prudent in filing the tax audit report for the previous years and even during the subsequent years.
He further stated that the assessee’s accountant had left service without intimation and that because of these reasons, there was delay in filing the tax audit report.
Mahita Nair, on behalf of the revenue controverted the said facts and contended that the assessee had not specified as to why the change in the accounting software has caused the delay.
He also submitted that the assessee had not filed his return of income for the impugned year till a survey under Section 133A of the Income Tax Act was conducted on the business premises of the assessee dated 25.01.2018 and also reason stated by the assessee was not sufficient to consider it to be a reasonable cause and relied on the orders of the lower authorities. The two-member Bench of Prashant Maharishi, (Accountant Member) and Kavitha Rajagopal, (Judicial Member) observed that Section 271B of the Income Tax Act was very much covered by Section 273B of the Income Tax Act where if the assessee was able to substantiate that there was a reasonable cause for the failure to comply with the provision, then the penalty should not be imposed in such cases.
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