Income Tax

AO can not question genuineness of medical certificate unless has material to counter it-ITAT

AO can not question genuineness of medical certificate unless he has some material to counter it – ITAT deletes penalty u/s 271B

ABCAUS Case Law Citation:
ABCAUS 3722 (2023) (04) ITAT

Important Case Laws relied upon:
Balaji Logistics vs. ACIT

In the instant case, the assessee had challenged the order passed by the NFAC CIT(A) in confirming the levy of penalty u/s 271B of the Income Tax Act, 1961 (the Act).

The appellant assessee  filed  return  of income which was accepted by  the department while framing assessment u/s 143(3) of the Act with initiation of Penalty proceedings u/s 271B for non-filing of Tax Audit Report in prescribed format u/s 44AB of the Act within the prescribed due date.

The assessee explained that the delay was due to his ill health for one year during the intervening period for which he produced a medical certificate. 

The AO did not give credence to the medical certificate by observing that the certificate was not backed by any medical records to show how serious the illness was and whether the assessee was really incapacitated as to make him unable to file his return of income and the audit report in time.  Accordingly, he levied the penalty u/s 271B of the Act at ½ % of the total turnover.   

Against the penalty order, the assessee went in appeal before NFAC where the assessee did not participate in the first appellate proceedings and the levy of penalty u/s 271B of the Act was confirmed by the NFAC.

The Tribunal observed that there was no addition of whatsoever made by the AO while framing assessment u/s 143(3) of the Act. The assessee had given reason for delay in filing tax audit report that he had been suffering from illness.  The AO did not accept this medical certificate on the reason that the certificate was not backed up by any medical records to show how serious the illness was and whether assessee was really incapacitated to make him unable to file his return of income and the audit report in time. 

The Tribunal opined that the action of the AO was unwarranted when the qualified medical practitioner had given the medical certificate regarding illness of the assessee. 

The Tribunal said that the AO is not bound to question the genuineness of such medical certificate unless he had some material in his hand to counter it. Therefore, the observation made by the AO in this regard cannot be appreciated.  

The Tribunal observed that a similar issue which came up for consideration before the coordinate bench of the Tribunal in which it was held that when the tax audit report was made available to the AO before completion of assessment proceedings, then for venial technological breach without any malafide intention, penalty cannot be levied u/s 271B of the Act.

Following the judgment, the Tribunal opined that levy of penalty u/s 271B of the Act was not justified. Accordingly, order of the lower authorities were reversed and the appeal of the assessee was allowed.

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