Penalty set aside as Tax Audit Report not filed due to strained relationship with CA

ITAT set aside Penalty u/s 271B as Tax Audit Report was not filed due to strained relationship with CA

In a recent judgment, ITAT Nagpur has set aside Penalty u/s 271B as the assessee could not file Tax Audit Report due to strained relationship with Chartered Accountant.

ABCAUS Case Law Citation:
ABCAUS 4001 (2024) (05) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) National Faceless Appeal Centre (NFAC) in confirming penalty u/s 271B of the Income Tax Act, 1961 (the Act) imposed by the Assessing Officer (AO) for not filing of tax audit report.

In the assessment order, the AO noticed that the assessee had reported a total revenue from operation exceeding statutory limit for tax audit as per section 44AB of the Act and tax audit report had not been filed.

After following the due procedure, assessment was completed and penalty proceedings u/s 271B of the Act was imposed.

On first appeal against the penalty order passed by the A.O. u/s 271B of the Act, the CIT(A) confirmed the order of the A.O.

Before the Tribunal the assessee submitted that there was strained relationship between the assessee’s Chartered Accountant and the assessee and, therefore, he was not able to file relevant details before the CIT(A) and, hence, one more opportunity should be given to substantiate his case before the CIT(A).

The assessee also filed certain additional evidences before the Tribunal.

The Tribunal observed that the A.O. in the instant case, imposed penalty u/s 271B of the Act on the ground that audit report was not obtained as per the provisions of section 44AB of the Act. The case of the assessee was that the assessee and the assessee’s Chartered Accountant has a strained relationship and, therefore, he was not able to file the audit report and he was not able to explain his case before the CIT(A) properly.

The assessee had filed some details in shape of additional evidence and in view of the above, the Tribunal opined that one more opportunity should be given to the assessee to substantiate his case before the CIT(A).

Accordingly, the Tribunal set aside the order passed by the CIT(A) and restored the matter back to the file of CIT(A) with direction to consider the evidence to be filed by the asseseee after giving reasonable opportunity of being heard to the assessee.

Download Full Judgment Click Here >>

• Empanelment of ICAI Exam observer for January 2027 Examinations. Last date: 20.11.2026
• No arrest under GST- Major decision of 57th Meeting of GST Council held on 8th October 2026
• Later SC ruling cannot render an act done in compliance of a court order a statutory default
• Interest payment on mobilisation advance to NHAI not liable to TDS u/s 194A
• Typographical error in turnover accepted during assessment not a mistake apparent from record