Penalty u/s 271B confirmed for lack of proof that Books were destroyed by termite

Penalty u/s 271B confirmed for lack of proof that Books of accounts were destroyed by termite

In a recent judgment, the ITAT Visakhapatnam has confirmed penalty u/s 271B holding that assessee was not able to submit any evidences to show that books of accounts were destroyed by white ants and the audit was delayed.

ABCAUS Case Law Citation:
4290 (2024) (10) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) confirming penalty order passed under section 271B of the Income Tax Act, 1961 (the Act).

The case of the appellant assessee was selected for scrutiny and the assessment was completed under section 143(3) r.w.s. 144B of the Act. The Assessing Officer noticed that the assessee has total sales / turnover / gross receipts for the year exceed the prescribed limit under section 44AB of the Act. Therefore, the Assessing Officer considered that assessee was required to get his books of accounts audited in terms of provisions of section 44AB of the Act and file the audit report in the Form -3CB and Form -3CD as required within the due date under section 139(1) of the Act.

However, it was noticed that assessee has filed the audit report on beyond the extended due date. The Assessing Officer thereafter issued show cause notice and levied a penalty under section 271B of the Act @ one-half percent of the total turnover subject to maximum penalty Rs. 1,50,000/-.

Before the Tribunal the assessee submitted that assessee could not file the audit report before the extended due date due to the fact that the invoices and other records were destroyed by the white ants (termite), and the appellant had reconstructed the books of accounts for submission to the Chartered Accountant for completion of the audit.

It was pleaded that there was a sufficient reasonable cause for the assessee for not filing the audit report under section 44AB within the time limit prescribed. He therefore pleaded to delete the penalty.

The Tribunal observed that a plain reading of the section 44AB shows that the assessee is required to get his books of account audited before the specified date and such report shall be duly signed and verified by such Accountant as prescribed. However, under exceptional circumstances, when assessee provides a reasonable and sufficient cause, the delayed filing of the audit report may be condoned.

The Tribunal further observed that in the instant case, assessee had stated that books of accounts were destroyed by white ants and the audit report of the books of accounts was commenced late only.

The Tribunal further observed that Section 273B provides that no penalty thereby imposable on the assessee, if the assessee proves that there is a reasonable cause for the said failure. However, assessee was not able to submit any evidences to show that assessee was  having a reasonable cause showing that the books of accounts have been destroyed by the white ants. Further, the cause adduced by the assessee could not be considered as reasonable cause.

The Tribunal held that in the absence of assessee not being able to demonstrate reasonable cause the non-filing of audit report attracted provisions of section 271B of the Act

Therefore, the Tribunal confirmed the penalty levied under section 271B of the Act and dismissed the appeal.

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