Penalty u/s 271B deleted. Books of Accounts not finalised due to TDS credit mismatch despite assessee made sincere attempts for its rectification and resignation of accountant
ABCAUS Case Law Citation:
ABCAUS 3246 (2020) (02) ITAT
The assessee had filed an appeal against the order of Commissioner of Income Tax (Appeals) in upholding the levy of penalty u/s 271B of the Income Tax Act, 1961 (the Act) for not getting the Books of Accounts audited under Section 44AB and not filing the Audit Report within time prescribed under Section 139(1) of the Act.
The assessee was engaged in civil contract works and filed the Return of Income under Section 139(1) of the Act. In pursuance of a search and seizure operation under Section 132 of the Act a notice under Section 153A of the Act was issued to the assessee to file the Return of Income.
In compliance the assessee filed the Return of Income. Subsequently Notice under Section 143(2) and 142(1) of the Act were issued.
During the assessment, the Assessing Officer considering the statements of assessee and the material in respect of unexplained investment in properties and the undisclosed income of the assessee, assessed the total income and passed the order under Section 153A r.w.s. 143(3) of the Act.
The assessee had filed the Return of Income beyond the time limit stipulated under Section 139(1) of the Act. The turnover of the assessee during the relevant Financial Year was in excess of Rs. 1 Crore and therefore provisions of Section 44AB of the Act was attracted whereby assessee should have got the books of accounts audited before the specified date and submit Audit Report before the due date under Section 139(1) of the Act.
Since there was a failure on the part of the assessee in getting the Books of Accounts audited, hence the penalty under Section 271B of the Act was initiated by issuance of penalty notice under Section 271B of the Act as
In response to the notice the assessee offered explanation stating that Accountant of the assessee has left the office which resulted in delay. It was further submitted that there was a TDS credit mismatch and the concerned Government Department did not amended its TDS return due to repeated requests.
The assessee also submitted an affidavit of the accountant corroborating its submission and stated that the delay was unintentional and without any motive.
However, the Assessing Officer rejected the explanations and held that there was no reasonable cause for not filing the Audit Report u/s 44AB within the specified time limit and levied penalty of Rs.1,50,000 under Section 271B.
Aggrieved by the order, the assessee filed an appeal with the CIT(Appeals) who confirmed the penalty order and dismissed the assessee’s appeal. Aggrieved by the order of CIT(Appeals), the assessee had filed an appeal with the Tribunal.
The assessee contended that the assessee firm was in civil contract business and regular in filing the Return of Incomes and there were Bona fide reasons and causes for not getting the accounts audited within the time limit.
Penalty 271B deleted due to TDS credit mismatch
The Tribunal observed that in support of the contention that the Accountant who was working with the assessee’s firm had left the services without finalizing the accounting works and hence auditing work couldnot be completed, the assessee had filed Affidavit of the Accountant confirming his leaving the job by him could not be disputed.
Further in respect of mismatch of TDS credit, the Tribunal observed that the assessee had been following with the Chief Engineer Office, PWD for rectification of TDS during the period. Therefore the Books of Accounts could not be completed/finalised.
The Tribunal noted that the assessee firm had made sincere attempts for rectification of TDS credit and therefore the Return of Income was filed belatedly.
The Tribunal stated that the arguments and submissions of the assessee were realistic and unambiguous. The assessee firm was having huge turnover and due to mismatch of income the Books of Accounts could not be audited within the time limit. Whereas it demonstrated with the Affidavit of the Accountant and the reminder letters on attempts to curtail the mismatch.
The Tribunal held that there was a reasonable and sufficient cause in getting the Books of Accounts audited and therefore, the penalty levied by the Assessing Officer could not be sustained considering the facts and material demonstrated in the course of hearing proceedings.
Accordingly the Tribunal directed the Assessing Officer to delete the penalty and allowed the grounds of appeal of the assessee.
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