The Income Tax Appellate Tribunal

Bangalore held that the delay in furnishing audit reports has resulted only in the technical venial breach which does not cause any loss to the exchequer.

The ruling was made by a division bench comprising of members Shri B.R Baskaran, Accountant Member, And  Smt. Beena Pillai, Judicial Member in the case of Arka Eduserve Pvt. Ltd,  Vs The Income-tax Officer. The assessee has filed this appeal challenging the order passed by Ld CIT(A) Bengaluru confirming the penalty levied by the AO u/s 271B of the Act for the assessment year 2014-15 for not furnishing the tax audit reports as required u/s 44AB of the Act.

The assessee filed its return of income and the tax audit report for AY 2014-15 on 30-03-2015.  As per the provisions of Sec.44AB of the Act, the tax audit report should have been furnished to the AO before the due date for filing return of income prescribed u/s 139(1) of the Act.  In the instant year, the due date was 30.11.2014.  In view of the above-said failure, the AO initiated penalty proceedings u/s 271B of the Act.

The assessee submitted that it was under the impression that the tax audit report could be filed any time before 31.3.2015 and the major source of income of the assessee was rental income and the TDS deducted by the tenants were not fully reflected in Form No.26AS, which resulted in delay in filing return of income as well as tax audit report.  Not satisfied with the explanations of the assessee, the AO levied a penalty of Rs.1.50 lakhs u/s 271B of the Act. The Ld CIT(A) also confirmed the penalty.

The court held in the light of the order of Cochin bench of Tribunal in the case of Attinkara Electronics vs. ITO (ITA No.601/Coch/2018 dated 01-03-2019) that the audit report was obtained within the due date prescribed u/s 44AB of the Act.  The delay has occurred due to a delay in filing the return of income.  The assessee has stated that it was under bonafide belief that the audit report could also be filed before 31.3.2015.  Hence the view taken by the Cochin bench of Tribunal that the delay in furnishing audit report has resulted only in the technical venial breach which does not cause any loss to exchequer could be applied here also.  Accordingly, set aside the order passed by Ld CIT(A) and direct the AO to delete the penalty levied u/s 271B of the Act.