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June 23, 2022

No section 271B penalty for filing an audit report late due to an accountant’s illness

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

No section 271B penalty for filing an audit report late due to an accountant’s illness

Facts and Issue of the case

The assessee is engaged in the wholesale trading of food grains as a proprietary concern under the name and style “Swaminath Nilkanth Patil” at Akkalkot. That on perusal of the grounds of appeal filed by the assessee, the only grievance in this appeal is imposition of penalty u/s 271B of the Income- taxAct,1961 (hereinafter referred to as the “Act”). The assessee had e-filed return of income on 28-01-2015 declaring total income of Rs. 6,33,380/-. The case was selected for scrutiny under CASS and the assessment was completed u/s 143(3) of the Act assessing total income at Rs. 9,54,780/-.

  The A.O also noticed that the assessee had failed to file audit report within the prescribed date i.e. on or before 30-11-2014 (extended period) and had updated the audit report only on 22-01-2015. That accordingly, the A.O had imposed penalty u/s 271B of the Act for non- compliance of the provisions of sec. 44AB of the Act. That during the appellate proceedings before the ld. CIT(A) the assessee had explained the reasons for delay in filing the audit report. He has stated that the accountant who was looking into the records of accounts was admitted in the hospital and even the Doctor‟s certificate was also enclosed and submitted as evidence. It was also explained that practically it was difficult to get an experienced accountant within the short period of time in a place like Akkalkot, Dist. Solapur. Therefore, the entire events and circumstances were beyond the control of the assessee and he was helpless and for such reasons delay occurred which was never deliberate nor intentional. The ld. CIT(A) however, as per the reasons appearing at para 6 of his order did not support the submissions of the assessee and upheld the levy of penalty imposed by the A.O u/s 271B of the Act.

Observation by the court

The court had find that the assessee has reasonably well explained before the ld. CIT(A) the reasons why there was delay in filing the tax audit report and non-compliance as per the provisions of sec. 44AB of the Act.   The reasons are definitely such that they were beyond the control of the assessee and since the Income-tax Act is a welfare legislation the practical difficulties of the tax payers assessee and the bonafide nature has to be considered. In this case, the assessee had even submitted the Doctor‟s Certificate under whose treatment the accountant was admitted in the hospital. The ld. CIT(A) should have considered all these facts in its proper perspective. Section 273B of the Act provides that the penalty u/s 271B need not be imposed if there is a reasonable cause for the said failure. In our considered view, the assessee in this case through documentary evidence has explained the reasonable cause and accordingly the court set aside the order of the CIT(A) and direct the A.O to delete the penalty from the hands of the assessee.


The appeal of the assessee is allowed by the court.


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