No Penalty u/s 271B of Income Tax Act when there is Reasonable Cause for not getting Audited u/s 44AB: ITAT

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By Aparna. M – On May 11, 2023 4:00 pm – 2 mins read

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has recently held that no penalty should be levied under Section 271B of the Income Tax Act 1961 when there is reasonable cause for not getting audited under Section 44AB of the Income Tax Act, 1961.

Section 271B of the Income Tax Act states that if any person failed to audit his account in relation to any previous year or year relevant to the assessment year such person shall be liable to pay a penalty.

Section 44AB of the Income Tax Act states the audit of tax under the Income Tax Act.

Assessee Palabathuni Chandra is an individual and filed his return of income electronically and declared the total income at Rs.6,21,210/-.

During the assessment proceedings, AO found that the assessee deposited some amount during the demonetization period which is on account of the sale of petrol, diesel and lubricants.

Thereafter completing the assessment proceedings under Section 143(3) of the Income Tax Act and calculated the total income.

Subsequently, the AO initiated penalty proceedings under Section 271B of the Income Tax Act on the ground that the turnover of the assessee exceeds the limit as mandated under the provisions of Section 44AB of the Income Tax Act.

Aggrieved by the order, the assessee filed an appeal before CIT(A). The CIT(A) rejected the appeal filed by the assessee and confirmed the order of AO.

Further, aggrieved by the above order of the CIT(A), the assessee filed a second appeal before the tribunal.

K.A. Sai Prasad, counsel for the assessee submitted that the assessee got his accounts audited under Section  44AB of the Income Tax Act Within the stipulated time under the Income Tax Act. But he could not file the same due to ill health and immobility as he was advised to take rest for 3 months.

KPRR Murthy, counsel for the revenue submitted that the “medical certificate furnished by the assessee  was not certified from any specialist doctor related to any recognized/speciality hospital but certified from a private hospital run by an MBBS doctor whereas the disease mentioned in the certificate was low back pain with enteric fever (nerve) which requires supervision from a specialist doctor in that field.”

The tribunal, while considering the appeal observed that a number of opportunities are given to the assessee by the CIT (A). But the assessee did not comply with the statutory notices for which CIT (A) dismissed the appeal filed by the assessee.

It was also observed that a penalty should not be levied under Section 271B of the Income Tax Act when there is a reasonable cause.

Therefore, the two-member bench of Shri R.K. Panda, (Accountant Member) and K. Narasimha Chary, (Judicial Member) allowed the appeal filed by the assessee and restored the issue to the file of the CIT(A) with a direction to grant one last opportunity to the assessee.To Read the full text of the Order CLICK HERE

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Shri Palabathuni Chandra Ravi vs Income Tax Officer


Counsel for Appellant:   Shri K.A. Sai Prasad

Counsel for Respondent:   Shri KPRR Murthy

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