{"id":338156,"date":"2024-12-30T13:00:19","date_gmt":"2024-12-30T07:30:19","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=338156"},"modified":"2025-01-02T16:37:45","modified_gmt":"2025-01-02T11:07:45","slug":"penalty-delay-filing-audit-report-kerala-high-court","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/12\/30\/penalty-delay-filing-audit-report-kerala-high-court\/","title":{"rendered":"Penalty for delay in filing audit report before assessing authority under IT Act can be avoided by demonstrating reasonable cause: Kerala High Court"},"content":{"rendered":"
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Kerala High Court<\/span>: A division bench of A.K. Jayasankaran Nambiar*<\/span> and K.V. Jayakumar, JJ. was hearing a group of I.T. appeals preferred by Co-operative Societies raising common questions of law. The appeals challenged the orders of the Assessing Authority, later upheld by the First Appellate Authority and thereafter by the Appellate Tribunal, imposing penalties on the assessees Societies under Section 271-B<\/a> of the Income Tax Act, 1961<\/a> (‘I.T. Act’) for the alleged breach of the procedural provisions under Section 44-AB<\/a> of the I.T. Act<\/a>, owing to the failure of the assessees in filing the audit report within the specified time limit. Finding that the assessees had demonstrated reasonable cause for the delay in filing the audit report, the Court allowed the appeals and set aside the impugned orders.<\/p>\n

Background<\/h3>\n

The appellants\/assessees were Co-operative Societies who had filed returns of income for the purposes of assessment under the I.T. Act<\/a>. However, breaching the provisions of Section 44-AB<\/a> of the I.T. Act<\/a> (which deals inter alia<\/span> with the manner in which reports of audit have to be submitted before the Assessing Authority), they did not file the mandated audit report within the specified time limit. However, the audit reports were made available before and were relied on by the Assessing Authority at the time of finalisation of the assessments. While passing the assessment orders, the Assessment Authority initiated penalty proposals under Section 271-B<\/a> of the IT Act<\/a> for alleged breach of the procedure under Section 44-AB. Consequently, penalties of Rs. 1.5 lakhs were imposed on the assessees, which was the least of the two amounts mentioned in Section 271-B<\/a> of the I.T. Act<\/a>. These orders were upheld by the First Appellate Authority and thereafter by the Appellate Tribunal.<\/p>\n

Section 273-B<\/a> of the I.T. Act<\/a> mandates that a penalty cannot be imposed whenever a reasonable cause is shown by the assessees. In the present case, the assesses had reasoned that the delay was occasioned solely on account of the corresponding delay in receiving the audit reports from the statutory auditors appointed under the Kerala Co-operative Societies Act and Rules. This explanation was rejected by the Assessing Authority which held that once it was established that there was a delay in submitting the audit reports prescribed in Section 44AB, the penalty under Section 271-B<\/a> of the I.T. Act<\/a> was automatic. The First Appellate Authority noted that although the provisions of 273B would apply whenever a reasonable cause was shown, such a cause had not been shown in the present cases. This view was accepted by the Appellate Tribunal. Aggrieved, the assessee filed the present appeals.<\/p>\n

Issues<\/h3>\n