ITAT Delhi: No Penalty U/S 271B if An Audit Report is Delay Due to IBC Proceedings

No penalty would get charged under Section 271B of the Income Tax Act, 1961 for the late filing of the audit report because of the proceedings beneath the insolvency and bankruptcy code (IBC), the Income Tax Appellate Tribunal (ITAT) Delhi bench ruled.

The taxpayer, Bhushan Aviation Limited’s return was filed dated 29.03.2019 at the time of assessment proceedings reporting total income as NIL including claiming losses. Thereupon the taxpayer’s case was chosen for scrutiny.

At the time of assessment proceedings, the Assessing officer has executed the penalty proceedings on the basis of the non-filing of the audit report in the stipulated time. The taxpayer clarifies the cause of the delay to AO. But AO does not accept the taxpayer’s contention. He charged Rs 1,50,000 as a penalty under Section 271B of the Income Tax Act towards the taxpayers.

Dissatisfied with the order the taxpayer furnished a petition to the Commissioner of Income Tax (Appeal){ CIT(A)}, who would have dismissed the taxpayer’s petition. Hence the taxpayers furnished a petition to the tribunal.

At the time of proceedings, Ashwani Kumar the taxpayer’s counsel furnished that the audit report of the taxpayer’s company was late due to the holding company was performing the proceedings beneath the insolvency and bankruptcy code. Hence the same would consequence in the delay in collecting the proofs and data compilation.

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According to Om Parkash, the revenue’s attorney, the assessee, and its holding company are two separate legal organizations. The assessee was also not the subject of IBC proceedings.

The tribunal concluded that there was a fair explanation for the delay after hearing from both parties that evidence from the holding company could not be gathered because of IBC proceedings.

The single-member bench of Kul Bharat (Judicial Member) ordered the deletion of the penalty charged via the assessing officer after taking into account the information provided by both parties.