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Penalty u/s 271B for delay in filing of Audit Report

  1. The e-filling of income tax return was first introduced in 2007, with the object of making the interaction/correspondence with the department paperless. In 2007, e-filling of return of income u/s 139 was made mandatory for companies & assesses to whom provisions of section 44AB relating to tax audit were applicable. The concept of e-filling was introduced to have the centralized information in paper less form. 
  2.  This first move of e-filling of return of income was highly supported, favoured and whole heartedly welcomed by the assessees as well as Chartered Accountants/Professionals fraternity.
  3.  However, still Thereafter from 2007 till 2012, it was only return of income which required to be filed online and not the audit report. However, for the first time ever, The Department vide the Notification No. 34 dated 01.05.2013 made e-filing of audit report along with return of income also mandatory.
  4. Thus, it is submitted that online filling of Audit report is a new system implemented by the department in the year under consideration. Notifications for the same had been issued too late, i.e. in the month of May 2013 & June 2013 (Notification No. 36 dated 23rd May, 2013 & Notification No. 44 dated 19th June, 2013) and further the utility/software for e-filing the audit report was introduced in the month of July 2013.
  5. Initially, there was a faulty system of uploading the Tax Audit Report and the said utility/software was not functioning properly so the audit reports could not be uploaded. There was a constant change in the utility by the Income Tax Department (12 times). Actually, the department had changed the utility every week and sometimes even two or three times in a week. Further the utility introduced by the Government did not have facility to Print Report hence the Chartered Accountants had to input the Financials thrice, once in the Tax Audit utility and then again in the Word format to enable Print outs and submissions at various forums and then again input into the ITRs for return filing . Further whenever the new utility was updated , there were instances that the old data vanished by itself and the CA had to start his data entry from scratch.
  6.  The problem being faced by the assessees as well as tax professionals in not being able to file the income tax return and the audit report electronically was further confounded and aggravated, as on 30.09.2013, the server/site of the Income Tax Department crashed with the result that the returns and reports which were required to be filed electronically could not be filed. The site of the Department was not working which is evident from the fact that despite several attempts at regular intervals the returns could not be uploaded.
  7.  A writ petition was also been filed in this regard before the Delhi high court. The copy of the writ is filed herewith. h. Consequently in exercise of power u/s. 119(2)(a) r.w.s. 139 and Rule 12, CBDT vide order dated 26.09.2013 extended the due date for obtaining and furnishing of Tax Audit Report under section 44AB of the Act for Assessment Year 2013-14 from 30th September, 2013 to 31st October, 2013 subject to certain conditions.
  8.  In the instant case, Audit report was obtained on 16.09.2013 and was attempted to be furnished along with ITR on 30.09.2013 however the same was not uploaded due to technical reason beyond the control of the assessee. The copy of CA login, ITR Form, Acknowledgement, and Tax audit Report dated 16.09.2013 is filed herewith. Assessee during this phased added CA to his profile, uploaded the Audit Report and no error message was shown hence the assessee was under a bona fide belief that the report is already uploaded. It was only when show cause notice dated 31.10.2014 asking the assessee as to why penalty u/s 271B should not be imposed was received, assessee came to know that the report was not uploaded due to technical error and immediately in response to show cause, he filed the tax audit report dated 16.09.2013 before the assessing officer.
  9.  In the case of R. Wadiwala & Co. vs. ACIT 72 TTJ 0034(Ahd.Trib) it has been held in the context of sec. 271B r.w.s sec. 44AB that “bonafide belief” is a reasonable cause for avoiding penalty. The bonafide explanation of the assessee can also be proved on perusal of the return of income filed on 30.09.2013 as there is no change in figures of profit and loss account and balance sheet of tax audit report and return of income filed on 30.09.2013. This clearly proves that Audit report was obtained on 16.09.2013 and the same was not uploaded due to technical error.
  10. In view of the above submissions, it is prayed that penalty imposed by assessing officer may kindly be deleted.