Income Tax Appellate Tribunal - Chennai
Sundaresan Sureshkumar,Cuddalore vs Dcit, Circle-1,, Cuddalore on 15 April, 2026
आयकरअपील यअ धकरण, 'ए' यायपीठ,चे नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH: CHENNAI
ी इं तूरी रामा राव लेखासद एवं ी मनु कुमार िग र, ाियक सद
BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND
SHRI MANU KUMAR GIRI, JUDICIAL MEMBER
आयकरअपीलसं. ITA No 2291 & 2292/Chny/2025
नधारणवष/Assessment Years: 2018-19 & 2019-20
Sundaresan Sureshkumar, v. DCIT, Circle 1, Cuddalore,
75- C, M.P. Kovil street, Tamil Nadu
Bhuvanagiri, Cuddalore-608 601
[PAN: AYDPS3972Q]
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओरसे/ Appellant/Assessee by : Mr. Abhishek Murali, C.A. by
Virtual
यथ क ओरसे /Respondent by : Ms. Sandhya Rani Kure JCIT
सुनवाईक तार ख/Date of Hearing : 13.04.2026
घोषणाक तार ख /Date of Pronouncement : 15.04.2026
आदे श / O R D E R
PER MANU KUMAR GIRI, Judicial Member:
Captioned appeals filed by the assesseeare directed against the orders passed by the Commissioner of Income Tax (Appeals), NFAC, Delhi [hereinafter referred to as "CIT(A)"] both dated 16.06.2025 for the Assessment Year 2018-19 and 2019-20.
2. The assesseeraised the following grounds of appeal in AY 2018- 19:
1. The order, levying penalty u/s 271B, of the AO/CIT(A) is erroneous, is contrary to law, facts, opposed to the principles of natural justice and well settled principles of various courts.
2 The Learned AO/CIT(A) ought to have noted that the Audit Report was submitted before the assessment proceedings.
ITA No 2291 & 2292/Chny/2025 (AY 2018-19 & 2019-20) Sundaresan Sureshkumar Vs DCIT C-1 :: 2 ::
3. The Learned AO/CIT(A) failed to appreciate that there was a covid lockdown prior to this and subsequently there was an Income Tax Portal change leading to several issues such as unavailability of Forms to File. 4 The Learned AO/CIT(A) ought to have noted that he Appellant has made genuine efforts to file his tax audit report, however, due to the website issues the same was not filed.
5 Without prejudice to the above, the Learned AO/CIT(A) ought to have noted that he first notice u/s 142(1) was sent only on 13/06/2023 whereas the Appellant had already filed the Tax Audit report on 23/03/2021, more than 2 years prior to the same. 6 The Learned AO/CIT(A) ought to have appreciated that the Appellant has voluntarily complied with the requirements of filing the return of income and tax audit reports and has demonstrated that he has consistently complied with the same, except for this unavoidable situation.
7. The Learned AO/CIT(A) ought to have appreciated that reason for the delay falls under the category allowable u/s 273B and ought to have been allowed.
8. Any other ground that may be raised during the course of the hearing.
3. The assessee raised the following grounds of appeal in AY 2019- 20:
1. The order, levying penalty u/s 271B, of the AO/CIT(A) is erroneous, is contrary to law, facts, opposed to the principles of natural justice and well settled principles of various courts.
2 The Learned AO/CIT(A) ought to have noted that the Audit Report was submitted before the assessment proceedingswas completed.
3. The Learned AO/CIT(A) ought to have noted that no addition was made during the assessment proceedings.
4. The Learned AO/CIT(A) failed to appreciate that there was a covid lockdown prior to this and subsequently there was an Income Tax Portal change leading to several issues such as unavailability of Forms to File. 5 The Learned AO/CIT(A) ought to have noted that the Appellant has made genuine efforts to file his tax audit report, however, due to the webside issues the same was not filed.
6 The Learned AO/CIT(A) ought to have appreciated that the Appellant has voluntarily complied with the requirements of filing the return of income and tax audit reports and has demonstrated that he has consistently complied with the same, except for this unavoidable situation.
7. The Learned AO/CIT(A) ought to have appreciated that reason for the delay falls under the category allowable u/s 273B and ought to have been allowed.
8. Any other ground that may be raised during the course of the hearing.
4. Brief facts of the case:
The appellant assessee did not originally file the return of income for the relevant assessment year. Based on information relating to ITA No 2291 & 2292/Chny/2025 (AY 2018-19 & 2019-20) Sundaresan Sureshkumar Vs DCIT C-1 :: 3 ::
substantial financial transactions, including cash deposits of Rs.6,37,53,465/- and purchase/sale of motor vehicles amounting to Rs.10,99,801/-, the case was reopened u/s. 147 of the Income-tax Act, 1961.In response to notice u/s. 148, the assessee filed the return of income on 26.04.2022 declaring total income of Rs.15,32,530/-. The assessment was completed on 19.03.2024 u/s.147, accepting the returned income. During the assessment proceedings, the Assessing Officer (AO) observed that the turnover of the assessee was Rs.12,18,36,355/-, exceeding the threshold prescribed u/s. 44AB. Accordingly, the assessee was required to get the accounts audited and furnish the tax audit report within the prescribed time. Since, according to the AO, the assessee failed to comply with the provisions of section 44AB, penalty proceedings u/s. 271B were initiated. The AO passed an order dated 26.08.2024 levying penalty of Rs.1,50,000/-.Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)].
5. Before the ld. CIT(A), the assessee contended as under the provisions of section 271B are applicable only in cases of failure to get accounts audited, failure to obtain audit report, or failure to furnish audit report along with return. In the present case, none of these conditions were violated. The assessee had obtained and filed the tax audit report on 23.03.2021, i.e., prior to initiation of reassessment proceedings and much before issuance of notice u/s. 142(1). Since no original return was filed u/s. 139(1) or 142(1), there could not be any default of non-furnishing of audit report ITA No 2291 & 2292/Chny/2025 (AY 2018-19 & 2019-20) Sundaresan Sureshkumar Vs DCIT C-1 :: 4 ::
along with such return. The audit report was available with the department before completion of assessment proceedings, and therefore no prejudice was caused to the Revenue. The delay, if any, was due toCOVID-19 pandemic and lockdown disruptions, technical glitches and transition to the new income tax portal, ill health of the assessee. The assessee had made genuine efforts to comply with statutory requirements and had also paid due taxes. The delay constituted only a technical/venial breach without any mala fide intention. The case was covered under the provisions of section 273B, as there existed a reasonable cause for the delay. Since the returned income was accepted by the AO without any modification, no loss was caused to the Revenue. Reliance was placed on various judicial precedents to contend that penalty is not leviable where audit report is furnished before completion of assessment, and default is technical in nature.
6. The CIT(A), after considering the submissions, held as follows:
• The turnover of the assessee exceeded the threshold prescribed u/s. 44AB, making it mandatory to get accounts audited and furnish the audit report within the specified date. • The assessee failed to comply with the statutory requirement of section 44AB within the prescribed time.
• The contention that penalty is not leviable due to non-filing of original return was rejected.
• The reliance on the concept of technical breach was not accepted.
ITA No 2291 & 2292/Chny/2025 (AY 2018-19 & 2019-20) Sundaresan Sureshkumar Vs DCIT C-1 :: 5 ::
• The CIT(A) held that penalty u/s. 271B is a civil liability, and mens rea (intent) is not a necessary condition, relying on the decision of the Supreme Court in Dharmendra Textile Processors.
• The assessee failed to establish reasonable cause u/s. 273B for non-compliance.
• The explanations relating to COVID-19, portal issues, and ill health were found to be insufficient and not substantiated adequately. The burden to prove reasonable cause lies on the assessee, which was not discharged. Accordingly, the CIT(A) concluded that there was a clear failure to comply with section 44AB, the AO was justified in levying penalty u/s. 271B. The CIT(A) upheld the penalty of Rs.1,50,000/- levied by the AO u/s. 271B and dismissed the appeal of the assessee, holding that there was no reasonable cause for failure to comply with the statutory audit requirements.
Now assessee is in appeal before this Tribunal.
7. We have heard the rival submissions and perused the material available on record. The grounds raised by the assessee in both the assessment years are identical in substance, and therefore, for the sake of convenience, they are adjudicated together.
8. The issue involved in the present appeals relates to levy of penalty under section 271B of the Act for alleged failure to furnish the tax audit report within the time prescribed under section 44AB of the Act. The undisputed facts borne out from the record are that ITA No 2291 & 2292/Chny/2025 (AY 2018-19 & 2019-20) Sundaresan Sureshkumar Vs DCIT C-1 :: 6 ::
though the assessee did not file the original return of income within the due date, the tax audit report was obtained and furnished on 23.03.2021, much prior to completion of the assessment proceedings. The assessment in both the years was ultimately completed accepting the returned income without any variation.
9. The contention of the Revenue authorities is that the assessee failed to furnish the audit report within the prescribed due date and therefore violated the provisions of section 44AB, attracting penalty under section 271B. However, the assessee has consistently maintained that the audit report was made available before completion of assessment and the delay occurred due to circumstances beyond control, including COVID-19 pandemic disruptions and technical issues relating to the new income-tax portal.
10. We find that an identical issue has been considered by the Hon'ble Jurisdictional High Court in CIT v. AKS Alloys (P) Ltd. [2012] 205 Taxman 11 (Mad.), wherein it has been held that the requirement of furnishing the audit report along with the return is directory and not mandatory, and if the audit report is filed at any time before completion of assessment, the requirement of law stands satisfied. Similar view has been taken in CIT v. Jayant Patel [2001] 117 Taxman 707 (Mad.) and CIT v. Ramani Realtors (P) Ltd. [2015] 54 taxmann.com 321 (Mad.), wherein it has been consistently held that the object of the provision is fulfilled if the audit report is available before the assessment is completed.
ITA No 2291 & 2292/Chny/2025 (AY 2018-19 & 2019-20) Sundaresan Sureshkumar Vs DCIT C-1 :: 7 ::
11. Respectfully following the above binding judicial precedents, we hold that the mere delay in furnishing the audit report, when the same has been filed before completion of assessment proceedings, cannot be a ground for levy of penalty under section 271B of the Act.
12. Further, we also find merit in the contention of the assessee that the delay, if any, was on account of reasonable cause within the meaning of section 273B of the Act. The period under consideration coincides with the unprecedented COVID-19 pandemic, coupled with transition to the new income-tax portal, which has been judicially recognized as a valid ground causing genuine hardship and technical impediments in statutory compliances. The assessee has demonstrated that the audit report was duly obtained and ultimately furnished, and there is no material on record to suggest any deliberate or contumacious conduct. 13. It is also relevant to note that the returned income has been accepted by the Assessing Officer without any addition, which further supports the bona fides of the assessee and establishes that no prejudice has been caused to the Revenue.
13. Considering the totality of facts and circumstances of the case, and in the light of the judicial precedents cited above, we are of the view that the assessee has satisfactorily explained the cause for delay and the case squarely falls within the ambit of section 273B of the Act. Accordingly, the penalty levied under section 271B is not sustainable.
ITA No 2291 & 2292/Chny/2025 (AY 2018-19 & 2019-20) Sundaresan Sureshkumar Vs DCIT C-1 :: 8 ::
14. Since the facts in Assessment Year 2019-20 are identical, our above findings shall apply mutatis mutandis to that year as well.
15. In the result, the penalties levied under section 271B for Assessment Years 2018-19 and 2019-20 are hereby deleted and both the appeals of the assessee are allowed.
Order pronounced on the 15th day of April 2026, in Chennai.
Sd/- Sd/-
(इं तूरी रामा राव) (मनु कुमार िग र)
(INTURI RAMA RAO) (MANU KUMAR GIRI)
लेखा सद)य/ACCOUNTANT MEMBER या यक सद)य/JUDICIAL MEMBER
चे नई/Chennai,
*दनांक/Dated: 15th April, 2026.
SNDP, Sr. PS
आदे श क त,ल-प अ.े-षत/Copy to:
1. अपीलाथ /Assessee
2. थ /Respondent
3. आयकरआयु /CIT, Chennai / Madurai / Salem / Coimbatore.
4. िवभागीय ितिनिध/DR
5. गाडफाईल/GF