Penalty under section 271B deleted after tribunal accepts bona fide belief on turnover computation for tax audit threshold

5-Second Takeaway

The tribunal held that no penalty under section 271B could survive because the assessee had a reasonable cause for not getting its accounts audited under section 44AB, based on a bona fide belief about the turnover threshold. It also accepted that where GST or another tax is included in the sale price, no adjustment is made while computing turnover, and the assessee’s appeal delay was condoned.

The assessee, engaged in manufacturing and selling packaging materials, reported sales of Rs. 9,82,74,982 in its profit and loss account. The Assessing Officer instead relied on the GSTR-1 invoice value of Rs. 11,59,43,746 inclusive of GST and treated the assessee as liable for tax audit under section 44AB.

On that basis, a penalty of Rs. 1,50,000 was imposed under section 271B for failure to get the accounts audited. The assessee explained that it had proceeded on a bona fide understanding that tax-inclusive amounts were not to be adjusted for turnover computation and that no audit was therefore required.

The tribunal noted the ICAI Guidance Note on tax audit, which states that where GST or any other tax is included in the sale price, no adjustment is to be made while computing turnover. It held that the assessee’s belief was bona fide and that, where two views were possible, the explanation constituted reasonable cause.

Accordingly, the tribunal condoned the 133-day delay in filing the appeal and directed deletion of the penalty under section 271B.