M/S. SHARK DYEING MILLS ,TIRUPPUR V. ITO, WARD-1(2), TIRUPPUR

ITA 2692/CHNY/2025

AI Insights

The case involves M/s. Shark Dyeing Mills, a firm engaged in textile dyeing and processing, which faced a penalty for not filing an audit report on time as required under section 44AD of the Income Tax Act, 1961, for the assessment year 2018-19. The firm appealed against the penalty imposed by the Assessing Officer (AO) and upheld by the First Appellate Authority (FAA). The Tribunal considered the firm's operational disruptions due to National Company Law Tribunal (NCLT) proceedings and the death of a partner who managed the accounts, which were presented as reasons for the delay in filing the audit report. The Tribunal concluded that these circumstances constituted a 'reasonable cause' under section 273B of the Act, leading to the decision to delete the penalty.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 827771 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Appeal Filed On: 29-09-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: S. SHARAVANAN; F.C.A
• Keywords: Reasonable cause; Liquidation

Judgement Text

"आयकर अपीलȣय अͬधकरण, ‘बी’ Ûयायपीठ, चेÛनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI Įी जॉज[ जॉज[ क े, उपाÚय¢ एवं सुĮी पɮमावती एस, लेखा सदèय क े सम¢ BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENTAND MS PADMAVATHY S, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 2692/CHNY/2025 िनधाᭅरण वषᭅ/Assessment Year: 2018-19 M/s. Shark Dyeing Mills, No.5A, SuriaprabhaGarden, M.P. Nagar Extension, Tiruppur – 641 607. PAN: ACYFS 7041R Vs. The Income Tax Officer, Ward 1(2), Tiruppur. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri S. Sharavanan, F.C.A ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Ms. Gouthami Manivasagam, Addl.CIT सुनवाई कᳱ तारीख/Date of Hearing : 07.01.2026 घोषणा कᳱ तारीख/Date of Pronouncement : 09.01.2026 आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 01.08.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19. Printed from counselvise.com ITA No.2692/Chny/2025 :- 2 -: 2. The order of the First Appellate Authority (FAA) is emanating from the order of the AO imposing penalty u/s.271B of the Act amounting to Rs.1,50,000/-. 3. Brief facts of the case are as follows: The assessee is a firm. It is engaged in the business of textile dye and processing. For the assessment year 2018-19, assessee’s turnover exceeded the prescribed limit. Therefore, the assessee firm, was required to file the audit report u/s.44AD of the Act. Since the assessee did not file the audit report within the time prescribed, the AO imposed penalty u/s.271B of the Act vide order dated 27.06.2024 amounting to Rs.1,50,000/-. 4. Aggrieved by the order imposing penalty, assessee filed appeal before the FAA. The FAA confirmed the penalty imposed. 5. Aggrieved by the order of the FAA, assessee filed the present appeal before the Tribunal. The Ld.AR had placed on record the NCLT proceedings disrupting operations of the firm, death certificate of partner indicating illness of the partner who is looking after the accounts of the assessee firm, GST returns Printed from counselvise.com ITA No.2692/Chny/2025 :- 3 -: showing slowdown of assessee’s business, etc. It was stated that the above documents were furnished before the AO and the FAA. It was contended that there is ‘reasonable cause’ as mandated u/s.273B of the Act for late filing of audit report, hence, on fact of the instant case, penalty u/s.271B of the Act needs to be deleted. 6. The Ld.DR supported the orders of the AO and the FAA. 7. We have heard rival submissions and perused the material on record. It is an admitted fact that liquidation proceedings were initiated against the assessee firm under the NCLT. The proceedings before the NCLT has been placed on record. The assessee’s partner who is looking after the assessee’s accounts had also expired after a prolonged illness, copy of death certificate of the said partner is also filed. Taking into account the totality of facts of the instant case, we are of the view that there is reasonable cause as mandated u/s.273B of the Act for not furnishing the audit report within the prescribed time. Further, we also note that the audit report was filed much prior to the assessment order being completed. The AO had the Printed from counselvise.com ITA No.2692/Chny/2025 :- 4 -: benefit of audit report while completing the assessment order. Hence, it is only a venial breach which has not resulted in any loss to the exchequer. Therefore, on the facts of the instant case, we are of the view that penalty needs to be deleted and we do so. It is ordered accordingly. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 9th January, 2026 at Chennai. Sd/- Sd/- (पɮमावती एस) (PADMAVATHY S) लेखा सदèय/ACCOUNTANT MEMBER (जॉज[ जॉज[ क े) (GEORGE GEORGE K) उपाÚय¢ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 9th January, 2026 RSR आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy to: 1. अपीलाथȸ/Appellant 2. Ĥ×यथȸ/Respondent 3. आयकर आयुÈत /CIT, Coimbatore 4. ͪवभागीय ĤǓतǓनͬध/DR 5. गाड[ फाईल/GF. Printed from counselvise.com "