Maintenance of Books of Account – Penalty for Non-compliance of Audit Provision
Introduction : There are many due dates coming in upcoming period within which assessee is required to furnish books of audit report to the various revenue authority. It is important to know that what if such provision are not complied, what will be the penal consequence in case of such failure.
What if assessee fails to furnish audit report under Income Tax Act, 1962?
In case if assessee fails to furnish audit report within the due date provided (i.e., 30th September, 2020; as provided under Income Tax, 1961) than assessee will be liable to pay the penalty as prescribed under section 271B of Income Tax, 1961.
Also, assessee which is covered under the provision of International taxation will be liable to furnish the Transfer pricing audit report and due date of furnishing such report is 30th November, 2020; if assessee fails to furnish such report he will be liable to pay the penalty as prescribed under section 271E of Income Tax Act. 1961.
What if extended due date of furnishing Tax Audit report?
As per the notification issued by CBDT the extended date for furnishing audit report is 31st Decemeber,2020 for financial year 2019-20 (i.e., 01-04-2019 to 31-03-2020) and for transfer pricing audit report due date is also 31st December,2020.
What if assessee fails to get his accounts audited or furnish a report of such audit u/s 44AB?
In case of assessee fails to get his books of account audited than he will be liable to pay flat penalty of lower of lower of the following two.
- 5% of total Sales, turnover or gross receipts in business / profession or
Therefore, it shall be noted the amount of penalty in case of non-compliance maximum penalty amount may go up to Rs. 1,50,000/-.
What will be amount of penalty in case of non-compliance in furnishing transfer pricing report?
In case if audit report required for transfer pricing transaction is not furnished within the due date than in that case penalty as per section 271E will be flat Rs. 1,00,000/-.
Whether this penalty can be waived?
As per section 273B of Income Tax Act, 1961; penalty can be waived in case there was reasonable cause for such failure. Such reasons may be as follows:
- Resignation of tax auditor and consequent delay;
- Bona fide interpretation of the ‘turnover ‘based on expert advice;
- Death or physical inability of the partner in charge of the account.
- Labour problems such as strike, lock-out for a long period, etc.
- Loss of accounts because of fire, theft, etc., beyond the control of the assessee.
- Non-availability of accounts on account of seizure;
- Natural calamities, commotion, etc.
What if assessee has furnished the tax audit report but no income return has been filed by the said assessee. Can in that case penalty is levied?
It shall be noted that penalty is levied only in case assessee fails to furnish tax audit report; for non-filling of return on timely manner there is separate section for the levy of penalty (i.e., section 234F)
What if assessee is required to get his books of account audited but has not maintained the books of account?
In such cases it is well settled position of law that assessee will be liable to pay penalty for non-maintenance of books of account and not for non-compliance of audit provision. As both penalties cannot be levied simultaneously.
It is very clear from above provision that assessee shall get his books of account audited well within time and furnish the audit report to government authority to avoid such harsh penalty.