The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) deleted the penalty under Section 271B of the Income Tax Act 1961, imposed on assessee for bonafide belief of treating gross commission as turnover.
The assessee,DummiShivraj Deepak was an individual carrying on the business of dealing in mobile currency or mobile recharge. For the assessment year 2017-2018, the assessee filed the return of income by declaring income of Rs.3,45,520.
The assessing officer initiated penalty under Section 271B of the Income Tax Act for failure to comply with the provisions of Section 44AB of the Income Tax Act, as the assessee-company has not filed a tax audit report before the due date of filing of the return of income.
The assessee submitted that he was under the bonafide belief that only gross commission is to be considered as turnover for the purpose of Section 44AB of the Income Tax Act and the gross commission did not cross the threshold limit as per Section 44AB of the Income Tax Act, the assessee did not get the books of account audited. The assessing officer and CIT(A) rejected his contentions and hence the present appeal.
The Counsel for the assessee submitted that the assessee had not maintained books of account during the year or at the time of filing of the return. Therefore, imposition of penalty under Section 271B of the Income tax Act was contended to be bad in law.
The two-member tribunal Bench consisting of Laxmi Prasad Sahu, Accountant Member and George George K, Judicial Member observed that, “the assessee had got the books of account audited for the first time for the relevant assessment year. Prior to the relevant assessment year, the assessee was under the bonafide belief that only the gross commission receipts are to be taken as turnover for the purpose of audit.”
“During assessment proceedings, the assessing officer required the books of account to be provided and audited. The audit report was furnished on May15, 2019, prior to the completion of assessment (Assessment order under section 143(3) of the Income Tax Act was completed on 18.12.2019).Therefore, the assessing officer had the benefit of an audit report in completing the assessment” the Tribunal noted.
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