The Pune bench of Income Tax Appellate (ITAT) upheld the penalty imposed by the lower authorities under section 271B of the Income Tax Act, 1961.
The bench stated that the assessee has been getting advice from the Chartered Accountant and failure to audit books of accounts cannot be treated as a bonafide mistake.
The Assessee, Benchmarrk Realty LLP was in the business of Builder and developer, filed return of income for A.Y. 2015-16 declaring total income of Rs.33,80,870.
During the scrutiny assessment the Assessing Officer (AO) asked the assessee to file a copy of the Audit report, along with certain other documents.
The Assessee responded that since there was just Work in Progress (WIP) and no sale for the year, there had been no tax audit. Following the initiation of penalty proceedings under section 271B of the Income Tax Act, the AO assessed the fine.
The assessee’s counsel, Kishor B. Phadke, maintained that because there was only ongoing work during the year, the assessee had a genuine misconception that an audit was unnecessary and did not perform one.
Counsel for Revenue, Ramnath P Murkunde, submitted that the assessee’s turnover was more than the prescribed limit of Rs.1 crores under section 44AB of Income Tax Act. Hence it was mandatory for the assessee to audit the books of accounts.
The bench highlighted that according to Section 44AB of Income Tax Act, it is mandatory for an assessee whose Total Sales, Turnover, or Gross receipts exceeds Rs.1 crores to get books of accounts audited.
Thus, as per the provision of the Act, either Turnover, Sales, or Gross receipts shall exceed Rs. 1 crores. The legislature has used three words, Sales, Turnover, Gross receipts.
Therefore, the AO must determine during the assessment of the assessee’s business whether the Sale, Gross Receipt, or Turnover exceeds Rs. 1 crore before applying Section 44AB of the Income Tax Act’s requirements.
The Rajasthan High Court case Bajrang Oil Mills v. ITO was referenced by the tribunal, and it was determined that the assessee in that case had receipts above Rs. 1 crore. As a result, the assessee was required by section 44AB of Income Tax Act to audit the books of accounts. It’s true that the assessee didn’t do that.
The tribunal noted that the assessee has merely stated that it was under bonafide belief. Further stated that the explanation is not acceptable as the assessee is a builder, having advice of professionals like Chartered Accountant.
The bench of S. S. Godara (Judicial Member) and Dipak P. Ripote (Accountant Member) on the facts and circumstances of the case upheld the penalty levied by the AO under section 271B of Income Tax Act.
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