The Jaipur Bench of Income Tax Appellate Tribunal (ITAT) has deleted the penalty under Section 271B of the Income Tax Act 1961, as the turnover was below 2 crores as prescribed under Section 44AD of Income Tax Act 1961.
The return of income for A. Y. 2017-18 declaring income was filed on 28.03.2018 by Subhash Chand Saini. The assessee had declared income from business or profession for the year under consideration. The case was selected for scrutiny with remarks “ (i) cash deposit during the year”. Notice under Section 143(2) of the Income Tax Act, 1961 was issued on 14.08.2018 fixing the case for hearing on 29.08.2018.
Further notice under Section 142(1) of the Income Tax Act was issued and in compliance to this notice the assessee had furnished documents, details and produced relevant documents which were examined on test check basis and replies filed were placed on record. Assessee was engaged in the business of wholesale trading of vegetables during the year under consideration.
The AO on completion of assessment proceedings initiated a notice for penalty proceedings under Section 271B of the Income Tax Act for failure to file audit report as per provision of Section 44AB of the Income Tax Act, as the turn over as declared in the return of income is exceeding to Rs. 1 cr. Based on these the AO passed an order under Section 271B of the Income Tax Act levying penalty.
P. K. Garg appeared on behalf of the assessee and Monisha Choudhary who appeared on behalf of the revenue sought time to check whether the assessee filing of the return under Section 44AD of the Income Tax Act even if the turnover exceeding at Rs. 1,10,47,462/- was permitted or not and thereby the penalty under Section 271B of the Income Tax Act was leviable or not and did not bring anything contrary to the provision of Section 44AD of the Income Tax Act so as to debar of the assessee even though the turnover exceeding Rs. 1 cr to file the return of income or any decision to support the view for levy of penalty.
The two-member Bench of S. Seethalakshmi, (Judicial Member) and Rathod Kamlesh Jayantbhai, (Accountant Member) as per the Section 44AD of Income Tax Act which had a change with effect from 01.04.2017 wherein the words “eight per cent”, substitute to six per cent”, in respect of the amount of total turnover or gross receipts which was received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed] during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year.
As per Section 44AD of Income Tax Act,
(e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,
get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.
Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:
Thus, on conjoint reading of the Section the Bench held that the assessee was eligible to avail the benefit of presumptive taxation up to Rs. 2 crores turnover and the assessee had not controverted the provisions of Section 44AB of the Income Tax Act and since turnover was not exceeding the revised limit of Rs. 2 crores.
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