No Penalty If there is a Bonafide belief that Books need not be Subjected to Audit: ITAT Hyderabad [Read Order]

Hyderabad bench of Income Tax Appellate Tribunal held that penalty under section 271B of the Income Tax Act is not leviable where the assessee was under a bonafide belief that books need not be subjected to audit.

In the instant case three assessees were voluntarily filed appeals for the deletion of penalty imposed by the AO for non-submission of books of accounts for audit. Assessees are family members and engaged in the business of manufacture of cloth.

The Assessing Officer has imposed penalty for all the three assessees for non-submission of books of accounts for audit under Section 44AB of the Income Tax Act. In the case of the first two assessees the AO has determined additional incomes and charged a penalty of Rs. 35,390/- and Rs. 32,370/- respectively. In the case of the second assessee the AO made an addition in closing stock which is amounting almost 45 percent of turnover and imposed penalty on the said amount.

The ITAT bench comprising of Accountant Member B.Ramakotaiah has observed that penalty u/s 271B is applicable for non-submission of books of accounts for audit u/s 44AB. Even though the law prescribes the levy of penalty, in case of default, the same is not automatic as provisions of Section 273B gives relief, when there is a reasonable cause. The said section also amended to provide relief for small businesses having annual turnover of less than 60 lakhs. Therefor there can be a bonafide belief that books need not be subjected to audit. It was noted that the material facts clearly reflected that the annual turnover of these assessees were less than 60 lakhs, hence there is a bonafide belief exists in between them that books of accounts need not be subjected to audit. And further the books are rejected and addition on closing stock valuation was made, which was subject matter of appeal separately. The bench contented that there is reasonable cause exists in this case u/s. 273B. Hence the penalty levied by the AO was deleted while allowing the appeal of the assessees.

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