The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has recently, in an appeal filed before it, held that once penalty is levied for non-maintenance of book of accounts, no further default is to be imposed for not getting the same audited under Section 44AB of the Income Tax Act.
The aforesaid observation was made by the Jaipur ITAT, when an appeal was preferred before it by the Assessee, arising out of the order of the National Faceless Appeal Centre, Delhi dated 24/11/2022 [(NFAC)/ CIT(A)], for assessment year 2015-16, which in turn arise from the order of penalty passed under Section. 271B of the Income Tax Act, dated 18.05.2018, by the Income Tax Officer, Jaipur [AO].
The grounds of the assessee’s appeal being as to whether, on the facts and circumstances of the case, the CIT(A) has grossly erred in law, by approving action of the AO , in levying penalty ,for not getting the books of accounts audited by the assessee, ignoring the facts that no books of accounts have been maintained by the assessee, and also as to whether ,on the facts and circumstances of the case and without prejudice to other grounds of appeal, the CIT(A) has grossly erred in law and in facts, by approving the action of the AO , in imposing penalty on the turnover also, which was declared by the assessee under the relevant section of the Income Tax Act, it was prayed by the assessee that the penalty thus imposed being in alternate excessive , therefore be kindly reduced by the Jaipur ITAT.
The aforesaid being the grounds of the assessee’s appeal, the facts as culled out from the records was that the return declaring an income of Rs. 294800/- was e-filed by the assessee on 31.8.2015 and the assessment under Section 143(3) of the Income Tax Act was completed on 25.11.2017, assessing income at Rs. 294800/-.
Thereafter, the penalty proceedings under Section 271B were initiated, along with the assessment order dated 25.11.2017, for not furnishing the audit report within time allowed as per provisions of section 44AB of the Income Tax Act.
During the year, assessee was engaged in the business of trading bangles and other artificial accessories, and had shown gross receipt of Rs.55,14,602/, thus declaring a net profit under Section 44AD, for an amount of Rs.4,42,314/. However, during the year, it was found that assessee had also made transactions of shares and not disclosed the same in his return of income.
Thus, during the proceedings, the assessee was asked to furnish complete details of the share transactions. And, after examination of details filed, it was found that the assessee had made transactions in various segments and made total sales of Rs. 51,49,169/, and therefore that, the assessee had made two business viz trading of bangles and share.
Thus, the total turnover of both business of Rs.1,06,63,771/- made two business viz trading of bangles and share, thereby making the total turnover of both businesses to be of Rs.1,06,63,771.
In view of provision of section 44AB, the assessee was required to get audited its accounts before the specified date and furnish by that date, the report of such audit in the prescribed form duly singed and verified by such accounts, setting fourth such particulars as may be prescribed. And, as per the explanation (ii) of section 44AB, the specified date in relation to the accounts of the assessee, of the previous year relevant to an assessment year, means the due date for furnishing the return of income under sub-section (1) of section 139.
However, the assessee failed to get his accounts audited under Section 44AB, and hence, the penalty proceedings under Section 271B, was initiated, while finalizing the assessment proceedings. And, the show cause notice was issued on 25.11.2017 & 13.4.2018.
In response to these notices, the assessee had filed a detailed reply dated 11.05.2018, which the AO considered but not found acceptable. And subsequently, on 18.05.2018, the AO therefore, levied the penalty of Rs. 53,518.
Aggrieved by the order of the assessing officer, the assessee preferred an appeal before the CIT(A), who confirmed the levy of the penalty, thereby holding that the assessee is not covered under any of the reasonable clause and further that since the assessee had not complied with the statutory provisions, the action of levy of penalty by the AO was correct.
As the assessee did not get any favour from the appeal filed before the CIT(A), it is in this situation that the Assessee has moved the present appeal before the Jaipur ITAT.
Hearing the opposing contentions of either sides as presented by Shri Vishal Gupta (C.A.), on behalf of the assessee , and by SmtMonisha Choudhary (Addl. CIT) on the Revenue’s behalf, the Jaipur ITAT observed:
“We have heard the rival contentions, perused the material on record and order of the lower authorities. We have also gone through the various judicial decision cited by the ld. AR of the assessee in support his arguments before us. The bench noted from the paper book of the assessee that in the case of the assessee there has been a levy of penalty for non-maintenance of books of accounts under Section. 271A of the Act and the ld. DR did not controvert the fact the same is not deleted. So, once it has been held the assessee has not maintained the books of account and consequent there upon the penalty has also been levied the separate penalty for not getting the books of account audited cannot be fastened.”
“The penalty under Section. 271B can be levied when the assessee maintains the books and not get them audited but once it has been held and not disputed that the assessee has not maintained the books, how the penalty for not getting the books audited be levied. The ld. DR did not controvert these basic facts and the decision of the coordinate bench cited by the ld. AR of the assessee and thus, considering the ratio of decision so relied upon by the ld. AR of the assessee where in the decision of various Hon’ble High Courts and of this Co-ordinate Bench also in the case of Shahnaz Khanan, Jhalawar Vs. ITO, we are of the view that once the penalty is levied for non-maintenance of book of accounts, there cannot be further default for not getting the same audited as required under Section 44AB of the Act”, the ITAT Panel of Dr. S. Seethalakshmi, the Judcial Member, and Rathod Kamlesh Jayantbhai, the Accountant Member added.
Finally, the Jaipur ITAT held:
“Therefore, the penalty levied under Section 271B is not justified and thus vacated. In the result, appeal of the assessee is allowed.”
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