In Roshini Devi vs. Income Tax Officer, the Jaipur Bench of the Income Tax Appellate Tribunal ( ITAT ) held that penalty under Section 271B of the Income Tax Act, 1961 cannot be levied for non-audit of books of accounts under Section 44AB of the Income Tax Act.
In the Instant case, assessee was selected for scrutiny assessment to examine the source of cash deposit of Rs 1.13 crores in the bank account maintained by the assessee. During the course of assessment proceedings, the Assessing Officer (A.O) observed that the total receipt/turnover of the assessee business from both M/s Krishna Electronics and M/s Jharkhand Electric & Electronics, amounted to Rs.1,02,68,170/- as the assessee was having turnover exceeding Rs. 60 lacs during the year under consideration, accordingly, the provisions of Section 44AA of the Act were clearly held to be applicable and the assessee was liable to maintain her books of account, which she had failed to do so.
Accordingly, penalty amounting to Rs. 25,000/- was levied U/s 271A of the Act. The Assessing Officer further observed that since the turnover of the assessee’s business exceeds Rs. 60 lacs, the provisions of Section 44AB of the Act are clearly applicable and the assessee had failed to get her books of account audited. Accordingly, penalty at the rate of 0.5% of total turnover amounting to Rs. 51,341/- was levied on the assessee. The Commissioner of Income Tax (Appeals)) confirmed the said levy of penalty.
The Counsel for the assessee argued that there was a bona fide mistake by the assessee not to disclose the income from Jharkhand Electric & Electronics and that under those circumstances, there was no part of income concealed or understated. He contended that the assessee was under the bona fide belief that he was not required to obtain audit report only in respect of that business, the turnover of which crosses the limit of the assessment year It was clarified by ICAI that tax audit as such is conducted in respect of an assessee and not in respect of particular business. He further argued the assessee having acted in bona fide belief and had no dishonest intention in not obtaining audit report for all the two businesses carried on by her, no penalty under section 271B of the Income Tax Act, 1961 to be imposed. He prayed to delete the penalty. The Counsel for the Revenue supported the orders of the CIT(A) and the A.O.
The bench comprising of Judicial Member Vijay Pal Rao and Accountant Member Vikram Singh Yadav observed that the assessee had already been penalized under section 271A for non-maintenance of books of accounts. “Once the penalty has been levied for non-maintenance of books of accounts, there cannot be penalty again for non-audit of books of accounts which were not kept at first place. It is clearly a case of impossibility of performance where it is expected that the assessee should get her books of accounts audited when it is a known and admitted fact that there are no regular books of accounts which have been maintained at first place. Our view is fortified by the decision of the Hon’ble Gauhati High Court in case of Rajmal Parsuram Todi (supra) wherein it was held that when a person commits an offence by not maintaining the books of accounts as contemplated under section 44AA, the offence is complete and after that, there can be no possibility of any offence as contemplated under section 44AB and therefore, the imposition of penalty under section 271A is erroneous.” observed the bench.
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