Provisions of S.44 AB of the Act are not applicable if Turnover of  Assessee  less than Prescribed Limit: ITAT delete Penalty u/S 271B [Read Order] 

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has recently held that provisions of Section 44 of the Income Tax Act, 1961 are not applicable if turnover of assessee less than prescribed limit therefore the tribunal deleted the penalty levied under Section 271B of the Income Tax Act 1961.

Section 44AB of the Income Tax Act provides for tax audit. Every person  who carries business if his total sales or receipts exceed or exceeds one crore shall be liable to audit as per the above section.

Assessee Meena Jain is an individual who is engaged in the business of cheque discounting and finance. After filing the return of the assessment year 2018-19  assessee declared the total income of Rs.23,17,010/-. After the assessment proceedings, the AO  found that total income of the assessee is at 1,65,98,550/- as against the returned income of Rs. 23,17,010/-.

Thus, the AO initiated penalty proceedings under section 271B of the Income Tax Act for not getting the accounts audited. Against the order assesee filed an appeal before the first appellate authority. The CIT(A), rejected the contention of the assessee and confirmed imposition of penalty under Section 271B of the Income Tax Act. Thereafter assessee filed second appeal before the tribunal.

Suman Lunkar, counsel for the assessee relying on the guidance note on tax audit under Section 44AB of the Income Tax Act submitted that the interest, commission and brokerage receipt alone need to be taken as gross turnover of the assessee and if that is to be taken as turnover the same is only Rs.92,22,002/-.

Hence the assessee was not liable to get audited the books of account, since the turnover was below the prescribed limit

 Moreover since the turnover was less than the prescribed limit for tax audit, provisions of Section 44AB of the Income Tax Act are not applicable.

Gudimella VP Pavan Kumar, counsel for the revenue, contented that Assesse had done the cash discounting business of Rs.1,48,64,73,069, so the turnover was over 1 crore.therefore the penalty levied by the AO is correct.

The tribunal observed that During the previous year assessee has received commission of only Rs.57, 47,973/- along with interest income of Rs.34,74,029/-. Therefore, the gross turnover of the assessee is only Rs.92, 22,002/-. As the turnover of the assessee was less than the prescribed limit fixed for tax audit, provisions of Section 44AB of the Income Tax Act are not applicable to the assessee.

Therefore, the bench of George George K., Judicial Member and Laxmi Prasad Sahu, Accountant Member allowed the appeal of the assessee and held that when the provisions of Section 44 AB of the Income Tax Act are not applicable to the facts of the case, and that a situation for levy of penalty under Section 271B of the Income Tax Act did not arise.

To Read the full text of the Order CLICK HERE

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