If books of account not maintained penalty u/s 271B cannot be levied for non audit u/s 44AB. ITAT deleted penalty u/s 271B and sustained penalty u/s 271A
ABCAUS Case Law Citation:
ABCAUS 2935 (2019) (05) ITAT
Important Case Laws Cited/relied upon by the parties
CIT Vs. S.K. Gupta and Co. [2010] 322 ITR 86 (All.)
CIT Vs. Bisauli Tractors’ [2008] 299 ITR 219 (All.)
In the instant appeal, the only grievance of the assessee was related to the sustenance of the penalty levied by the Assessing Officer u/s 271B of the Income Tax Act, 1961 (the Act).
The Assessing Officer had levied the impugned penalty by observing that the assessee was engaged in business of trading of shares, derivatives and commodities etc and the turnover of the assessee was in excess of the limit prescribed under Section 44AA and 44AB of the Act.
During the year under consideration the assessee was required to maintain the books of account as per the provisions of section 44AA of the Act and got the same audited as per the provisions contained in section 44AB of the Act but the assessee did not get the accounts audited.
Therefore, the Assessing Officer levied the penalty u/s 271A for not maintaining books of accounts and also u/s 271B of the Act for not getting the books of account audited.
Being aggrieved, the assessee carried the matter to the CIT(A).
The assessee pleaded that he had not made such trading transactions either in the past years or subsequent years to the year under consideration, therefore, the same should not be termed as the appellant’s business activities.
It was also submitted that due to ignorance, the appellate was in bonafide belief that there was no requirement of maintenance of books of accounts.
However, the CIT did not agree with the submissions and opined that the assessee dealing with different stock exchanges and having transactions in crores could not be treated as ignorant person not aware of the requirement to maintain the books of accounts. Nor did the CIT(A) accepted that these should not be treated as business activities.
The CIT(A) sustained the penalties and dismissed the appeals.
Before the Tribunal the assessee submitted that he was not having the books of account so there was no question of getting the same audited and that a penalty u/s 271A of the Act for non maintaining the books of account was levied by the Assessing Officer and since there were no books of account, penalty levied u/s 271B of the Act for not getting those audited was not justified.
The Tribunal noted that admittedly, the assessee did not maintain the books of account, so there was no question of getting those audited. For that default i.e. non maintenance of the books of account, the Assessing Officer had already levied penalty u/s 271A of the Act.
The Tribunal noted that on a similar issue the Hon’ble High Court had held that requirement of getting the books of account audited could arise only where the books of account are maintained. If for some reason the assessee has not maintained the books of account, penalty cannot be levied under section 271B of the Income-tax Act, 1961.
Also, in yet another case, the Hon’ble High Court had held that a penalty provision in a taxing statute has to be strictly construed. Penalty is eligible only where a person falls within the four corners of the penal provisions, otherwise not.
It was held that Separate penalty has been provided for non maintenance of accounts, i.e. under section 271A of the Act and for not getting the amounts audited and not furnishing the audit report, i.e. under section 271B. If a person has not maintained account books or any accounts the question of audit does no arise. In such an event the imposition of penalty under the provision contained in section 271A for alleged non-compliance with section 44AA may arise but the provisions of section 44AB do not get violated in a case where accounts have not been maintained at all and therefore the penal provisions of section 271B of the Act would not apply.
Therefore, following the ratio laid down by the Hon’ble High Court, the Tribunal deleted the penalty levied by the Assessing Officer u/s 271B of the Act and sustained the penalty u/s 271A.
