No penalty u/s 271A due to Bonafide belief that assessee was covered u/s 44AF – ITAT

No penalty u/s 271A when assessee was under Bonafide belief that being covered under section 44AF he was not required to maintain books of account

ABCAUS Case Law Citation:
ABCAUS 2787 (2019) (02) ITAT

Important Case Laws Cited/relied upon by the parties
ACIT vs Anil Luthra (2001) 116 Taxman 126(Chd)
Hindustan Steel Ltd. Vs State of Orissa, 83 ITR 26(SC)

The grievance of the assessee WAs that the CIT(A) was unjustified in confirming the levy of penalty under section 271A of the Income Tax Act, 1961 (the Act).

The assessee contended that it was the first year of business of the assessee and the assessee was under bonafide belief that since he falls within the ambit of provisions of section 44AF of the Act, therefore, did not maintain any books of account.

It was also submitted that neither the Act nor the Rule prescribes the type of books of account to be maintained by the assessee. Therefore, penalty could not be levied against the assessee

On the other hand, the Department supporting to the orders of lower authorities, submitted that when the assessee had not maintained any books of account, the authorities below have no alternative option but to impose penalty.

The Tribunal noted that section 273B provides that if the assessee proves that there is a reasonable cause, he is not subject to levy of penalty.

The Tribunal observed that the contention of the assessee was that he was under Bonafide belief that he is not required to maintain books of account.

The Tribunal opined that even if it was assumed that the assessee had an obligation to maintain regular books of account, which he failed to do, the failure is definitely due to a reasonable cause and the case is covered under the provisions of section 273B of the Act.

The Tribunal further observed that it is well settled principle of law as laid down by Hon’ble Supreme Court that penalty proceedings are quasi-criminal in nature and it must be brought on record by the Assessing Officer that the assessee has deliberately acted in defiance of law or was guilty of conduct contemptuous or dishonest but in the reasoning given by the Assessing Officer in the assessment order, nothing has been mentioned.

Therefore, the Tribunal held that the assessee under Bonafide belief, had not maintained books of account. Accordingly, the Tribunal set aside the orders of lower authorities and deleted the penalty u/s.271A of the Act.

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