When books of account are not maintained, penalty u/s 271B can’t be levied

Once it is established that assessee has not maintained the books of account, same can not be audited – ITAT

In a recent judgment, ITAT Jaipur quashed the levy of penalty u/s 271B for failure to get accounts audited u/s 44AB holding that once it is established that the assessee has not maintained the books of account, same can not be audited.

ABCAUS Case Law Citation:
4702 (2025) (08) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by National Faceless Appeal Centre/CIT(A) in confirming the levy of penalty under section 271B of the Income Tax Act, 1961 (the Act).

The appellant assessee was carrying on business of trading in commodity. The Assessing Officer (AO) had levied the penalty under section 271B due to the assessee made transaction through commodity transaction amounting to more than the turnover threshold for mandatory tax audit. As the assessee did not get his accounts audited as provided in section 44AB of the Act, the AO held that the assessee violated the provision of section 44AB of the Act and thereby liable for penalty u/s. 271B of the Act.

In the instant case two penalties were imposed upon the appellant assessee, one related to 271A for failure to maintain accounts and other of 271B. The assessee had already settled the dispute of levy of penalty as per provision of section 271A of the Act under the DTVSV Act 2020 and the assessee did not prefer the appeal against the levy of penalty u/s. 271B of the Act.

Aggrieved from that order of levy of penalty as per provisions of section 271B of the Act, the assessee challenged the same before the CIT(A). Though the appeal was related to section 271B of the Act penalty but while dealing with the finding part, CIT(A) dealt with the appeal relates to the levy of penalty u/s 271A of the Act and passed the order treating the appeal filed as withdrawn.

The Tribunal observed that in this case solitary issue raised by the assessee was that levy of penalty 271B of the Act. In this case it was not disputed by the revenue that the assessee had already settled the dispute regarding levy of penalty u/s 271A of the Act wherein the levy of penalty was for maintenance of books of accounts.

The Tribunal concurred with the argument of the assessee that once he accepted to have not maintained the books of account there cannot be a case to levy the penalty of not getting those books of accounts audited.

The Tribunal held that once it is established that the assessee has not maintained the books of account the same can be audited.

Accordingly, the Tribunal quashed the levy of penalty u/s 271B of the Act and allowed the appeal of the assessee. 

Download Full Judgment Click Here >>

• Penalty u/s 271B for unfilled column 40 in Tax Audit Report Form 3CD deleted by ITAT
• Merely ex-parte rectifying computation without amending assessment order not make it nullity- ITAT
• Once assessee discharges primary onus, it shifts to AO to bring evidence to contrary – ITAT
• Cost Inflation Index for FY/Tax Year 2026-27 notified by CBDT. See Up-to-date Table of CII
• Power of CIT(A) u/s 251(1)(a) to remand case can be exercised only in best judgment assessment