2013 (11) TMI 114 - AT - Income Tax

Penalty for non-maintenance of books deleted due to reasonable cause, upheld for failure to file return.

The Tribunal deleted the penalty under section 271A for non-maintenance of books of account in a remote village due to reasonable cause related to the ... Reasonable cause for non-maintenance of books of account - immunity from penalty under section 273B - requirement to maintain books of account where income exceeds Rs. 25,000 - deemed concealment under Explanation 3 to section 271(1)(c) for failure to furnish return in response to section 148 - penalty under section 271A for non-maintenance of books - penalty under section 271(1)(c) for concealment of incomeReasonable cause for non-maintenance of books of account - immunity from penalty under section 273B - penalty under section 271A for non-maintenance of books - Whether penalty under section 271A for failure to maintain books of account for assessment years 1998-99 to 2001-02 is leviable - HELD THAT: - The Tribunal accepted that the assessee was a small-time poultry farmer operating in a remote village and was not maintaining books of account, despite income exceeding Rs. 25,000 which attracts the requirement to maintain books. However, having regard to the remoteness of the village, the unorganised nature of agricultural/poultry activity and difficulty in obtaining affordable accounting assistance, the Tribunal held that there was a reasonable cause within the meaning of section 273B for non-compliance with the bookkeeping requirement. On that basis the statutory immunity from penalty under section 273B was held to apply and the penalty under section 271A was deleted.Penalty under section 271A for assessment years 1998-99 to 2001-02 deleted as reasonable cause under section 273B established.Deemed concealment under Explanation 3 to section 271(1)(c) for failure to furnish return in response to section 148 - penalty under section 271(1)(c) for concealment of income - Whether penalty under section 271(1)(c) for assessment years 1995-96 to 2001-02 is justified where the assessee failed to furnish return in response to notice under section 148 and assessed income exceeded returned income - HELD THAT: - The Tribunal noted that the assessee did not furnish returns in response to notices issued under section 148. Explanation 3 to section 271(1)(c) provides that where a person fails, without reasonable cause, to furnish within the specified period a return required under section 139 and no prior notice under section 142(i) or section 148 was issued, but a notice under section 148 is subsequently issued and the Assessing Officer is satisfied that the person had taxable income, the person shall be deemed to have concealed particulars of income. The assessment in the present cases was made on information collected from shops and banks and resulted in assessed income exceeding the income returned. In view of the failure to file returns under section 148 and the Tribunal's assessment showing taxable income in excess of returned income, the deemed concealment provision applied. The Commissioner (Appeals) had, however, restricted the penalty to the minimum amount prescribed under section 271(1)(c), and the Tribunal found no infirmity in that exercise of discretion.Penalty under section 271(1)(c) for assessment years 1995-96 to 2001-02 upheld, subject to the minimum penalty as fixed by the Commissioner (Appeals).Final Conclusion: The Tribunal allowed appeals against penalty under section 271A for assessment years 1998-99 to 2001-02 and deleted the penalty on the basis of reasonable cause and section 273B; appeals against penalty under section 271(1)(c) for assessment years 1995-96 to 2001-02 were dismissed, confirming the imposition of penalty but as restricted to the minimum amount by the Commissioner (Appeals). Issues:1. Penalty under section 271A for assessment years 1998-99 to 2001-02.2. Penalty under section 271(1)(c) for assessment years 1995-96 to 2001-02.Penalty under section 271A:The case involved appeals against penalties under sections 271A and 271(1)(c) for different assessment years. The assessee, a poultry farmer in a remote village, argued the non-maintenance of books of account was due to reasonable cause as it was challenging to find an accountant in the village. The Departmental representative contended that exceeding income of Rs. 25,000 required maintaining books of account as per section 44AA. The Tribunal acknowledged the difficulty in finding an accountant in a remote village but emphasized the obligation to maintain books of account. However, considering the remote village's circumstances and the nature of the poultry farming business, the Tribunal found a reasonable cause for non-maintenance of books of account. Consequently, the penalty under section 271A was deleted.Penalty under section 271(1)(c):Regarding penalties under section 271(1)(c) for earlier assessment years, the assessee claimed there was a reasonable cause as the Assessing Officer's additions were reduced by the Tribunal. The Departmental representative argued that the assessee did not disclose correct income and failed to file a return after a notice under section 148. The Tribunal noted the failure to furnish a return post-notice under section 148 and the deemed concealment under section 271(1)(c). The assessment was based on material from shops and banks, resulting in assessed income exceeding the income returned. The Tribunal upheld the penalty as the Commissioner had already reduced it to the minimum prescribed under section 271(1)(c). Consequently, the order of the lower authority was confirmed.In conclusion, the penalty under section 271A was deleted due to a reasonable cause for non-maintenance of books of account in a remote village, while the penalty under section 271(1)(c) was upheld as the failure to file a return post-notice resulted in deemed concealment. The Tribunal allowed some appeals and dismissed others based on the detailed analysis of the issues involved in the case.