ITAT PANAJI: Assessee Wins Appeal Against Penalty for Understated Turnover

The Appellate Tribunal ITAT PANAJI allowed the Assessee's appeal against the penalty imposed under Sec. 271B for A.Y 2007-08 and A.Y 2008-09. The Tribunal found the Assessee's belief that turnover was below Rs. 40 lacs to be bona fide, as the income was primarily from commission on transportation and no fraudulent activity was detected. Distinguishing the case from previous instances involving fraudulent activities, the Tribunal concluded that the penalty was unjustified. As a result, the penalty imposed by the AO was deleted, and the Assessee's appeals were upheld.

---

---

Issues:
Appeal against levy of penalty u/s 271B for A.Y 2007-08 and A.Y 2008-09.

Analysis:
The Assessee, a booking agent for transportation of goods, challenged the penalty u/s 271B. The Assessee's gross receipts and commission income were detailed for both years. The Assessee maintained a separate 'Freight payable' account for total freight received and paid to truck operators. The Assessee argued that since its turnover was below Rs. 40 lacs and only commission income was accounted for, no audit was required. The AO included the 'Freight payable' account, alleging a violation of Sec. 44AB. The Assessee contended that the penalty should be deleted as turnover didn't exceed Rs. 40 lacs.

The Tribunal noted the Assessee's income was primarily from commission on transportation. The penalty u/s 271B requires a reasonable cause, subject to Sec. 273B. The Assessee demonstrated accounting only for commission income and maintained a separate 'Freight payable' account. No fraudulent activity was found in the books. The Assessee's belief that turnover was below Rs. 40 lacs was deemed bona fide, justifying no penalty under Sec. 271B.

Regarding the comparison to a prior case involving accommodation entries, the Tribunal distinguished the Assessee's case. In the previous case, fraudulent activities were evident, unlike the present scenario. As the Assessee was not involved in accommodation entry business, the penalty u/s 271B was unjustified. Consequently, the penalty imposed by the AO and upheld by the CIT(A) was deleted, and the Assessee's appeals were allowed.

The judgment was delivered on 18/06/2015 by the Appellate Tribunal ITAT PANAJI, with detailed arguments from both parties and a thorough analysis of the Assessee's case, ultimately leading to the deletion of the penalty under Sec. 271B for the relevant assessment years.

---