Tribunal rules auditing not needed for unaccounted sales, penalty unjustified.

Nirmal Kumar Joshi C/o Rajasthan Marble And Shri Krishan Murari Agarwal Versus ITO, Ward-1, Kishangarh

Nirmal Kumar Joshi C/o Rajasthan Marble And Shri Krishan Murari Agarwal Versus ITO, Ward-1, Kishangarh - TMI Issues Involved:
1. Levy of penalty under section 271B of the Income Tax Act for not getting accounts audited as required under section 44AB.
2. Applicability of section 44AD and its impact on the requirement to maintain and audit books of accounts.
3. Consideration of unaccounted sales and its effect on the total turnover threshold for audit under section 44AB.

Detailed Analysis:

1. Levy of Penalty under Section 271B:
The primary issue was whether the assessee was liable for a penalty under section 271B for failing to get accounts audited when the total turnover exceeded the threshold of Rs. 60 lakhs. The Assessing Officer (AO) found that the assessee's total turnover, including unaccounted sales, exceeded the specified limit, and hence, the assessee was required to get the accounts audited. The AO initiated penalty proceedings and levied a penalty of Rs. 46,162, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].

2. Applicability of Section 44AD:
The assessee argued that they declared income under section 44AD, which exempts them from maintaining and auditing books of accounts if the net profit is above 8% of the turnover. Section 44AD provides a presumptive taxation scheme for small businesses, where maintaining books of accounts and getting them audited is not required if the conditions are met. The Tribunal noted that the AO accepted the income under section 44AD, implying the assessee was eligible for presumptive taxation.

3. Unaccounted Sales and Audit Requirement:
The AO included unaccounted sales discovered during a survey in the total turnover, which pushed it above the Rs. 60 lakh threshold. The Tribunal observed that the unaccounted sales were not part of the regular books of accounts and were discovered through third-party statements and bank records. The Tribunal held that unaccounted sales, not recorded in regular books, do not necessitate an audit under section 44AB. The Tribunal referred to judicial precedents, emphasizing that only books maintained in the regular course of business require auditing.

Conclusion:
The Tribunal concluded that since the assessee's declared income under section 44AD was accepted, and the unaccounted sales were not part of the regular books, the requirement to audit the accounts under section 44AB did not arise. Consequently, the penalty under section 271B was not justified. The appeals were allowed, and the penalties were deleted.

Order Pronounced:
The Tribunal pronounced the order in the open court on 27/03/2018, allowing both appeals of the respective assessees.