2018 (4) TMI 791 - AT - Income Tax

Tribunal directs AO to verify assessee's claim, assess penalties within limits, based on legal precedents

Rajesh Agarwal Versus ITO Ward 36 (1) Kolkata

The Tribunal allowed the appeals for statistical purposes, directing the Assessing Officer to verify the assessee's claim regarding the non-maintenance of ... Penalty u/s 271B - assessee had failed to get his books of account audited before the due date as required by section 44AB - not maintained regular books of accounts - Held that:- As rightly pointed out by the DR from the relevant provisions of section 44AB, every person carrying on business is required to get his accounts audited if his total sales turnover or gross receipts, as the case may be, in business exceeds ₹ 40,00,000/- upto A.Y. 2010-11. What is relevant for the purpose of application of section 44AB is the actual gross receipts or turnover of the business of the assessee for the relevant year and not the turnover as declared by the assessee in his returns of income filed under section 139(1). In the present case, the gross receipts or turnover of the business of the assessee for all the four years under consideration was found to be actually more than the limit of ₹ 40,00,000/- prescribed in section 44AB and the said quantum having been upheld even in appeal by the Tribunal, we are of the view that the provisions of section 44AB were clearly attracted going by the actual turnover or gross receipts of the assessee’s business. Restore this matter to the file of the A.O. with the direction to verify the claim of the assessee of having not maintained any regular books of account for all the four years under consideration from the relevant record and decide the issue in the light of the decision in the case of Suraj Mal Parasuram Todi (1996 (8) TMI 102 - GAUHATI High Court) and case of Bisauli Tractors (2007 (5) TMI 181 - ALLAHABAD HIGH COURT). A.O. is also directed to verify another contention raised by the learned counsel for the assessee that the penalties of ₹ 1,47,702/- and ₹ 1,35,820/- imposed for A.Y. 2008-09 and 2009-10 respectively are more than the maximum penalty of ₹ 1,00,000/- leviable for the said years and allow appropriate relief to the assessee accordingly. Issues Involved:1. Imposition of penalty under section 271B of the Income Tax Act, 1961 for failure to get accounts audited as required by section 44AB.2. Determination of actual gross receipts versus declared gross receipts.3. Maintenance of books of account by the assessee.4. Verification of the maximum penalty limit under section 271B.Detailed Analysis:1. Imposition of Penalty under Section 271B:The core issue in these appeals was the imposition of penalties under section 271B of the Income Tax Act, 1961, for the assessee's failure to get his accounts audited as mandated by section 44AB. The penalties were confirmed by the CIT(A) for all four assessment years (2007-08, 2008-09, 2009-10, and 2010-11).2. Determination of Actual Gross Receipts:The assessee originally filed returns declaring gross receipts below the threshold limit specified under section 44AB. However, during the assessment proceedings for A.Y. 2011-12, the A.O. discovered from Form 26AS that the actual gross receipts for the relevant years were higher than declared. Consequently, the assessments were reopened, and the revised gross receipts were determined to be Rs. 50,36,700/-, Rs. 2,95,40,582/-, Rs. 1,68,58,239/-, and Rs. 2,71,63,464/- for A.Y. 2007-08, 2008-09, 2009-10, and 2010-11, respectively. The Tribunal upheld these revised figures, thereby confirming that the provisions of section 44AB were applicable based on the actual gross receipts.3. Maintenance of Books of Account:The assessee contended that no regular books of account were maintained for the relevant years, and therefore, no penalty under section 271B should be imposed. The assessee relied on the decisions of the Hon'ble Gauhati High Court in Suraj Mal Parasuram Todi vs CIT and the Hon'ble Allahabad High Court in CIT vs Bisauli Tractors, which held that penalty under section 271B could not be imposed if no books of account were maintained. The A.O., however, noted that restructured books of account were maintained and rejected them under section 145(3), estimating the business income by applying a net profit rate. The Tribunal found that this contention required verification and directed the A.O. to verify the claim that no regular books of account were maintained.4. Verification of Maximum Penalty Limit:The assessee also raised the issue that the penalties imposed for A.Y. 2008-09 and 2009-10 exceeded the maximum penalty limit of Rs. 1,00,000/-. The Tribunal directed the A.O. to verify this contention and provide appropriate relief if the penalties indeed exceeded the statutory limit.Conclusion:The Tribunal allowed the appeals for statistical purposes, directing the A.O. to:- Verify the assessee's claim regarding the non-maintenance of regular books of account.- Assess the issue in light of relevant judicial precedents.- Verify and rectify any penalties exceeding the maximum limit prescribed under section 271B.Order Pronounced:The order was pronounced in the open court on 13th April 2018.