Tribunal cancels penalty under section 271B of Income Tax Act for lack of audit requirement

The Tribunal set aside the CIT(A)'s decision confirming the penalty imposed by the AO under section 271B of the Income Tax Act. It was determined that since the assessee did not maintain any books of accounts, there was no requirement for audit, and therefore, the penalty was not justified. The Tribunal relied on a previous decision and canceled the penalty, ultimately allowing the appeal of the assessee.

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Issues:
Whether CIT(A) was justified in confirming the penalty imposed by AO u/s 271B of the Income Tax Act.

Analysis:
The appeal was filed against the order passed by CIT(A)-14, Kolkata for AY 2013-14. The only issue to be decided was the justification of confirming the penalty imposed under section 271B of the Act. The assessee, engaged in the trading of Iron and Steel, declared a total income of Rs. 3,86,050. The AO determined the income at Rs. 8,06,820 under section 143(3) of the Act. The penalty proceedings were initiated by the AO as the assessee admitted to not maintaining any books of accounts. The total sales shown by the assessee were Rs. 10,75,76,516, exceeding the limit requiring audit under section 44AB of the Act.

The argument put forth by the Ld.AR was that since no books were maintained, there was no requirement for audit, and thus, no penalty should be imposed under section 271B. The Ld.AR relied on the decision of the Hon’ble High Court of Allahabad in CIT vs Bisauli Tractors [2008] 299 ITR 219 (All.). On the other hand, the Ld. DR contended that maintaining books of accounts is a statutory obligation, and hence, the penalty under section 271B was justified.

The Tribunal observed that the AO confirmed that no books were maintained by the assessee, making it necessary to impose a penalty under section 271B for failing to get accounts audited. The Tribunal agreed with the arguments presented by the Ld.AR and referred to the decision of the Hon’ble High Court of Allahabad in the case of CIT vs Bisauli Tractors. The Tribunal concluded that when no books were maintained, there was no requirement for audit, and hence, the penalty under section 271B was not maintainable. Therefore, the order of CIT(A) confirming the penalty was set aside, and the penalty imposed by the AO under section 271B was canceled. Consequently, the appeal of the assessee was allowed.

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