Penalty u/s 271B Reversed: Tribunal Rules Unaccounted Turnover Not for Audit, Deletes CIT(A) Order.

The ITAT allowed the appeal, determining that the penalty under Section 271B was unjustified. The Tribunal concluded that the turnover declared by the assessee did not exceed the threshold under Section 44AB, and unaccounted turnover discovered during assessment should not be included for audit requirements. Consequently, the penalty was deleted, and the CIT(A)'s order was set aside.

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Issues Involved:
1. Confirmation of penalty under Section 271B of the Income Tax Act.
2. Determination of turnover for the purpose of Section 44AB of the Income Tax Act.
3. Treatment of unaccounted turnover in assessing the applicability of Section 44AB.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty under Section 271B of the Income Tax Act:
The primary issue in the appeal was whether the penalty of Rs. 35,830 levied under Section 271B for not getting accounts audited as per Section 44AB was justified. The Commissioner of Income Tax (Appeals) confirmed the penalty, stating that the gross receipts of the assessee exceeded the prescribed limit under Section 44AB, making the audit mandatory. The CIT(A) rejected the appellant's contention that penalty under Section 271B could not be levied if books of account were not maintained, emphasizing that the provisions of Sections 44AB and 44AA are distinct and separate.

2. Determination of Turnover for the Purpose of Section 44AB:
The assessee argued that the actual turnover was Rs. 21,66,291, which did not necessitate a tax audit under Section 44AB. The Assessing Officer (AO) included an unaccounted turnover of Rs. 49,48,900, treating it as unexplained turnover and thereby increasing the total turnover beyond the threshold limit for mandatory audit. The assessee contended that the income from commission (1% of the alleged deposits) was already offered to tax, and thus, the turnover should not include the unaccounted amount.

3. Treatment of Unaccounted Turnover in Assessing the Applicability of Section 44AB:
The Tribunal examined whether the unaccounted turnover should be included in the total turnover for the purpose of Section 44AB. The Tribunal noted that the assessee was under a bona fide belief that the commission income was part of the turnover, and the actual turnover was below the limit specified under Section 44AB. The Tribunal referenced several decisions, including the case of Shri Satya Prakash Mundra vs. ITO, where it was held that unaccounted turnover found during assessment proceedings should not be considered for the purpose of Section 44AB if it was not part of the regular books of account maintained by the assessee.

Judgment:
The Tribunal concluded that the issue was covered in favor of the assessee by the decision of the Coordinate Bench in Shri Satya Prakash Mundra vs. ITO. It was observed that the turnover declared by the assessee in the books of account did not exceed the limit prescribed under Section 44AB, and the unaccounted turnover found during assessment should not be considered for the purpose of audit requirements. Consequently, the penalty levied under Section 271B was deemed unjustified and was deleted. The appeal of the assessee was allowed, and the order of the CIT(A) confirming the penalty was set aside.

Conclusion:
The Tribunal allowed the appeal, holding that the penalty under Section 271B was not applicable as the turnover declared by the assessee did not exceed the prescribed limit under Section 44AB. The unaccounted turnover found during assessment proceedings was not to be considered for the purpose of determining the applicability of Section 44AB. The order was pronounced in the open court on 31.10.2019.

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