2020 (4) TMI 258 - AT - Income Tax

ITAT Jaipur Upholds Penalty for Non-Maintenance of Books of Account

The Appellate Tribunal ITAT Jaipur upheld the penalty of Rs. 25,000 under section 271A for Assessment Year 2011-12, as the assessee failed to maintain ... Penalty under section 271A for failure to maintain books as required by section 44AA - Penalty under section 271B for failure to get accounts audited under section 44AB - Doctrine that penalty under section 271B is not sustainable where default under section 44AA (non-maintenance of books) makes audit impossiblePenalty under section 271A for failure to maintain books as required by section 44AA - Confirmation of penalty under section 271A for non-maintenance of books of account - HELD THAT: - The AO found that the assessee's gross receipts from business exceeded the threshold requiring maintenance of books under section 44AA, that no books were maintained and that the assessee failed to show any reasonable cause for non-maintenance. The CIT(A) upheld the AO's conclusion that the assessee was liable for penalty under section 271A read with section 274. On appeal before the Tribunal the assessee's authorised representative did not advance any contrary arguments. Applying the material on record and the findings of the lower authorities, the Tribunal found no reason to interfere with the confirmation of the penalty under section 271A and sustained the CIT(A)'s order. [Paras 2]Penalty under section 271A of the Act confirmed.Penalty under section 271B for failure to get accounts audited under section 44AB - Doctrine that penalty under section 271B is not sustainable where default under section 44AA (non-maintenance of books) makes audit impossible - Deletion of penalty under section 271B where books were not maintained and audit was therefore impossible - HELD THAT: - The AO imposed penalty under section 271B for failure to get accounts audited, rejecting the assessee's claim that a large part of the turnover comprised non-delivery speculative transactions because supporting evidence was not produced. The assessee relied on a coordinate-bench decision which held that once penalty is levied under section 271A for non-maintenance of books (section 44AA), a further penalty under section 271B for non-audit (section 44AB) cannot stand because audit of non-existent books is impossible. Respectfully following the coordinate-bench decision in Roshni Devi v. ITO, the Tribunal directed deletion of the penalty under section 271B confirmed by the CIT(A). [Paras 3, 4]Penalty under section 271B of the Act deleted.Final Conclusion: For Assessment Year 2011-12 the Tribunal upheld the penalty imposed under section 271A for failure to maintain books, and deleted the penalty under section 271B on the ground that audit penalty cannot be sustained where books were not maintained; appeals disposed accordingly with no order as to costs. Issues:1. Confirmation of penalty u/s 271A for Assessment Year 2011-12.2. Confirmation of penalty u/s 271B for Assessment Year 2011-12.Issue 1: Confirmation of Penalty u/s 271A for Assessment Year 2011-12:The Appellate Tribunal ITAT Jaipur dealt with the appeal filed by the assessee against the order of the ld. CIT(A) confirming the penalty u/s 271A of the I.T. Act, 1961. The AO imposed a penalty of Rs. 25,000 under section 271A, stating that the assessee willfully avoided maintaining books of account necessary for income computation. The ld. CIT(A) upheld this penalty, emphasizing that the gross receipts exceeded Rs. 10 lakhs, mandating book maintenance under Section 44A. The assessee failed to provide a reasonable cause for non-compliance. The Tribunal noted the absence of maintained books of account for gross receipts over Rs. 10 lakhs, leading to the confirmation of the penalty by the ld. CIT(A). The Tribunal found no grounds to interfere with the ld. CIT(A)'s decision, thus sustaining the penalty of Rs. 25,000 under section 271A.Issue 2: Confirmation of Penalty u/s 271B for Assessment Year 2011-12:Regarding the penalty u/s 271B for the same assessment year, the ld. CIT(A) confirmed a penalty of Rs. 1,50,000 imposed by the AO. The AO determined the turnover in trading of shares at Rs. 3,13,27,893, with the appellant claiming only Rs. 59,61,001 as turnover. The appellant failed to provide evidence supporting the claim that a significant portion of the turnover was non-delivery based. As the appellant did not get the accounts audited under section 44AB and failed to show a reasonable cause for not doing so, the penalty of Rs. 1,50,000 under section 271B was upheld. The Tribunal considered a similar case decided by the ITAT Coordinate Bench, where the penalty under section 271B was deleted due to non-maintenance of books of accounts. Following the precedent, the Tribunal directed the AO to delete the penalty of Rs. 1,50,000. Consequently, the penalty under section 271B was allowed, overturning the ld. CIT(A)'s decision.In conclusion, the Appellate Tribunal ITAT Jaipur dismissed the appeal against the penalty u/s 271A but allowed the appeal against the penalty u/s 271B for Assessment Year 2011-12. The judgment was pronounced on 23/01/2020.