Penalty under Section 271B vacated for lack of books of accounts, turnover recalculated based on accounting principles.

The tribunal held that the penalty under Section 271B was unjustified as the assessee did not maintain books of accounts. It found the show cause notice invalid and the AO's order based on a non-existent explanation to Section 271B. The turnover calculation was directed to adhere to basic accounting principles. Consequently, the appeal was allowed, and the penalty under Section 271B was vacated.

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Issues Involved:
1. Imposition of penalty under Section 271B for not getting books audited.
2. Validity of jurisdiction assumed by the Assessing Officer (AO) based on an invalid show cause notice.
3. Allegation of default under an explanation to Section 271B that does not exist.
4. Consideration of adjournment application by CIT(A).
5. Calculation of turnover based on basic accounting principles.

Detailed Analysis:

1. Imposition of Penalty under Section 271B:
The primary issue revolves around the imposition of a penalty under Section 271B for not getting the books audited. The assessee argued that since no books of accounts were maintained, the penalty under Section 271B should not be applicable. The tribunal noted that the AO had already levied a penalty under Section 271A for failure to maintain books of accounts. It was held that once it is established that the assessee did not maintain books, the question of getting them audited does not arise. This position is supported by various legal precedents, including the jurisdictional ITAT, Jaipur in the case of Shahnaz Khanam, and the Allahabad High Court in CIT vs. S.K. Gupta and Co., which held that if no books are maintained, the penalty under Section 271B is not justified.

2. Validity of Jurisdiction Based on an Invalid Show Cause Notice:
The assessee contended that the AO assumed jurisdiction and imposed a penalty on the basis of an invalid show cause notice dated 01.04.2021, which did not specify the actual charge. Additionally, an alleged show cause notice dated 19.12.2019 was never served. The tribunal observed that no notice was uploaded on the portal, and no manual notice was served. The tribunal cited judicial pronouncements, including the Guwahati bench of ITAT in North Eastern Constructions vs. The ITO, and the Supreme Court in CIT vs. SSA's Emerald Meadows, which held that penalty cannot be levied based on a vague show cause notice.

3. Allegation of Default Under Non-Existent Explanation to Section 271B:
The assessee argued that the AO passed the order based on an allegation that the assessee committed a default within the meaning of an explanation to Section 271B, which does not exist in law. The tribunal noted that the AO's order was based on a non-existent explanation, rendering the order void ab initio.

4. Consideration of Adjournment Application by CIT(A):
This ground was not pressed by the appellant and thus was not considered in detail by the tribunal.

5. Calculation of Turnover Based on Basic Accounting Principles:
The assessee argued that the AO disregarded and misinterpreted basic accounting principles for calculating turnover. The tribunal noted that the turnover for trading in securities should be calculated based on the guidance note issued by ICAI, which includes the summation of positive and negative differences for intra-day transactions. The AO's calculation of turnover at Rs. 1,59,27,862 was found to be arbitrary. The tribunal directed that the turnover should be recalculated as per basic accounting principles, considering the broker's statements indicating a turnover of Rs. 47,203.51 for F&O and Rs. 65,66,786.50 for commodity trading.

Conclusion:
The tribunal concluded that the penalty under Section 271B was not justified as the assessee did not maintain books of accounts. The tribunal also found the show cause notice to be invalid and the AO's order based on a non-existent explanation to Section 271B. The calculation of turnover was directed to be done as per basic accounting principles. The appeal of the assessee was allowed, and the penalty under Section 271B was vacated.

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