2023 (4) TMI 848 - AT - Income Tax

Tribunal overturns penalty for non-furnishing audit report due to lack of maintained books of account

The Tribunal allowed the appeal, deleting the penalty of Rs.1,50,000 imposed under section 271B of the Income Tax Act. The Tribunal found that as the ... Penalty imposed u/s 271B - Failure to get books of account audited - Assessee not maintained books of accounts - HELD THAT:- As decided in the case of CIT v. Bisauli Tractors [2007 (5) TMI 181 - ALLAHABAD HIGH COURT] wherein it is held that if a person is not maintained books of account, the question of audit does not arise. imposition of penalty u/s 271A of the I.T.Act for alleged non-compliance with section 44AA of the I.T.Act may arise but the provisions of section 44AB of the I.T.Act do not get violated in a case where accounts have not been maintained at all. Therefore, it was concluded by the Hon’ble Allahabad High Court [2007 (5) TMI 181 - ALLAHABAD HIGH COURT] that the penal provisions of section 271B of the I.T. Act would not apply. In the instant case as mentioned earlier, admittedly, the assessee has not maintained books of account, penalty imposed u/s 271B of the I.T. Act for non-furnishing of audit report does not arise. Therefore, we delete the penalty imposed u/s 271B of the I.T. Act. Appeal filed by the assessee is allowed. Issues:The judgment involves the issue of confirming penalty imposed under section 271B of the Income Tax Act.Summary:The appeal was directed against the CIT(A)'s order confirming a penalty of Rs.1,50,000 imposed under section 271B of the Income Tax Act. The assessee, an individual and distributor of a cable TV network, failed to get his books of account audited, leading to the penalty. The CIT(A) confirmed the penalty in an ex parte order as the assessee did not appear. The Tribunal proceeded with the matter in the absence of the assessee and heard the Departmental Representative. The Tribunal found that since the assessee did not maintain books of account, the penalty under section 271B for non-furnishing of an audit report was not justified.The Tribunal referred to a case where it was held that when an assessee is liable to pay penalty under section 271A for not maintaining books of account, penalty under section 271B cannot be imposed for non-furnishing of an audit report. Another case highlighted that if an individual has not maintained books of account, the penalty under section 271B does not apply. Therefore, in the present case, since the assessee did not maintain books of account, the penalty under section 271B was deleted. Consequently, the appeal filed by the assessee was allowed.The judgment was pronounced on March 30, 2023.