Books of account penalty under section 271A failed where business records were sufficient and no prescribed rule applied to assessees in business.

Penalty under section 271A was held unsustainable where a business assessee had furnished computation of income, statements of affairs, and details of assets and liabilities sufficient to enable computation of taxable income. The commentary notes that section 44AA requires maintenance of books and documents enabling assessment of total income, but the prescribed rules for business assessees had not been framed, while Rule 6F applied only to professionals. On those facts, the alleged failure to maintain books was not established, and the penalty was cancelled for both years.

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Issues: Whether penalty under section 271A of the Income-tax Act, 1961 was leviable for failure to maintain books of account under section 44AA of the Income-tax Act, 1961 in the case of an assessee carrying on business.

Analysis: The assessee had furnished computation of income, statements of affairs, details of assets and liabilities, and other records sufficient to enable computation of taxable income. Section 44AA requires maintenance of such books and documents as may enable the Assessing Officer to compute total income, while sub-section (3) empowers the Board to prescribe the books and documents to be maintained. For persons carrying on business, no prescribed rule had yet been framed, whereas Rule 6F applied only to persons deriving income from profession. Since adequate particulars were available and the statutory prescription for business assessees was absent, the default alleged for penalty purposes was not established on the facts.

Conclusion: Penalty under section 271A was not sustainable and was cancelled for both years, in favour of the assessee.

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