2003 (10) TMI 274 - AT - Income Tax

Tribunal Overturns Penalties for Non-Audit; Delays in Seized Documents Justify Relief for Assessees Under Income Tax Law.

Brij Lal Goyal. Versus Assistant Commissioner Of Income-Tax.

Brij Lal Goyal. Versus Assistant Commissioner Of Income-Tax. - ITD 088, 413, TTJ 090, 266, Issues Involved: Imposition of penalty u/s 271B for failure to audit accounts as required u/s 44AB of the Income Tax Act.Summary:In the case before the Appellate Tribunal ITAT DELHI-D, the common issue revolved around the imposition of penalties under section 271B for the failure of the assessee to have their accounts audited as mandated by section 44AB of the Income Tax Act. The Tribunal consolidated three appeals for convenience, all related to penalties confirmed by the ld. CIT(A).For the assessment year 1995-96, penalties were confirmed for two assessees, Shri Brij Lal Goyal and Shri I.S. Goyal, based on additional sales not reflected in their regular books of account. The Assessing Officer found that the turnover exceeded the threshold requiring audit under section 44AB, leading to the imposition of penalties.The ld. CIT(A) upheld the penalties, emphasizing that the law does not permit keeping duplicate or non-regular accounts, and all records related to business transactions must be included in the audit. The failure to disclose additional sales did not absolve the assessees from the audit requirement under section 44AB.Regarding the question of reasonable cause, the ld. CIT(A) rejected the argument that the voluntary disclosure of sales constituted a valid reason for non-compliance. Illegal intentions could not justify non-compliance with legal provisions, leading to the affirmation of the penalties.In analyzing the legislative intent behind Explanation 5 to section 271(1)(c) of the Act, the Tribunal considered the definition of 'books of account' crucial for granting immunity from penalties. Only credible accounting records maintained for income sources qualify for immunity, emphasizing the importance of regular and authentic bookkeeping practices.The Tribunal concluded that the additional sales not recorded in the regular books of account did not constitute grounds for penalty imposition, especially when the seized documents were not provided to the assessee promptly. Citing relevant case law, the Tribunal found no basis for penalties in the assessed years, leading to the allowance of all three appeals.In summary, the Tribunal ruled in favor of the assessees, highlighting the importance of maintaining regular and credible books of account for tax compliance and penalty immunity under the Income Tax Act.