2024 (5) TMI 437 - AT - Income Tax

Section 271B penalty invalid when books not maintained before income tax return due date

Shri Jaydev Bavalal Thummar, “Nijanand” Versus I.T.O, Ward-3 (1) (2), Rajkot

The ITAT Rajkot held that penalty under section 271B for non-audit of accounts cannot be imposed when books of accounts were not maintained within the due ... Penalty levied u/s 271B - not getting accounts Audited within the due date specified u/s 44AB - books of accounts were not written up (maintained) within the due date of filing the return of income, thus as argued there was no possibility of getting the accounts audited u/s 44AB - HELD THAT:- Once it is established that the books of accounts were not written up within the due date of filing the return of income, the question of getting them audited to comply the provision of section 44AB of the Act, does not arise. As such the first default of the assessee on stand-alone basis is non-maintenance of books of account u/s 44AA of the Act which is complete offence. As decided in the case of Surajmal Pursuram todi 1996 (8) TMI 102 - GAUHATI HIGH COURT] Maintenance of accounts is envisaged under section 44AA and on failure to do so the assessee shall be guilty and liable to be penalised under section 271A. Even after maintenance of books of account the obligation of the assessee does not come to an end. He is required to do something more, i.e., by getting the books of account audited by an accountant. But when a person commits an offence by not maintaining the books of account as contemplated by section 44AA the offence is complete. After that there can be no possibility of any offence as contemplated by section 44AB and, therefore, in our opinion, the imposition of penalty under section 271B is erroneous. DR has not brought any concrete evidence justifying that the books of accounts of the assessee were written up before the due date of filing written of income and therefore the assessee has contravened the provisions of section 44AB of the Act. - Decided in favour of assessee. Issues involved:The judgment involves appeals by the Assessee against penalty orders passed under section 271B of the Income Tax Act, 1961 for the Assessment Years 2009-2010 and 2010-2011.For AY 2009-2010:The Assessee contended that the penalty levied under section 271B was erroneous as there was a bona-fide reason for not getting accounts audited within the due date specified under section 44AB of the Act. The Assessee argued that non-maintenance of books of accounts under section 44AA was the first offence, making the penalty under section 271B unjustified. The Department cited case laws to support the penalty imposition. The Tribunal found that the books of accounts were not written up before the due date of filing the return of income, thus the question of getting them audited did not arise. Referring to relevant case laws, the Tribunal held that the Assessee could not be penalized under section 271B as the offence of non-maintenance of accounts was complete under section 44AA, and the penalty under section 271B was not applicable.For AY 2010-2011:The issue raised by the Assessee was identical to that of AY 2009-2010. The Tribunal applied the findings of the earlier year to AY 2010-2011, ruling in favor of the Assessee. Both the Assessee's appeals for the respective years were allowed.Conclusion:The Tribunal allowed both appeals by the Assessee against the penalty orders for AY 2009-2010 and AY 2010-2011, based on the finding that the penalty under section 271B was not justified due to the complete offence of non-maintenance of accounts under section 44AA. The Tribunal held that the Assessee could not be penalized for not getting accounts audited under section 271B in the given factual circumstances.