Penalty under section 271B cannot be imposed when books of accounts were not maintained before due date under section 139(1)

ITAT Rajkot held that penalty under section 271B for non-audit of books cannot be imposed when books of accounts were not maintained before the due date under section 139(1). The assessee filed return only after notice under section 148. Since books were written up after the due date, the primary default was non-maintenance under section 44AA, attracting penalty under section 271A, not section 271B. The tribunal ruled that audit provisions under section 44AB cannot be violated when accounts were not maintained at all. Appeal decided in favor of assessee.

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Issues:
Appeals against penalty order under section 271B of the Income Tax Act, 1961 for Assessment Years 2011-2012 & 2012-13.

Analysis:
1. The first appeal, ITA No. 57/RJT/2023, challenged the penalty imposed under section 271B for AY 2009-10. The assessee contended that non-maintenance of books of accounts under section 44AA precludes penalty under section 44AB. The Revenue argued that the assessee submitted accounts during assessment, thus differentiating the case from precedents. The Revenue cited case laws to support penalty imposition.
2. The tribunal noted that the assessee didn't file a return under section 139(1) but after a notice under section 148, indicating non-maintenance of accounts before the due date. The tribunal referenced the Guwahati High Court's ruling that failure to maintain accounts under section 44AA precludes section 44AB penalties. Similarly, the Allahabad High Court held that penalty under section 271B doesn't apply if accounts weren't maintained, focusing on section 271A4. The tribunal concluded that the penalty couldn't be imposed due to non-compliance with section 44AB.
3. In the second appeal, ITA No. 58/RJT/2023 for AY 2012-13, the issue mirrored the first appeal. The tribunal applied the findings from the earlier appeal, leading to the allowance of the second appeal.
4. The tribunal ruled in favor of the assessee in both appeals, emphasizing the non-maintenance of accounts before the due date as the crucial factor in determining penalty applicability under section 271B. The judgments of the Guwahati and Allahabad High Courts were pivotal in establishing the assessee's immunity from penalty due to non-compliance with section 44AB.

This detailed analysis of the judgment highlights the key legal arguments, precedents, and the tribunal's reasoning in deciding the appeals against the penalty orders.

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