Appeal succeeds: Penalty under Income-tax Act removed due to commission income misunderstanding, not sales turnover.

The Tribunal allowed the appeal, setting aside the penalty under section 271B of the Income-tax Act, 1961. It concluded that the assessee's income was commission-based, not sales turnover, and accepted the genuine belief that an audit was unnecessary. The penalty was deleted, emphasizing the distinction between commission income and sales turnover.

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Issues involved:
Penalty under section 271B of the Income-tax Act, 1961 for failure to get accounts audited under section 44AB.

Analysis:
The appeal was against the order confirming the penalty under section 271B imposed by the Assessing Officer (AO) for the assessment year 2017-18. The grounds of appeal raised by the assessee mainly focused on the errors in law and facts made by the ld. CIT (Appeals) in upholding the penalty. The primary contention was that the deposited cash into the current account and transactions with Mother Dairy should not have been considered as part of sales consideration for the tax audit requirement under section 44AB. The assessee argued that the income earned was only commission income, not sales turnover. The appeal challenged the penalty amount and cited case law to support the argument against the penalty.

The case involved the assessee earning commission from selling products of Mother Dairy. The AO noted significant cash deposits made by the assessee in the bank, which led to the conclusion that the sales turnover exceeded the limit requiring audit under section 44AB. The penalty under section 271B was imposed by the AO based on this finding. The ld. CIT (A) upheld the penalty, emphasizing that the turnover from sales exceeded the prescribed limit for audit, and the appellant had acknowledged getting the accounts audited in the subsequent assessment year. The ld. CIT (A) found the explanation of the appellant contradictory and upheld the penalty based on the turnover exceeding Rs. 1 crore during the relevant assessment year.

During the appeal before the Tribunal, the assessee reiterated that the income was solely from commission and not from sales turnover. The counsel argued that the assessee believed the sales belonged to Mother Dairy and thus did not get the accounts audited. The Tribunal, after considering the submissions, found merit in the assessee's arguments. It was established that the income was commission-based, and the deposits were on behalf of Mother Dairy. The Tribunal accepted that the assessee was under a genuine belief that accounts audit was unnecessary as the transactions were attributed to Mother Dairy. Consequently, the Tribunal set aside the penalty imposed under section 271B.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the commission income was distinct from sales turnover and that the assessee's belief regarding the audit requirement was reasonable. The penalty under section 271B was deleted based on the genuine belief of the assessee regarding the nature of income and transactions.

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