AI Drafter 
TaxTMI 
TaxTMI 
2018 (3) TMI 1523
X X X X Extracts X X X X
X X X X Extracts X X X X
.... through his proprietorship concern M/s Shree Sundar Marbles. In the original return of income, the assessee has disclosed a turnover of Rs. 48,98,269/- and has reported a net profit of Rs. 3,96,243/- in terms of section 44AD of the Act. A survey u/s 133A was conducted by the Investigation wing, Jaipur at the business premises of Shri Abhishek Kumawat on 18.01.2011. During the course of survey, it was noticed that Shri Abhishek Kumawat was maintaining bank accounts with PNB, Kishangarh where huge deposits have been found deposited. In the statement recorded during the survey operation, Shri Abhishek Kumawat stated that the amount credited in these bank accounts does not belong to him. He stated that many marble traders at Kishangarh are affecting sales of marble without recording the same in their books of accounts. This is being done either by selling the marbles totally without bills or by under invoicing. The sales consideration for such sales is received in cash which is not being recorded in their books of accounts. These traders have devised method of collecting cash through bank accounts of Shri Abhishek Kumawat. The cash used to be deposited at different stations of India i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd books of accounts were also rejected. It was submitted that during this period the monitory limit was Rs. 60 lacs and receipts were less than this amount. It was further submitted that the income was estimated on the basis of third party statement and records and the same cannot be basis for levy of penalty. Further, reliance was placed on the decision in case of Ram Prakash C. Puri vs. CIT (2001) 117 Taxman 154 (Pune) and CIT vs. Bisauli Tractors (2007) 165 Taxman 1 (All) for the proposition that no penalty u/s 271B can be levied where no books of accounts are maintained. The submissions so filed by the assessee were not found acceptable by the Assessing Officer. As per the Assessing Officer, on the basis of investigations carried out by the department and confronted to the assessee, it was noticed and accepted by the assessee that he was involved in the business of unaccounted sales through Shri Abhishek Kumawat the quantum of which works out to Rs. 4334064/- for the year under consideration apart from sales of Rs. 48,98,269/- declared in the return of income. It was held that the total receipts were more than Rs. 60 lacs and as per the provisions of section 44AB, the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ain the audit report and furnish the same before the specified date. In the written submission filed by the appellant, the assessee could not furnish any reasonable cause for not getting his accounts audited u/s 44AB. Hence, I am of the considered view that the AO was fully justified in levying penalty of Rs. 46,162/- u/s 271B of the I.T. Act. Accordingly, the penalty levied by the AO is hereby confirmed." 7. During the course of hearing, the ld. AR submitted that conditions precedent for invoking of Penalty is not met in the instant case. It is submitted that for levying of penalty u/s 271B for not getting the accounts audited, as per settled judicial pronouncement as has been discussed later on, the following two basic conditions which must be met: a. The assessee must have maintained the books of accounts as per section 44AA of the Act and b. The assessee must be required to get such accounts audited u/s 44AB of the Act If any one of such conditions is not met, then penalty u/s 271B of the Act cannot be levied. However, in the present case, both these conditions are not met as has been discussed below. 7.1 Assessee Declared Income u/s 44AD of the Act -....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by a new section 44AD. 21.2 The salient features of the new presumptive taxation scheme are as under: (a) The scheme is applicable to individuals, HUFs and partnership firms excluding Limited liability partnership firms. It is also not be applicable to an assessee who is availing deductions under sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading "C.-Deductions in respect of certain incomes" in the relevant assessment year. (b) The scheme is applicable for any business (excluding a business already covered under section 44AE) which has a maximum gross turnover/gross receipts of 40 lakhs. (c) The presumptive rate of income is prescribed at 8% of gross turnover/gross receipts. (d) An assessee opting for the above scheme is exempted from payment of advance tax related to such business under the current provisions of the Income-tax Act. (e) An assessee opting for the above scheme is exempted from maintenance of books of accounts related to such business as required under section 44AA of the Income-tax Act. (f) An assessee with turnover below Rs. 40 lakhs, who shows an income b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessing officer to compute total income of the assessee. Section 44AA: Maintenance of accounts by certain persons carrying on profession or business "-----(2) Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall,- ------------------------- (i) if his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds ten lakh rupees in any one of the three years immediately preceding the previous year; or (ii) where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed ten lakh rupees, during such previous year; or (iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AE or section 44BB or section 44BBB, as the case may be, and the assessee has claimed his inco....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... books maintained by the assessee, the same cannot be treated as books of accounts maintained for the purposes of section 44AA of the Act. Hence, there is no possibility of getting the same audited u/s 44AB of the Act and therefore, penalty u/s 271B could not be invoked. In such circumstances, there is impossibility to treat the same as books of accounts and even further get them audited as per provisions of section 44AB of the Act. 7.6 Independent Penalty Prescribed for Violation of Section 44AA & Section 44AB of the Act: We may submit that for violation of provisions of section 44AA of the Act, penalty is prescribed u/s 271A of the Act whereas for violation of section 44AB of the Act, penalty can be levied u/s 271B of the Act. But it is to be seen that section 44AB is dependent on section 44AA of the Act in so far as unless books of accounts are maintained as per provisions of section 44AA, question of audit of the same u/s 44AB would not arise. 7.7 Books of Accounts Not Maintained - Penalty Could be Levied u/s 271A of the Act - Section 271B Cannot Be Invoked: in view of the foregoing submission, we may submit that even if the assessee did not maintain any books of accou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the return of income filed under section 44AD of the Act and at the same time, has brought to tax the undisclosed business receipts of Rs. 43,34,064/- offered for taxation during the course of assessment proceedings. The AO has thus come to a conclusion that since the combined receipts exceed the prescribed threshold of Rs. 60 lacs, the assessee has failed to get his books of accounts audited. We find that by accepting the income offered under section 44AD(1), the AO has thus accepted the assessee's eligibility for presumptive basis of taxation under section 44AD. Once the said eligibility is accepted, if we read the provisions of section 44AD and in particular sub-section (5), it clearly provides that an eligible assessee who claims his income from the eligible business is below the presumptive rate of 8% of total turnover or gross receipts, he shall be required to maintain books of accounts and also get them audited and furnish a report as required under section 44AB of the Act. Therefore, only in a scenario, where such a claim is made by the assessee whereby he claims that his income to be lower than 8% of total turnover or gross receipts, he will be required to maintain books....