2021 (12) TMI 1257

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....hows that assessee is an individual engaged in the business of construction and maintaining the books of account following the project completion method. She filed her return of income on 28/03/2014 at a loss of Rs. 1,43,705/-. During the course of assessment proceedings, the learned assessing officer made a disallowance of Rs. 1 crore on estimate basis where assessee failed to prove the correctness of work-in-progress. He further disallowed a sum of Rs. 10,20,00,000/- being compensation paid to other party. Thus, the work-in-progress shown by the assessee of Rs. 14.99 crores was reduced to Rs. 3.79 crores. The assessment order was framed under section 143(3) of the Act on 31/03/2015 at the returned income / loss. 3. However, the learned....

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....he assessee, aggrieved by the order of the learned assessing officer, preferred appeal before the learned Commissioner of Income-tax (Appeals), who confirmed the penalty. Therefore, the assessee is aggrieved and has preferred this appeal. 7. The learned authorised representative reiterated the submissions made before the lower authorities. He stated that the assessee is following project completion method and does not have any sales during the year. Therefore, there is no turnover or gross receipts and all the expenditure are shown as work-in-progress; therefore, assessee was under a bonafide belief that tax audit was not required to be carried out. He supported his statement showing the profit & loss account for the year ended on 31/03/....

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....sessee are shown as work-in-progress. The advances received for the sale of property from the customers is disclosed as advances and no sale has been made during the year. In view of the above facts, assessee pleaded that there is no gross receipt exceeding the prescribed limit for which tax audit under section 44AB of the Act is required to be done. The assessee also submitted that there is no sales made during the year. Therefore, assessee was under a bona fide belief that if there is no sales turnover or gross receipts in the profit & loss account, then it is not required to obtain tax audit report under section 44AB of the Act. During the year assessee has only received the advances against sale of property. Because of this, as there wa....

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....ovisions of section 44AB of the Act does not apply and hence, no audit under section 44AB of the Act was got done. We find that this is a reasonable cause which has resulted into failure of the assessee to comply with the law. In view of this, we find that penalty under section 271B of the Act cannot be levied for the reason that there was a failure on the part of the assessee to obtain tax audit report because of a bonafide belief that there is no turnover, gross receipts, etc. The revenue could not show that the belief of the assessee was malafide. The judicial precedents cited by the learned departmental representative has given a reason that in case of project completion method, the assessing officer will not have any opportunity to ver....