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TaxTMI 
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2023 (4) TMI 463
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....ed for being deleted. 2. On the facts and circumstances of the case, the Ld. AO grossly erred in assuming jurisdiction and hence imposing penalty upon the assessee on the basis of an invalid show cause notice dated 01.04.2021 which even did not specify the actual charge upon the assessee. Similarly, there was an alleged show cause notice dates 19.12.2019 which was never served upon the assessees on portal or otherwise. Hence, it is hereby prayed that in absence of proper jurisdictional notice, proceedings in pursuance thereof may kindly be declared void. 3. On the facts and circumstances of the case the Ld. CIT(A) has erred in approving the action of the Ld. AO where the Ld. AO passed the said order against the provisions of law by making allegation that assessee has committed default within the meaning of explanation to section 271B of the act whereas no such explanation exists in law. Thus the order passed on the basis of such false allegation is void ab initio and hence prayed for being quashed. 4. On the facts and circumstances of the case, the Ld. CIT(A) has erred in passing order without considering the adjournment application of the assessee and on the basis of assumpt....
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..../2019 income of Rs.1,50,000/- for AY 2012-13 and accordingly, notice u/s 143(2) & notice u/s 142(1) were issued. 3.1 During the course of assessment proceeding the ld. AO observed from the data available with him that the assessee has incurred loss of Rs. 39,03,160/- against which he has shown Rs. 39,99,567/- which is taken in multi commodity transaction and loss of Rs. 22,548/- in Future and Options (F&O) totaling to Rs. 40,22,115/- under the head income from business and profession. The report reveals total turnover of Rs. 1,59,27,862/- which is the total of Mark to Mark (MTM) value irrespective of minus or plus. Thus, ld. AO observed that the assessee is required to keep and maintain books of account u/s. 44AA and the total sales turnover is exceeding to the prescribed limit for getting the audited books of accounts by a chartered accountant u/s. 44AB. The ld. AO further noted that the assessee has neither kept and maintained books of account and evidence of maintenance of books of account has not been furnished for verification of the claims. Thus, the assessing officer has initiated penalty proceeding u/s. 271A as the assessee has failed to keep & maintain books of account u/....
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....he assessment proceedings vide order dated 19.12.2019 (Paper Book Page No. 1-14) in which income was assessed at Rs 150291.00 and also loss was assessed at Rs 3932885.00 from commodity and F&O trading. Further, loss of Rs 7177.00 was assessed on account of short term capital loss on account of trading in securities. The Ld. A.O also allegedly issued two show cause notices for imposing penalty under Section 271B (Paper Book Page 15 & Pages 16-17). However, one of the show cause notice allegedly dated 20.12.2019 was not uploaded on portal and was also not served in hard copy. The copy of screenshot of portal is enclosed as Paper Book page no. 15. The assessee ignoring the vagueness of show cause notice (Second one) filed reply to show cause notice which is forming part of Paper Book as page No. 18. Without considering the arguments raised by the assessee in his reply, the Ld. A.O eventually imposed penalty under section 271B of Rs 79639.00 vide order dated 06.01.2022 (Paper Book Page no. 21-23) alleging that the assessee's turnover has exceeded the limit prescribed under Section 44AB. The Ld. A.O also imposed penalty under Section 271A vide order dated 06.01.2022 which is also enclos....
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....ounts can be confirmed with Page 7 of the assessment order (Also Page 7 of paper book) where Ld. A.O in last para has admitted that assessee did not maintain any books of accounts. This fact is also confirmed by the fact that the Ld. A.O has imposed penalty under Section 271A upon the assessee for not maintaining books of accounts. A copy of said order has already been submitted by us as a part of paper book. Thus, in absence of books of accounts, the audit of same is not possible as held in various legal precedents which are mentioned hereunder. 3. We rely upon the decision of the jurisdictional ITAT, Jaipur in the case of Shahnaz Khanam, Jhalawar vs The ITO, Jhalawar, ITA No. 38/JP/2018 where it was held by the H'ble bench that "Accordingly, in view of the binding precedent, we hold that once the assessee found to have not maintaining the regular books of account as contemplated by Section 44AA of the Act the default was completed and therefore, after the default of not maintaining the books of accounts there cannot be a further default for not getting the same audited as required U/s 44AB of the Act. Hence, the penalty of levy by the AO U/s 271B is not justified and the same....
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....e 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. The Tribunal has overlooked this aspect of the matter. Of course, it is apparent from the records that the assessee failed to maintain the books of account as required under section 44AA and for that penalty is prescribed under section 271A. It is for the Tribunal to take action in accordance with law". Similar findings were given by jurisdictional H'ble ITAT, Jaipur in the case of Yogendra Singh Shekhawat vs ITO, Ward 3(1), Jaipur, ITA No. 1001/JP/2016 relying upon the decisions in the case of Hon'ble Gauhati High Court in case of Surajmal Parsuram Todi vs. CIT 222 ITR 691 & h'ble Allahabad High Court in the case of CIT Bareilly v Bisauli Tractors - (2008) 299 ITR 219. We further place our reliance upon decision of coordinate bench in the case of Roshni Devi vs ITO, Ward 3(1), Jaipur, ITA No. 953/JP/2017 pronounced on 16.05.2018 in which it was held that: "It is clearly a case of impossibility of performance where it is expected that the assessee should get her books of accounts....
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....021 is enclosed as a part of paper book vide Page No. 16-17. Thus, it can be clearly seen that no notice was served upon the assessee which required him to show cause for his alleged default. As the show cause notice was itself missing, the order passed in pursuance thereof is void ab initio and prayed for being declared so. It has been held in various judicial pronouncements that penalty cannot be levied on the basis of a vague show cause notice i.e when there is no clear charge upon the assessee so as to enable him to reply. The cases relied upon are as follows: We rely upon the decision of the Guwahati bench of H'ble ITAT in the case of North Eastern Constructions vs The ITO, ITA 184/Gau/2019 where it was held in Para 10 and succeeding paras of the order as follows: "We have heard both the parties and perused the records. We note that the assessee had filed return of income for the AY 2015-16 on 31-03- 2016 along with TAR. Thereafter, we note the department accepted the return of income filed by the assessee by issuing intimation u/s. 143(1) of the Act on 28-05-2016. After two years on 15-05-2018, the AO had issued notice u/s. 274 read with section 271B of the Act proposing ....
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.... 423/35 taxmann.com 250, allowed appeal of assessee holding that notice issued by Assessing Officer under section 274 read with section 271 (1 )(c) was bad in law, as it did not specify under which limb of section 271 (1)(c) penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income - High Court held that matter was covered by aforesaid decision of Division Bench and, therefore, there was no substantial question of law arising for determination - Whether since there was no merit in SLP filed by revenue, same was liable to be dismissed - Held, yes [Para 2] [In favour of assessee]" We further rely on the decision of the coordinate bench in the case of Tejpal Singh Nunia vs DCIT, Central Circle - 2, Jaipur, ITA No. 1294 to 1296/JP/2019 where the H'ble bench observed as under: "6. The law is well settled that penalty u/s 271(1)(c) can be imposed for concealing particulars of income or furnishing inaccurate particulars of income which are two limbs of the section 271(1) (c) but the penalty can be imposed only when the authority is satisfied that either of the two events of limbs exists in a particu....
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....without striking off the unnecessary portions of the notice. If the AC) was of the view that the assessee has concealed the income or furnishing inaccurate particulars of income then he should have deleted or not mentioned the other limb for imposition of penalty i.e. concealing the particulars of income. The above act of the AO clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind. " Though few of the above the above decisions have been delivered in context of Section 271(1)(c ), but the ratio behind the same is that whenever any penal proceedings are initiated against the assessee, there must be a specific charge in the notice by which jurisdiction is assumed. In absence of same, the assessee is not able to reply to same and hence it vitiates the entire proceedings. Ground No. 3 On the facts and circumstances of the case, the ld. CIT(A) has erred in approving the action of the Ld. A.O where the Ld. A.O passed the said order against the provisions of law by making allegation that assessee has committed default within the meaning of explanation to Section 271B of the act whereas no such explanation exists in law.....
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....be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or (d) carrying on the profession shall, if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADA and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or (e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year, get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed : Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub....
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....value of contract note. The contract is settled otherwise and squared up by paying out the difference which may be positive or negative. As such, in such transaction the difference amount is 'turnover'. In the case of an assessee undertaking speculative transactions there can be both positive and negative differences arising by settlement of various such contracts during the year. Each transaction resulting into whether a positive or negative difference is an independent transaction. Further, amount paid on account of negative difference paid is not related to the amount received on account of positive difference. In such transactions though the contract notes are issued for full value of the purchased or sold asset the entries in the books of account are made only for the differences. Accordingly, the aggregate of both positive and negative differences is to be considered as the turnover of such transactions for determining the liability to audit vide section 44AB". Thus, the turnover has to be taken in this mode. The Ld. A.O miscalculated the turnover to Rs 15927862.00 by some arbitrary methodology. We have enclosed the relevant statements of broker from which it can be....
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.... the ld. AR of the assessee he has relied upon the decision of the Co-ordinate Bench in the case of Shahnaz Khanam, Jhalawar vs. the ITO, Jhalawar, ITA No. 38/JP/2018. 8. Per contra, ld. DR supported the orders of the lower authority and submitted that the assessee has even though liable to get his books of account failed to do and the levy of penalty is correct and the same be upheld. 9. We have heard the rival contentions, perused the material on record and order of the lower authorities. We have also gone through the various judicial decision cited by the ld. AR of the assessee in support his arguments before us. The bench has noted from the paper book of the assessee that in the case of the assessee there has been a levy of penalty for non-maintenance of books of accounts u/s. 271A of the Act and the ld. DR did not controvert the fact the same is not deleted. So once it has been held the assessee has not maintained the books of account and consequent there upon the penalty has also been levied the separate penalty for not getting the books of account audited cannot be fastened. The penalty u/s. 271B can be levied while the assessee maintain the books and not get them audited ....
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.... that an assessee on whom a penalty is proposed to be imposed under section 28(1)(b) should have in the first instance furnished his return. That, in my opinion, is the ordinary and grammatical meaning of the words occurring in the Act. To interpret the language of this provision in the manner suggested by the learned Government Pleader would, in my opinion, be too artificial and too far-fetched to commend itself for acceptance. Although it is true that the provisions of a statute like those contained in section 28(1)(b) have to receive to construction so as to promote the object of the statute, it is clear that when we interpret a penal provision like that contained in section 28(1)(b), the interpretation we should place upon it must accord with reason and justice and must be in accordance with the plain ordinary and rational meaning of the words contained in those provisions. So interpreted, I would not, in my opinion, be right in placing on section 28(1)(b) the construction for which the learned Government Pleader contends." (p. 133) 12. The Madras High Court in the case S. Santhosa Nadar v. First Addl. ITO [1962] 46 ITR 411 has gone to the extent that a voluntary return filed....
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....ovisions of sections 44AA, 44AB, 271A and 271B of the Act. 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. The Tribunal has overlooked this aspect of the matter. Of course, it is apparent from the records that the assessee failed to maintain the books of account as required under section 44AA and for that penalty is prescribed under section 271A. It is for the Tribunal to take action in accordance with law. The Delhi Benches of the Tribunal in case of Nirmal Kumar Jain vs. ITO (supra) has held in paras 3 & 4 as under:- "3. In so far as the penalty u/s 271B is concerned, ....