TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 523
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....sed the appeal without considering the reply by the assessee. This, it is hereby prayed to allow the relief to the assessee by calculating turnover as per basic accounting principles. 3. On the facts and circumstances of the case, the CIT (A) grossly erred in dismissing the appeal filed by the assessee without considering or adjudicating additional ground raised by the assessee as Ground No. 5 which was purely legal in nature and did not require consideration of any facts that where not in possession of the ld. Officer while passing the order. Even no comment or observation was given by ld. Authority for admission or non-admission of the additional ground. Thus, it is hereby prayed that the order was against principles of natural justice and hence liable for being quashed. 4. On the facts and circumstances of the case and as an alternate plea, the assessee hereby prays that as he did not have any mens rea for not getting the books audited. Further, the assessee had no taxable income from the said business. Thus it is hereby prayed for deleting the said penalty. 5. The appellant hereby craves leave to add, alter, amend or substitute one or more grounds of appeal at the time of....
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....tioned additional ground in addition to other grounds raised hereinabove. 4. First, I deal with the additional ground as the same goes to the root of the matter. 5. Before me, the ld. Counsel for the assessee submitted his written submissions as under :- "We hereby draw the attention of the Ld authority to Page No. 6 of paper book where we have attached the show cause notice issued by the Ld. A.O where we specifically draw the attention of the H'ble bench towards the following lines: "On verification of NO RETURN filed by you for the Assessment Year 2010-11, it was found that you were liable to get your accounts audited......." Thus, it can be clearly seen that the inference drawn was vague and also assessee was not intimated about any specific charge upon him. Further, even the turnover has not been mentioned in the said show cause notice. 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 Co....
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....s Emerald Meadows - (2016) 73 com248 (SC) where dismissing the SLP filed by the Revenue quashing the penalty by the Tribunal as well as Hon'ble High Court on ground of unspecified notice has held as under:- "Section 274, read with section 271(1)(c), of the Income-tax Act, 1961 - Penalty - Procedure for imposition of (Conditions precedent) - Assessment year 2009-10 - Tribunal, relying on decision of Division Bench of Karnataka High Court rendered in case of CIT v. Manjunatha Cotton & Ginning Factory [2013] 359 1TR 565/218 Taxman 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 as....
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.... in law in as much as it did not specify in which limb of section 271(1)(c) of the Income Tax Act, 1961 the penalty proceedings has been initiated, i.e. whether for concealment of income or furnishing of inaccurate particulars of income. 5.1. It is pertinent to note that in the notice, AO has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. The AO in assessment order or penalty notices did not specify the limb under which the penalty was initiated and simply issued a pre-printed notice 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 mu....
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....e. Therefore, I do not find any force in the contention of the ld. A/R. Thus the additional ground raised by the assessee is decided against the assessee. The additional ground is dismissed. Ground nos. 1 & 2 are inter-related challenging the levy of penalty under section 271AB for not getting the books of accounts audited. 8. Before me, the ld. Counsel for the assessee submitted that during the assessment year under consideration, the assessee was engaged in the business of purchase and sale of securities. The ld. A/R of the assessee submitted that since the assessee suffered loss from such activities, he did not file any return of income. During the course of assessment proceedings, the assessee submitted that he was not maintaining any regular books of accounts and, therefore, there was no audit of books of account. The AO completed the assessment on the basis of requisite information and details received and after test check estimated the turnover of the assessee at Rs. 1,07,21,863/- and assessed the income at Rs.(-) 43,658/-, and also initiated the proceedings for levy of penalty u/s 271B for not getting the books of accounts audited u/s 44AB of the Income Tax Act, 1961 and ....
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....ct that no other document was with the Ld. A.O on records except the said statement. If required, the H'ble bench may reconfirm the same. Thus, in absence of books of accounts, the audit of same is not possible as held in various legal precedents which are mentioned hereunder. We however bring to the notice of H'ble bench that the Ld. A.O has vaguely mentioned in Para 4 of the order that assesse has produced books of accounts whereas assessee has not maintained same at all. 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 is deleted". We also rely upon the landmark judgements of H'ble Allahabad High....
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....mplated 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 SurajmalParsuramTodi 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 audited when it is a known and admitted fact that there are no regular books of accounts ....
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....committed the default for not maintaining the regular books of accounts as required un/s 44AA of the Act. The Assessing Officer has already imposed the penalty u/s 271A for violation of the provisions of section 44AA of the Act. The AO has also imposed the penalty u/s 271B for not getting the books of accounts audited. It is pertinent to note that when the assessee did not maintain the regular books of account then the question of getting of books of accounts audited does not arise. Once, there is a violation of provisions of section 44AA of the Act the said violation cannot be extended to section 44AB of the Act. The provisions of section 44AB of the Act can be invoked only when the assessee has complied with the provisions of section 44AA of the Act. Therefore, the violation of section 44AA of the Act cannot continue because once it is found that the assessee did not maintain the regular books of account, the said violation cannot travel beyond the provisions of section 44AA and hence, cannot be held as a further violation of section 44AB of the Act. The Hon'ble Allahaband High Court in case of CIT Vs. Bisauli Tractors (supra) while dealing with this issue as held in paras 11 to ....
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....hich this subsection finds place it is impossible to construe section 28(1)(c) except as relating to a case where a return has been filed but from which return particulars of income have been omitted or any particulars have been deliberately inaccurately furnished. The use of the expression 'particulars of his income' and 'particulars of such income' would be wholly inapposite in a case where no return has at all been filed; such a case would clearly come within the scope of section 28(1)(a) alone." 13. This Court in CWT v. Yadu Raj Narain Singh [2006] 286 ITR 564 also taken the same view. It has held as follows : "Thus applying the strict construction of penalty provisions contained in clause (1) of sub-section (c) of section 18 of the Act, we find that prior to the amendment in Explanation 3 by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989 in a case where the person who has previously been assessed under the Act does not file any return in response to the notice or even where time for filing the return has expired has not filed any return there cannot be any concealment for which penalty provision can be imposed. In view of the foregoing discussions, we ar....
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....udit of accounts. Similar view has been taken by the Hon'ble Allahabad High Court in CIT vs. Bisauli Tractors (2008) 299 ITR 219 (All). The Hon'ble Allahabad High Court reiterated the similar view in CIT and Anr. Vs. S.K. Gupta and Co. (2010) 322 ITR 86 (All) by holding that requirement of getting the books of account audited can arise only where the books of account are maintained. In the absence of the maintenance of books of account, there Can be no penalty u/s 271B of the Act. In view of the foregoing legal position emanating from the judgment of the two Hon'ble High Courts, we are convinced that penalty u/s 271B ought not to have been levied because the assessee admittedly did not maintain any books of account as has been recorded in the assessment order itself. We, therefore, order for the deletion of penalty. 4. As regards the imposition of penalty u/s 271(1)(c) of the Act on the addition of Rs.7.50 lac, we find that this addition has resulted on estimation of income at 5% on estimated sales ITA Nos.6696 & 6645/De1/2014 of Rs.1.50 crore. Except that there is no other basis for imposition of penalty. The Hon'ble Delhi High Court in CIT vs. Aero Traders P. Ltd. (....