TaxTMI 
TaxTMI 
2024 (5) TMI 1358
X X X X Extracts X X X X
X X X X Extracts X X X X
....tting the accounts audited, as per settled judicial pronouncement as has been discussed later on, the following two basic conditions 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. 2. The AO has stated his observation in the assessment order that "the assessee is not showing its correct turnover as he is not maintaining books of accounts properly and showing his profit in compliance of section 44AD and showing 7.99% of the total turnover." 3. As the assessee is not maintaining proper books of accounts as per section 44AA as stated in the assessment order, he is only liable for the penalty u/s 271A. Since the assessee is not maintaining proper books of accounts audit of books of accounts is impossible. There was no occasion to levy penalty u/s 271B of the Act and obvious reason for the same is that where there are no books of accounts maintained by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts were maintained by the assessee u/s 44AA of the Act, penalty u/s 271B cannot be fastened on the assessee and accordingly, the appeal of the assessee may please be allowed. 9. Reliance has been placed on the following judgments:) a) Income Tax Appellate Tribunal - Jaipur in case of Shri Nirmal Kumar Joshi vs Income Tax Officer, Kishangarh dated 27 March, 2018. The judgment is attached herewith as "Annexure A1". Finding-We find that by accepting the income offered under section 44AD(1), the AD 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment order dated 25.03.2015 at para 6 has found that assessee is not maintaining any books of account. In such a scenario penalty u/s. 271A of the Act in contravention of sec. 44AA can be only levied and not u/s 271B of the Act." f) Hon'ble ITAT, Delhi in a judgment, in case of Nirmal Kumar Jain, vs DCIT, Circle 39(1) New Delhi, Ward-2(4). The judgment is attached herewith as "Annexure A6". Finding- Here also it was decided that since the assessee was not maintaining books of account and therefore penalty u/s 271B cannot be levied. The relevant extract of the judgment given in the case of Nirmal Kumar Jain, vs DCIT, Circle 39(1) New Delhi, Ward- 2(4) is given below: "In so far as the penalty u/s 271B is concerned, it is noticed that the AO has recorded a categorical finding on page 2 of the assessment order that no books of account were maintained by the assessee. 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." g) Hon'ble Allahabad High Court in the case of S.K. Gupta & Co, held as under. The judgment is attached herewi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as under- "the assessee is not showing its correct turnover as he is not maintaining books of accounts properly and showing his profit in compliance of section 44AD and showing 7.99% of the total turnover." The copy of the assessment order is attached as an "Annexure A10". (iii) Surajmal ParasuramTodi Vs. CIT (1996) 222 ITR 691,693(Gauh). This judgment observed that even after maintenance of books of accounts the obligation of the assessee does not come to an end. He is required to something more, l.e., by getting the books of account audited by an accountant. This judgment is not applicable in the present case as the assessee as already stated has not maintained the books of accounts in the first place so there was no question of doing something more which is getting the books audited. Since in the appellant's case audit was not possible so the penalty levied for non audit should be dropped. Considering all these facts and the provisions of the law it is clear that the first appeal to cancel the penalty u/s 271B has been dismissed on invalid grounds. So we request you kindly drop the penalty proceedings in favour of the assessee." 2. Brief facts of the case for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gments: a. Order dated 27/03/2018 in ITA No. 73/JP/2018 (A.Y 2011- 12) by ITAT Jaipur Bench Nirmal Kumar Joshi Vs. ITO, Ward No-1. b. Order dated 31/05/2016 in ITA No. 2087/PN/2014 (A.Y 2008-09) by ITAT Pune Bench Maxpro Associates Vs. ACIT, Panvel Circle, Panvel. c. Order dated 18th May, 2007 in the case of CIT Vs. Bisauli Tractors reported in (2008) 299 ITR 219 All passed by Allahabad High Court , Allahabad. d. Order dated 6th August, 1996 Gauhati High Court in the case of Surajmal Parsuram Todi Vs. Commissioner of Income Tax reported in (1996) 222 ITR 691 Gauhati High Court. e. Order dated 01.01.2020. in ITA No. 113/Kol/ 2019 (A.Y 2010-11) in Smt. Mukti Roy Vs. ITO passed by Kolkata Bench, Kolkata. f. Order dated 02.03.2016 in ITA No. 6696 & 6645/Del/ 2014 (A.Y 2010-11) in Nirmal Kumar Jain Vs. ITO passed by Delhi Benches, New Delhi. g. Order dated 12th October, 2004 Allahabad High Court in the case of CIT Vs. S. K. Gupta & Co. reported in (2006) 146 Taxman 399 All. h. Order dated 1st December, 1998 Madhya Pradesh High Court in the case of Bharat Construction company Vs. ITO reported in (1999) 153 CTR MP 414. i. Order dated 19th January, 1987 Andhra Pradesh Hig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....books of account properly and showing his profit incompliance of Section 44AD at 7.99% of total turnover credited in his Form 26AS on which tax has been deducted at source. It is specifically found by the A.O. during the assessment proceedings that the assessee showing his turnover on the basis of bank receipts and cash receipts but has not added the amount which was deducted by several deductors as TDS. Further found that the assessee claimed the TDS as well which is part of the turnover, but not included in the turnover. The orders of the penalty u/s 271B has been imposed on the ground that the assessee committed default by failing in uploading the Audit Report in the manner prescribed in the relevant provisions of the Income Tax Acts. It is the contention of the Assessee's Representative that admittedly the assessee is not maintaining the books of accounts then the Department can only charge penalty for the said default u/s 271A of the Act and since books of account are not maintained, the Department cannot invoke and impose penalty u/s 271B of the Act which is meant for getting the account audited. 7. The similar question arose for consideration before the Hon'ble High....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct that such person shall pay by way of penalty a sum of twenty five thousand rupees. 271B. Failure to get accounts audited. If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under Section 44AB the assessing officer may direct that such person shall pay, by way of penalty, a sum equal to one half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred thousand rupees, whichever is less. 7. It may be mentioned here that separate penalty has been provided for non-maintenance of accounts, i.e., under Section 271A of the Act and for not getting the accounts audited and not furnishing the audit report i.e., under Section 271B of the Act. In the present case, the assessing officer did not impose penalty under Section 271A of the Act and instead proceeded to impose penalty under Section 271B of the Act. If a person has not maintained the accounts book or any accounts the question of its audit does not arise. In such an event the imposition of p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... proceeding under Section 21. As there is no question of furnishing a return of a turnover in a proceeding under Section 21, the assessee cannot be guilty of concealing particulars of its turnover from, or of furnishing inaccurate particulars in a proceeding under Section 21. The concealment or furnishing inaccurate particulars must be in the return furnished under Section 7. Clause (a) of Section 15A(1) deals with the failure of the assessee to furnish the return of the turnover, which he is required to furnish under Section 7 or the failure of the assessee to furnish it within the time allowed or in the manner prescribed. Clause (b) of the Section deals with the concealment or inaccurate furnishing of particulars of the turnover in respect of which the return was required to be filed and which is referred to in Clause (a)? 9. This Court, in the case of CST v. Shahid Hussain Rakesh Kumar (1977) 39 STC 520 has held that in a case where no return has been filed penal proceedings can be initiated only under Section 15A(1)(a) and not 15A(1)(b) of the U.P. Sales Tax Act, 1948. It has held as follows: A perusal of the two parts clearly establishes that Section 15A(1)(a) applies in a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. 12. The Madras High Court in the case S. Santhosa Nadarv. First Addl ITO has gone to the extent that a voluntary return filed after the period of four years from the close of the assessment year is not a valid return and such a case should be regarded as if no return has been filed at all and it cannot be said in such a case that there has been a concealment of the particulars of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 44AA of the Act, the offence is complete. After that, there can be no possibility of any offence as contemplated u/s Section 44AB of the Act and, therefore, the imposition of penalty u/s 271B of the Act is erroneous. The relevant portion of the observation of the Gauhati High Court are as under:- "4. Heard Mr. R.K. Joshi, learned counsel appearing for the assessee, and Dr. A.K. Saraf, learned special counsel appearing on behalf of the respondent/Income-tax Department. 5. Mr. R.K. Joshi submits that it is an admitted fact that the assessee did not maintain any books of account and, therefore, the question of the books of account being audited as per the provisions of Section 44AB docs not arise. Therefore, the Tribunal erred in law in holding that the assessee was guilty of penalty under Section 27113 of the Act. On the other hand, Dr. Saraf, learned special counsel appearing on behalf of the Revenue, submits that maintenance of hooks of account is one of the conditions as contemplated by Section 44AA and Section 44AB contemplates audit of account and penalty is provided under Sections 271A and 27113 of the Act, 6. We have gone through the provisions of Sections 44AA, 44AB, 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 judgments 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 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. (2010) 322 ITR 316 (Del) has upheld the view taken by the Tribunal in deleting penalty u/s 271(1)(c) which was imposed on the basis of addition made by the AO on estimated profit. Similar view has been taken in a series of judgments including the Hon'ble Punjab & Haryana High Court in CIT vs. Dhillon Rice Mills (2002) 256 ITR 447 (P&H). In this case also, the Hon'ble P....