TaxTMI 
TaxTMI 
2023 (3) TMI 1521
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....ng the said penalty. 2. On the facts and circumstances of the case and without prejudice to other grounds of appeal, the Ld CIT (A) has grossly erred in law and facts by approving the action of the Ld. AO of imposing penalty also on the turnover which was declared by the assessee under Section 44AD of the act. The penalty thus imposed is in alternate excessive and prayed for being reduced. 3. On the facts and circumstances of the case, the notice initiating penalty proceedings under Section 271B was without jurisdiction and invalid. It is hereby thus prayed for quashing the said notice as well as entire proceedings in pursuance thereof. 4. That the appellant hereby craves the leave to add, delete, amend or abandon the grounds of this appeal at the time of or before the hearing of the case." 3. The fact as culled out from the records is that return declaring an income of Rs. 294800/- was e-filed by the assessee on 31.8.2015 and assessment u/s 143(3) of the I.T. Act was completed on 25.11.2017 assessed at Rs. 294800/-. Penalty proceedings u/s 271B of the I.T. Act were initiated along with the assessment order dated 25.11.2017 for not furnishing....
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....e this tribunal. challenging the levy of penalty on the grounds as raised in para 2 above. 5. To support the various grounds so raised the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below; "The assessee is an individual and was engaged in the business of trading of bangles and other artificial accessories along with trading in securities and derivatives. The assessee filed his return of income claiming loss under the head House Property, showing income under the head Profit and Gains from Business and Profession (covered under section 44AD) and Income from Other Sources. Since, assessee was not aware of the technical provisions of turnover etc. related to shares and securities business and since he also suffered loss, same was not declared in return of income. The case of the assessee was selected for limited scrutiny vide notice dated 26.07.2016 and all the queries raised by the Ld. A.O were duly responded to by the assessee from time to time. The Ld. A.O. completed the assessment proceedings u /s 143(3) of The Income Tax Act, 1961 without making any addition to the declared income of the assessee i.e Rs 294800.....
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....f 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 fifty thousand rupees, whichever is less". 2. Thus, the default mentioned in this penal provision is not getting the accounts audited by the assessee. Once it has been established that assessee has not maintained any books of accounts, the question of invoking penal provisions under section 271B does not arise. We draw the attention of Ld. Appellate authority to definition of books of accounts (Section 2(12A) as per the act which clearly stipulates as follows: "books or books of account" includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device; In the present case, the assessee was not maintaining books of accounts and declared his income under Section 44AD. The issue under question was basically transaction in securities which the assessee did not declared in his return of income owing to loss suffered by him. T....
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.... books of account the appropriate provision under which penalty proceedings can be initiated is under s. 271A of the Act which recourse has also been taken by the assessee as would appear from the order of the Tribunal. The Tribunal was, therefore, justified in upholding the order of the CIT (A) cancelling the penalty imposed under s. 271B of the Act". We further place our reliance on the decision delivered in the case of CIT Bareilly v Bisauli Tractors - (2008) 299 ITR 219, the H'ble Allahabad High Court held that: "14. Therefore, Section 27IB of the Act is not attracted in a case where no account has been maintained and instead recourse under Section 271A can be taken. 15. In view of the foregoing discussions we answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the revenue. There will be no order as to costs". We also rely upon the judgement of Hon'ble Gauhati High Court in case of Surajmal Parsuram Todi vs. CIT 222 ITR 691 where it was held by the court that "We have gone through the provisions of sections 44AA, 44AB, 271A and 271B of the Act. Maintenance of accounts is envisaged under section 4....
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....in it was held that "Since the issue in question is covered by the decision of the ITAT Coordinate Bench in the case of Roshni Devi vs ITO (supra), therefore, respectfully following the decision of this Bench on the issue of deleting the penalty u/s 271B of the Act, we direct the AO to delete the penalty of Rs. 1,50,000/- confirmed by the ld. CIT(A). Thus the solitary ground of the assessee is allowed". We further submit that this explanation for not imposing penalty was also submitted before the Ld. A.O as well as the Ld. CIT (A) but they did not consider same while passing the respective orders. It is also pertinent to note here that the assessee has not appealed against the order under Section 271A which may also be checked from records, if required. We thus hereby pray the Ld. authority to allow this ground raised by the assessee. Ground No. 2 On the facts and circumstances of the case and without prejudice to the other grounds of appeal, the Ld. CIT (A) has grossly erred in law and facts by approving the action of the Ld. A.O of imposing penalty also on the turnover which was declared by the assessee under section 44AD of the act. The penal....
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....hat was the fault for which the assessee is being proceeded against for levy of penalty. Since the AO has not struck down the irrelevant portion/fault which is not applicable in the facts and circumstances of the case, the notice reproduced (supra) is vague and therefore, bad in law as held by the Co-ordinate Bench of the Tribunal in the case of Parkinson Electrical Corprn (supra). We are of the opinion that notice proposing penalty should clearly spell out the fault/charge for which the assessee is put on notice, so that he can defend the charge properly. The issue of bad/vague penalty notice was adjudicated by the Hon'ble Karnataka High Court [though in a different context i.e notice issued u/s. 274 read with section 271(1)(c) of the Act] in the case of CIT vs. SSA's Emerald Meadows in ITA No. 380 of 2015 dated 23.11.2015 wherein the Hon'ble High Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 has held that if the penalty notice is vague, then the penalty order is also bad in the eyes of law. This decision of Karnataka High Court was challenged by the Revenue before the Hon'ble Apex Court, and th....
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....ase, from the notice u/s 274 dated 27.12.2011, neither the assessee nor anyone else could make out as to 'for what precise charge, the assessee was asked to show cause viz. whether the charge is for furnishing inaccurate particulars of income or concealment of particulars of such income. It is further important to note that, in notice, under the point which is intended towards proposed penalty u/s 271(1)(c), the word OR has been used between the charge of concealment of income and furnishing inaccurate particulars of income. These facts and circumstances make it abundantly clear that in the case of assessee, penalty notice is completely vague and ambiguous. The AO simply issued a preprinted notice without striking off the unnecessary charge and not mentioning the precise charge. The above act of the AO clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind which resulted into issuing a completely vague jurisdictional notice u/s 274 and the jurisdictional notice being vague, the consequent levy of penalty is illegal and deserves to be deleted in full. 8. In view of above facts and circumstances, the initiati....
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....antum assessment order dated 25.11.2017 passed by the ld. AO 1-2 Both 2 Show cause notice dated 25.11.2017 3 Both 3 Show cause notice dated 18.05.2018 4 Both 4 Reply to show cause notice filed by the assessee. 5-6 Both 5 Order under section 271A dated 18.05.2018 7-11 Both 6 Order under section 271B dated 18.05.2018 12-17 Both 7 Form 35 filed by the assessee 18-21 Ld. CIT(A) 8 Written submission filed by the assessee before ld. CIT (A) 21-31 Ld. CIT(A) 9 Order dated 24.11.2022 passed by ld. CIT (A) 32-43 Ld.CIT(A) 7. The ld. AR of the assessee in addition to the written submission and paper book filed to support the contentions so raised, also filed a compilation of evidences relied upon. Based on these evidences placed on record drawn our attention to the fact that the department has already levied and confirmed the penalty u/s 271A, being the penalty for failure to keep /maintain or retain books of accounts, documents etc. if so then the levy of penalty u/s 271B is incorrect. Since, the assessee has already been held that he failed to maintain the books of accounts then again, ....
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.... 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 Allahabad High Court in case of CIT Vs. Bisauli Tractors (supra) while dealing with this issue as held in paras 11 to 14 as under:- "11. In the case of S. Narayanappa & Bros. v. CIT [1961] 41 ITR 125 the Mysore High Court has held as follows : "What was urged before us was that in a case where an assessee has furnished no return at all before the Income-tax Officer, it should be presumed for the purposes of section 28(1)(b) that he has furnished a return of his income intimating the Income-tax Officer that his income i....
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....re 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 are of the considered opinion that in the present case the respondent assessee has not concealed the particulars of his income for which wealth no penalty under clause (1) of sub-section (c) of section 18 of the Act is exigible. 14. Therefore, section 271B of the Act is not attracted in a case where no account has been maintained and instead recourse under section 271....
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....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. 1. As regards the imposition of penalty u/s 271(1)(c) of the Act on the addition of Rs. 7.5o lac, we find that this addition has resulted on estimation of income at 5% on estimated sales ITA Nos. 6696 & 6645/Del/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. (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 M....