TaxTMI 
TaxTMI 
2025 (12) TMI 963
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....: 5. The appellant is an individual engaged in the wholesale trading of Tea. The appellant did not file the return of income u/s 139(1) for the AY 2018-19. The case was reopened by issue of notice u/s 148 dated 30.03.2022 to verify the various reported financial transactions undertaken during the previous year. In response to the notice u/s 148, the appellant filed return of income on 28.04.2022 declaring income at Rs. 2,43,850. 5.1. As per the information with the AO, the appellant had suffered TDS u/s 194A/194B in respect interest received amounting to Rs. 56,019. Also as per the information with the AO, appellant had deposited cash of Rs. 1,16,86,440 with HDFC bank in the previous year. 5.2. During assessment, the AO found that the total credits in the bank account was Rs. 1,97,04,950. The AO estimated income thereof @ 1.9% which was net profit rate of the preceding year. Thus business income was estimated at Rs. 3,74,394. The appellant had admitted business income of Rs. 1,90,840 @ np rate of 1.18% on a turnover of Rs. 1,61,72,862. The AO brought to tax the difference between business income returned and income worked out. Thus an addition of Rs. 1,83....
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....that the burden of proof lies on that person. According to Section 103 of the Indian Evidence Act, 1872, the burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence. Section 106 of Indian Evidence Act, 1872 says that when any fact is especially within the knowledge of any person, then burden of proving that fact is upon him. All the aforesaid provisions are applicable to the assessee. This is a fact which he asserts. Therefore, burden lies on him to prove the said facts (Section 101 and 103 of Indian Evidence Act 1872). Therefore, the burden is on the assessee to establish that fact. However, the burden of proof was not discharged. Therefore, the assessee has failed to discharge the onus of proving the bonafide case. 11. In view of the facts of the case, it is held that the assessee has not furnished the audit report within the time specified u/s. 44AB of the Act. Thus, I am satisfied that the assessee has committed default u/s.271B of the Act, and the case of the assessee is a fit case for levy of penalty. 12. The penalty leviable u/s. 271B shall be a sum equal to one-half percent of the total sales, turnover....
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.... The co-ordinate bench in the case of Varadagovind Parthasarthy lyer (through the legal heir Arvind lyer) (supra) has held the same and the relevant extract of the said decision is cited hereunder for ease of reference: 6. After considering the relevant facts placed on record and also the orders passed by the authorities below, we find that the penalty has been levied u/s. 271B for violation of Section 44AB, ie., failure to get the accounts audited. It is not in dispute that assessee has not maintained any books of accounts as required u/s 44AA. For violation of non maintenance of books of account u/s. 44AA, there is a separate penal provision for levying penalty for not maintaining of books of accounts prescribed u/s. 271A and therefore if at all penalty should have been levied under this section. The Hon'ble Allahabad High Court in the case of CIT vs. Bisauli Tractors reported in 299 ITR 219 had held that Section 271B of the Act is not attracted in the case where no account has been maintained and instead recourse u/s. 271A can be taken. This principle has again been reiterated by the Hon'ble Allahabad High Court in the case of CIT vs. S.K Gupta reported in ....
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....appellant has been filing returns of income along with audit report. This is shown below. Therefore to claim that the appellant does not have any books in the previous year belies belief and is not tenable. It is merely an argument designed to escape the penal consequences of not auditing the books which are more severe that the penal consequences of non maintenance of books. AY Turnover Returned income Date of Audit report 2016-17 1,72,16,580 2,98,690 15.10.2016 2017-18 1,73,77,412 3,31,150 29.10.2017 2018-19 1,61,72,862 2,43,850 Nil 6.4. I have examined the case laws cited by the appellant. All these decisions argue that where there are no books of accounts, the assessee should not be penalised for not auditing the non existent books. Instead penalty should be u/s 271A for non maintenance of books. In this case, as the above table shows, the appellant has been maintaining books. Therefore the plea of the appellant that there was no books in the previous year is not convincing. Also the AO has not imposed penalty u/s 271A for AY 2018-19. In the light of the foregoing discussion, I uphold the penalty levied under section 271B....
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....would also like to bring to your notice some case relevant to my case. The case law I would like quote is Mahadev Cold Storage V/s A.O Aligarh (ITA No. 41 & 42 / Agr / 2021). In the given case law, the Honourable Bench of Agra has clearly made following submission at Para 35 - 35. In Sundarjas Kanyalal Bhathija v. The Collector, Thane, Maharashtra, AIR 1990 SC 261, the Supreme Court held as under: - "One must remember that pursuit of the law, however glamorous it is, has its own limitation on the Bench. In a multi judge Court, the Judges are bound by precedents and procedure. They could use their discretion only when there is no declared principle to be found, no rule and no authority." Therefore, respectfully following the decision of Hon'ble SC Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd., AIR 1997 SC 2477, Sundarjas Kanyalal Bhathija v. The Collector, Thane, Maharashtra, AIR 1990 SC 261 and Tribhovandas Purshottamdas Thakkar v. Ratilal Motilal Patel, AIR 1968 SC 372We deprecate this practice of NFAC in following the decision of Gujrat High court a against the binding decision of Allahabad High .This practice is in contra....
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....even when 271A is not imposed by the learned Assessing Officer (Para 7 of the Order). Also, in very recent judgement on 9th Jan, 2025 of Arvind Agarwal v/s ITO (ITA No. 1035/Del/2023), in which the Honourable Delhi Tribunal has deleted the penalty of 271B on the similar case. Also, in case of Commissioner of Income Tax V/s S K Gupta and Co. INCOME-TAX APPEAL NO. 89 OF 2000, the Honourable High Court has taken the similar view. Copy of Order is attached for your kind reference. (C.1) Alongwith the written submissions; copies of the decisions in the following cases were also filed from the assessee's side: (a) ITAT Agra Bench order in the case of Mahadev Cold Storage vs. Jurisdictional Assessing Officer [2021] 190 ITD 273; [2021] 127 taxmann.com 722, I.T.A. No.41 & 42/Agr/2021, order dated 14/06/2021 (b) ITAT Bangalore Bench order in the case of Nagesh Consultants vs. DCIT, I.T.A. No.32/Bang/2023, order dated 07/03/2023 (c) ITAT Delhi Bench order in the case of Arvind Aggarwal vs. Income Tax Officer, [2025] 137 TCL 174, I.T.A. No.1035/Del/2023, order dated 09/01/2025 (d) Hon'ble Allahabad High Court order in the case of CIT vs. S. K. Gup....
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.... dated 03.03.2023 * Assessment order u/s 147 r.w.s. 144B dated 06.03.2023 * Penalty show cause notice u/s 274 r/w 271B dated 06.03.2023 * Assessee's reply e-filed on 21.03.2023 * Penalty show cause notice u/s 274 r/w 271B dated 04.09.2023 * Assessee's reply e-filed on 04.09.2023 (requesting to consider the earlier reply) * Impugned Penalty order u/s 271B dated 13.09.2023 (for Rs. 98,524/-) 2. Text of section 2(12A) containing inclusive definition of "books of a/cs", w.e.f. 01.06.2001 3. Text of section 44AA CASE LAWS for the proposition that defaults contemplated by section 271A and 271B are separate and distinct. Neither section 44AA and 44AB are in substitution of each other and nor the penalty levied u/s 271A and 271B are in alternate or in substitution to each other 1. [1999] 106 TAXMAN 460 (MP), Bharat Construction Co. v. ITO Held :- (para-8) .... the defaults contemplated by section 271A and section 271B are separate and distinct. Under the latter provision if the assessee fails to get his accounts audited under section 44AB, he is liable to penalty as laid down in this section....
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....ier levied penalty u/s 271A of the Act for non-maintenance of books, thereafter the Assessing Officer issued another notice for levy of penalty u/s 271B of the Act for not getting the books of accounts audited .... The Hon'ble Madhya Pradesh High Court has held that the defaults contemplated by section 271A and section 271B are separate and distinct. Under the latter provision, if the assessee fails to get his accounts audited u/s 44AB, he is liable to penalty. The object is to get a clear picture of the assessee's accounts whose turnover exceeds the prescribed limit. The rates envisaging two types of defaults are also different .... Hon'ble High Court held that the earlier penalty levied by the Assessing Officer u/s 271A of the Act was only for non- maintenance of books of account and the same did not cover the penalty for not getting the books audited u/s 271B.... (para-8) The object of requiring the assessee to get his books of account audited u/s 44AB is to get a clear picture of the assessee's accounts so as to enable the Income Tax Authorities to assess true and correct income of the assessee .... Since, the case in hand, the assessee did not get his books ....
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.... Rs. 66,99,564/- (pp-42) * Closing cash balance: Rs. 1,54,803/- (pp-42) * Total income: Rs. 2,43,850/- (admitting tax liability of Rs. 515/-) (pp/52-53) 2.1 It cannot be believed by any stretch of imagination that the assessee (a whole seller of Tea) could exactly remember in her mind the above stated figures EXACTLY while filing ITR for the 1st time after lapse of more than 04 years (ITR filed on 28.04.2022 for the year ended on 31.03.2018, there being no ITR u/s 139) and therefore, she definitely kept and maintained at least sales invoices/registers or diaries and a kind of daybook for the receipts of money, expenses and cash & stock balances, on the basis of which the above figures are reported in the ITR. After insertion of section 2(12A) by the finance Act 2001(w.e.f. 01.06.2001) giving an "inclusive" definition of the term "books of accounts", even such records of sales, expenses, cash & stock balances constitute "books of accounts" [prior to insertion of the said section 2(12A), the term "books of accounts" was not expressly defined in the Income-tax Act and the same was understood in a common parlance to mean a set of cash book, journal & ledger].....
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....01). Hence, the assessee's case is not covered by the said decisions cited by the Ld. AR. Rather, it is covered by the following two decisions- * [2010] 329 ITR 615 (Karnataka), CIT v. S.C. Naregal (pp/133-140) * [2023] 201 ITD 565 (Ranchi-Trib.), Rakesh Kumar Jha v. ITO (pp/125-132) in favour of revenue. There is no other decision. contrary to these two decisions (Karnataka High Court & ITAT, Ranchi bench) in the context of section 2(12A) inserted w.e.f. 01.06.2001. 2.4 I, accordingly, urged the Hon'ble Bench (in my oral submissions today) to kindly confirm the said penalty of Rs. 98,524 imposed u/s 271B and; to dismiss the present appeal of the assessee, being devoid of merits. Index S. No. Description of Documents enclosed 1. As per AO's records: * Dashboard of ITRs e-filed by the assessee * ITR, B/S & P/L a/c for A.Y. 2016-17 (Turnover Rs. 1,72,16,580/- and declared total income Rs. 2,98,690/-) * ITR & B/S for A.Y. 2017-18 (Turnover Rs. 1,73,77,412/- and declared total income Rs. 3,31,150/-) * ITR for A.Y. 2018-19 filed for the 1st time u/s 148 on 28.04.2022 (thereby denying the t....
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.... CASE LAWS for the proposition that defaults contemplated by section 271A and 271B are separate and distinct. Neither section 44AA and 44AB are in substitution of each other and nor the penalty levied u/s 271A and 271B are in alternate or in substitution to each other 1. [1999] 106 TAXMAN 460 (MP), Bharat Construction Co. v. ITO Held :- (para-8) .... the defaults contemplated by section 271A and section 271B are separate and distinct. Under the latter provision if the assessee fails to get his accounts audited under section 44AB, he is liable to penalty as laid down in this section. The object is to get a clear picture of the assessee's accounts whose turnover exceeds the prescribed limit. The rates envisaging two types of defaults are also different .... 2. [2023] 201 ITD 565 (Ranchi-Trib.), Rakesh Kumar Jha v. ITO Held :- (para-6) .... As per section 44AA however u/s 44AB, ..... An person covered u/s 44AB is of course also covered u/s 44AA of the Act but the vice-versa may not be true ..... Neither section 44AA and 44AB are in substitution of each other and nor the penalty levied u/s 271A and 271B are in alternate or in substitution ....
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....it. The rates envisaging two types of defaults are also different .... Hon'ble High Court held that the earlier penalty levied by the Assessing Officer u/s 271A of the Act was only for non- maintenance of books of account and the same did not cover the penalty for not getting the books audited u/s 271B .... (para-8) The object of requiring the assessee to get his books of account audited u/s 44AB is to get a clear picture of the assessee's accounts so as to enable the Income Tax Authorities to assess true and correct income of the assessee .... Since, the case in hand, the assessee did not get his books of account audited, therefore, as per the provisions of section 44AB read with section 271B of the Income Tax Act, the Assessing Officer rightly levied the penalty u/s 271B .... for the proposition that pacca book of cash sales and purchase register are account books as defined under section 2(12A) and therefore, finding of Tribunal that initiation of proceedings for imposing of penalty under section 271B was not justified, could not be sustained 3. [2010] 329 ITR 615 (Karnataka), CIT v. S.C. Naregal (para 3, 6 & 10) (D) At the time of hearing, le....
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....y that has already proceeding u/s. 271A of the Act, penalty u/s. 271A of the Act been initiated for non maintain books of accounts by assessee u/s. 44AA of the Act, penalty u/s. 271B cannot be imposed. 7. Per contra, the learned DR relied upon the orders passed by both the lower authorities. 8. The AR further submitted that Hon'ble Allahabad High Court held in the order [(2007) 165 Taxmann 1 All)] CIT, Bareilly Vs. Bisauli Tractors that the Section 271B of the Act is not attracted in a case where no account has been maintained and instead recourse u/s. 271A can be taken. 9. Further, in support of his contentions the Ld. AR has relied upon following decisions i. "Mr. Mohit Garg Vs. ITO (DEL-Trib.) :(2022) 109 TLC 395, (ITAT Delhi) 12. At the same time, the legislature is also provided for separate levy of penalty for failure to meet each statutory requirement. In the instant case, the audit could have been conducted in the absence of books of accounts. If a person has not maintained the books of accounts, the question of audit does not arise. The infraction of Section 44AB gets attracted only when the assessee maintains the books of a....
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....ccount have not been maintained. (E.2) In the case of CIT vs. S. K. Gupta & Co. (All-HC): (2010) 322 ITR 86 also, relevant portion of which is reproduced below; Hon'ble Allahabad High Court has taken a view in favour of assessee: 6. The submission of Sri Mahajan is misconceived for the reason that the requirement of getting the books of account audited could arise only where the books of accounts are maintained. If for some reason the assessee has not maintained the books of account the appropriate provision under which penalty proceedings can be initiated is under section 271A of the Act which recourse has also been taken by the assessee as would appear from the order of the Tribunal. 7. The Tribunal was, therefore, justified in upholding the order of the Commissioner of Income-tax (Appeals) cancelling the penalty imposed under section 271B of the Act. 8. The appeal fails and is, therefore, dismissed. (E.2.1) In view of the foregoing, and respectfully following the precedents in CIT vs. Bisnauli Tractors (supra); and in CIT vs. S. K. Gupta & Co. (supra); the penalty levied under section 271B of the I.T. Act is hereby deleted. (E.3) In the re....
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....aid order clearly states that the order is only for initiation of penalty proceedings. Complete Para 8 is reproduced for your kind consideration. Document 2 8. It remains to be seen whether proceedings under section 2718 were necessarily required to be initiated in the assessment proceedings of the relevant assetscacot year, But as it is, the defaults contemplated by section 271A and section: 2718 are separate and distinct. Under the latter provision if the assessce fails to get his accounts audited under section 44AB, he is liable to penalty as laid down in this section. The object is to get a clear picture of the assessce's accounts whose tamover exceeds the prescribed limit. The rates envissging two types of defaults are also different. Therefore, without dilating on the issue further we find no difficulty in holding that the impegned second notice dated 11-9-1989 cannot be ascribed to the direction of the Assessing Officer for initiation of penalty proceedings in his assessment order datod 30-5-1986. Since it is not covered by that ondes, it should be treated as initiating penalty proceedings under section 2718 from the date it was issued and this was not barnd by time unde....
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.... c) The third case law quoted by learned D.R. taxmann.com Research 133 [2011] 16 taxmann.com 420 (Karnataka)/[2011] 200 Taxman 17 (Karnataka) (Mag.)/[2010] 329 ITR 615 (Karnataka)[23-09-2008] [2011] 16 taxmann.com 420 (Karnataka) HIGH COURT OF KARNATAKA Commissioner of Income-tax v. S.C. Naregal" V.G. SABHAHIT AND S. SATYANARAYANA, JJ. IT APPEAL NO. 362 OF 2004 SEPTEMBER 23, 2008 Your Honour the given case (Page 133 of Paper Book submitted by learned D.R.) is not applicable to the appellant case. In the given at Para 7 and Para 8 clearly states that the appellant was maintaining party wise register for credit sales, pucca book of cash sale and purchase register and since in the appellant case, no such statements has been prepared or maintained for the year under consideration and therefore the appellant request your honour to kindly ignore the given case law and the same is not applicable in appellant case. Document 4 7. The learned counsel for the appellant submitted that the assessee has admitted in its statement and the reply given to the show cause notice that he is maintaining the party wise register for credit sales, pucca book of cash sales and purchase....