TaxTMI 
TaxTMI 
2026 (7) TMI 1588
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..... "Objectives of Tax Audit" has been elaborated in CBDT Circular No.387 dated 6th July 1984. Herein, it is clearly stated that Section 44AB has been introduced in the statute book of Income-Tax Act to ensure that books of accounts & other records of business are properly maintained. That is to say, intention of legislature is to enforce maintenance of books of accounts (See Exhibit-1). 3. Both learned AO & CIT(A) ought to have considered the fact that Section 44AB inserted in statute book to enforce compliance of maintaining books of accounts. The Appellant has maintained books of accounts in Tally Accounting Package & also uploaded Report U/s 44AB vide Ack.No.388470401090720 Dt.09.07.2020, that too before conclusion of assessment. Neither AO nor CIT(A) disputed these two major facts & circumstances of the case in their orders passed. 4. In the case of Vardhabhai Jethabhai Patel Vs ITO (ITA No.1197/AHD/2024), Ahmedabad Bench of ITAT (See Exhibit-2) it was held that Penalty U/s 271B is applicable only when the accounts are not audited as mandated U/s 44AB & not just for late submission of Report U/s 44AB. In the case of Commissioner of Income-Tax Vs Capital Electro....
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....ncluded the penalty proceedings by levying penalty u/s 271B of the Act as below: Failure to get accounts audited as required u/s 44AB of the Act Total receipts/turnover 1,96,03,345/- Half percent of receipts (0.5%* 1,96,03,345) 98,016/- Penalty imposed u/s 271B of the IT Act, 1961 98,016/- Thus, the AO imposed the penalty u/s 271B of the Act amounting to Rs. 98,016/- for failure to get accounts audited vide penalty order dated 9.9.2024. 4. Aggrieved by the above penalty order passed u/s 271B of the Act, dated 9.9.2024, the assessee preferred an appeal before the ld. CIT(A)/NFAC. 5. The ld. CIT(A)/NFAC dismissed the appeal of the assessee on the ground that the assessee being engaged in a business in which he had such a huge turnover, then the assessee must be knowing that he is required to maintain proper books of accounts and get these audited. Further, the ld. CIT(A)/NFAC held that the assessee has no reasonable cause for not getting the accounts audited and accordingly there is no excuse from levying penalty on him. In view of these facts of the matter, the ld. CIT(A)/NFAC held that the penalty levied by the AO is liable to be upheld. 6....
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....tained. 9.1 Before proceeding further, we may take note of the provisions of section 44AB, 271B & 273B of the Act for the purpose of this case, which reads as under: 44AB. Audit of accounts of certain persons carrying on business or profession. Every person,- (a)carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year [***]: [Provided that in the case of a person whose- (a)aggregate of all amounts received including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed five per cent of the said amount; and (b)aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed five per cent of the said payment, this clause shall have effect as if for the words "one crore rupees", the words "[ten] crore rupees" had been substituted:] [Provided further that for the purposes of this clause, the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, sh....
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....te and furnishes by that date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section. Explanation.-For the purposes of this section,- (i)"accountant" shall have the same meaning as in the Explanation below subsection (2) of section 288; (ii)"specified date", in relation to the accounts of the assessee of the previous year relevant to an assessment year, means [date one month prior to] the due date for furnishing the return of income under sub-section (1) of section 139. 271B. [ Failure to get accounts audited. [Inserted by Act 21 of 1984, Section 30 (w.e.f. 1.4.1985).] - If any person fails ][* * *] [ Omitted by Act 46 of 1986, Section 21 (w.e.f. 10.9.1986).] 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 44-AB] [ Substituted by Act 22 of 1995, Section 48, for certain words (w.e.f. 1.7.1995).], the [Assessing Officer] [ Substituted by Act 4 of 1988, Section 2, for " Income-tax Officer" (w.e.f. 1.4.1988).] may direct that such person shall pay, b....
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.... on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.]". 9.2 An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. 9.3 Section 273B starts with the non obstante clause and provides that notwithstanding anything contained in several provisions enumerated therein including section 271B, no penalty shall be imposable on the person or the assessee, as the case may be, for failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. A clause beginning with 'notwiths....