TaxTMI 
TaxTMI 
2026 (8) TMI 948
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....9-20. 2. The Assessing Officer (AO) observed that the appellant, M/s. Sri Palanivel Traders, a partnership firm, had not filed its return of income for AY 2019-20. Based on information available with the Department, the AO noted that cash deposits aggregating to Rs. 3,71,50,000/- had been made during the relevant previous year in a bank account maintained with CSB Bank Ltd. Consequently, the assessment was reopened u/s. 147/148A of the Income Tax Act after following the prescribed statutory procedure. During the reassessment proceedings, the appellant contended that the bank account in question did not belong to the partnership firm but to a separate proprietorship concern, namely M/s. Sree Palanivel Traders, owned by Smt. K. Savithiri. ....
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....4AB. Accordingly, the AO initiated penalty proceedings u/s. 271B read with section 274 of the Act and, holding that no reasonable cause had been established for the failure to obtain the mandatory tax audit, imposed a penalty of Rs. 1,50,000/- u/s. 271B after obtaining the approval of the competent authority. 3. On appeal before CIT(A), the ld.CIT(A) in sum and substance has given the following findings: I have carefully considered the penalty order passed by the Assessing Officer, the written submissions filed by the appellant, and the material available on record. The Assessing Officer observed that the appellant had bank deposits aggregating to Rs. 4,30,60,895/- during the relevant previous year. Since the appellant failed to....
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....turnover has been determined accordingly. Thus, the appellant's contention that no business activity was carried on during the relevant previous year is not borne out by the facts on record. As regards the contention that no books of account were maintained and, therefore, no penalty u/s. 271B is leviable, it is seen that the Assessing Officer has specifically recorded that the appellant failed to produce books of account despite being afforded adequate opportunities during the assessment proceedings. The appellant has also not established that it was under no statutory obligation to maintain books of account. Once the Assessing Officer has determined that the appellant carried on business with turnover far exceeding the prescr....
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....dited does not arise. At best, failure to maintain books may attract the provisions of section 271A, wherever applicable, but penalty u/s. 271B cannot be levied for failure to audit books which admittedly do not exist. It was further submitted that the Assessing Officer himself has estimated the turnover by treating the bank credits as business receipts. Therefore, the turnover was not derived from any books of account maintained by the assessee. Penalty u/s. 271B cannot rest merely on estimated turnover. The ld.AR also submitted that the assessee had consistently taken the stand that the business of the partnership firm had already been discontinued in April, 2018 and that the bank account belonged to a proprietorship concern of Smt. K. Sa....
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....he Assessing Officer had repeatedly called upon the assessee to produce the books of account of the alleged proprietorship concern, but the assessee failed to do so. Consequently, the Assessing Officer rightly concluded that the deposits represented the business turnover of the assessee. The ld. DR therefore submitted that the Commissioner (Appeals) has correctly upheld the penalty and no interference is called for. 6. We have heard the rival submissions and carefully perused the material available on record. The short controversy before us is whether penalty u/s. 271B is exigible where the Assessing Officer himself proceeds on the footing that no books of account were produced or maintained and estimates the business income on the basis....
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....r failure to get those very accounts audited. Such reasoning is legally self-contradictory. Merely because the Assessing Officer estimated the bank deposits as business turnover exceeding the threshold prescribed u/s. 44AB would not automatically justify levy of penalty u/s. 271B in the absence of books of account. The audit contemplated u/s. 44AB is of books of account and not of estimated turnover or bank statements. The Commissioner (Appeals), while confirming the penalty, has observed that the assessee cannot avoid the statutory audit requirement merely by pleading non-maintenance of books. In our considered view, this reasoning overlooks the distinction maintained by the Act between the obligation to maintain books and the obligation t....