SHRI SHARAD KANKARIA,JAIPUR vs. INCOME TAX OFFICER, WARD-6-1, JAIPUR

ORDER PER SANDEEP GOSAIN, JM Both these appeals have been filed by the assessee against separate orders of the ld. CIT(A), Ajmer dated 10-12-2018 and 27-12-2018 for the Assessment Year 2011-12 in the matter of confirming penalty u/s 271A and 271B of the I.T. Act, 1961 respectively. The assessee has raised the following ground in the respective appeals. Shri Sharad Kankaria vs ITO, Ward- 6(1), Jaipur A.Y. 2011-12 u/s 271A ‘’in the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the actions of AO in levying penalty of Rs. 25,000/- u/s 271A. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said penalty of Rs. 25,000/- A.Y. 2011-12 u/s 271B ‘’in the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the actions of AO in levying penalty of Rs. 1,50,000/- u/s 271B. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said penalty of Rs. 1,50,000/- 2.1 The solitary grievance of the assessee in this appeal is regarding confirming the penalty of Rs. 25,000/- u/s 271A of the Act by the ld. CIT(A). In this appeal of the assessee, it is noted that the AO has imposed the penalty of Rs. 25,000/- by observing as under:-

‘’4. I have considered the material available on record and the assessee's above submission. The reply of the assessee is not acceptable. I am satisfied that the assessee has willfully avoided to maintain the books of account and other documents which may enable the AO to compute his total income and accordingly the assessee is liable for imposing penalty as envisaged u/s 271A r.w.s. 274 of I.T. Act, 1961. Accordingly, I hold the assessee is liable for imposing penalty of Rs. 25,000/- and as such penalty of Rs. 25,000/- is hereby imposed u/s 271A r.w.s. 274 of the I.T. Act, 1961.

Shri Sharad Kankaria vs ITO, Ward- 6(1), Jaipur 2.2 In first appeal, the ld. CIT(A) has confirmed the action of the AO by observing as under:-

‘’4.3 I have gone through the penalty order, statement of facts, grounds of appeal and written submission carefully. In view of the facts discussed by the AO in the penalty order, I am of the considered opinion that the gross receipts from the business of the appellant was more than Rs. 10 lacs and the assessee was required to maintain the books of account as provided u/s 44A. The appellant has failed t show that there was any reasonable cause for non-maintenance of books of accounts. Therefore, the penalty of Rs.25,000/- levied by the AO u/s 271A is hereby confirmed.’’ 2.3 We have heard the rival contentions and perused the materials available on record. Brief facts of the case are that the assessee filed its return of income on 3-2-2012 declaring total income of Rs. 1,85,410/- and the assessment u/s 143(3) of the Act was completed on 5-03-2014 at an income of Rs. 7,82,150/-. As per the details available with the department, the assessee had received aggregate receipt from business of Rs. 5,82,860/- during the year under consideration. The AO noted that the assessee has shown the income from business under the category of no books case. The AO further noted that as per the provisions of Section 44AAA(2) of the Act every person carrying on business or profession and the gross receipts exceeds Rs. 10 lacs in the just preceding year or in case Shri Sharad Kankaria vs ITO, Ward- 6(1), Jaipur where the business or profession is newly set up in any previous year and his income from business or profession is likely to exceed Rs. 1.20 lacs or the total sales, turnover or gross receipts as the case may be likely to exceed Rs. 10 lacs is mandatory to keep and maintain such books of accounts and other documents which may enable the AO to compute his total income in accordance with the provisions of this Act. The AO further noted that as the gross receipts of the assessee from business were more than Rs. 10 lacs therefore, the assessee was required to maintain books of account and other documents which may enable the AO to compute his total income. In this case the AO noted that the assessee has not maintained any books of accounts and as such he has committed a default within the meaning of provisions of sec 44AA of the Act which made the assessee liable for penalty u/s 271A of the Act. The AO thus imposed the penalty of Rs. 25,000/- u/s 271A of the Act which was confirmed by the ld. CIT(A). During the course of hearing, the Bench noted that the assessee did not maintain the books of account as provided u/s 44AA of the Act as the gross receipts of the assessee from business was more than Rs. 10 lacs. The ld.AR of the assessee did not advance any controverting arguments against the findings of the lower authorities. In Shri Sharad Kankaria vs ITO, Ward- 6(1), Jaipur view of the above facts and circumstances of the case, we find no reason to interfere with the order of the ld. CIT(A). Thus the solitary ground of the assessee as to confirming of penalty of Rs. 25,000/- u/s 271A of the Act by the ld. CIT(A) is sustained.

3.1 The solitary ground of the assessee is regarding confirming the penalty of Rs.1,50,000/- by the ld. CIT(A) made by the AO u/s 271B of the Act. The facts as emerges from the ld. CIT(A)’s order are as under:-

‘’4.3 I have gone through the penalty order, statement of facts, grounds of appeal and written submissions carefully. It is seen that the AO has levied the penalty holding that the appellant had the turnover of Rs. 3,13,27,893/- in trading of shares. The appellant has contended that only transaction of Rs. 48,61,090/- were delivery based transactions and the transactions of Rs. 2,60,85,508/- were non-delivery based transactions. Therefore, turnover of the appellant was only Rs. 59,61,001/-which has been worked out by the appellant as under:-

S.N. Particulars Amount (Rs.) 1. Intra-day turnover covered under speculative transactions 56994 2. Intra-day turnover other than speculative transactions 42917 3. Turnover for sale of shares (Delivery based) 4861090 Total Turnover 4961001 Code Amount Amount Amount No. (Rs.) (Rs.) (Rs.) 2. Sale of an equity share in a company 776991 4084099 4861090 Shri Sharad Kankaria vs ITO, Ward- 6(1), Jaipur or a unit of an equity oriented fund, where – 02 (a) the transaction of such sale is entered into in a recognized stock exchange; and (b) the contract for the sale of such share or unit is settled by the actual delivery or transfer of such share or unit 3. Sale of an equity share in a company 1908225 24177283 26085508 or a unit of an equity oriented fund, where – 03 (a) the transaction of such sale is entered into in a recognized stock exchange; and (b) the contract for the sale of such share or unit is settled by the actual delivery or transfer of such share or unit

The appellant was provided more than opportunity to furnish documentary evidences in support of his claim that the turnover of Rs. 2,60,85,508/- was non-delivery based speculative transactions but he could not produce the evidence to prove his contention. Therefore, the contention of appellant that only transactions of Rs. 48,61,090/- were delivery based transactions and all other transactions were non-delivery based speculative transactions cannot be accepted. As the appellant has failed to get his accounts audited u/s 44AB and he has also failed to show that there was any reasonable cause for not getting the books of accounts audited, therefore, the penalty of Rs.1,50,000/- made by the AO u/s 271B is hereby confirmed.’’ 3.2 We have heard the rival contentions and perused the materials available on record. At the outset of the hearing the ld.AR of the assessee relied on the decision of the ITAT Coordinate Bench in the case of Shri Sharad Kankaria vs ITO, Ward- 6(1), Jaipur Roshni Devi vs ITO (ITA No. for the Assessment Year 2011-12) praying that this issue is covered vide order dated 16-05- 2018. The observation of this bench in deleting the penalty u/s 271B is as under:-

‘’17. We have heard the rival contentions and pursued the material available on record. It is an admitted position that the assessee has not maintained the books of accounts in respect of her business run in name and style of M/s Jharkhand Electric & Electronics, the turnover of which was determined at Rs 96.10 lacs. Basis the same, we have upheld the levy of penalty under section 271A for non-maintenance of books of accounts. Once the penalty has been levied for non-maintenance of books of accounts, there cannot be penalty again for non-audit of books of accounts which were not kept at first place. It is clearly a case of impossibility of performance where it is expected that the assessee should get her books of accounts audited when it is a known and admitted fact that there are no regular books of accounts which have been maintained at first place. Our view is fortified by the decision of the Hon’ble Gauhati High Court in case of Rajmal Parsuram Todi (supra) wherein it was held that when a person commits an offence by not maintaining the books of accounts as contemplated under section 44AA, the offence is complete and after that, there can be no possibility of any offence as contemplated under section 44AB and therefore, the imposition of penalty under section 271A is erroneous. In the result, the levy of penalty under section 271B is hereby deleted.’’ 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 Shri Sharad Kankaria vs ITO, Ward- 6(1), Jaipur 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.

4.0 In the result, the appeals of the assessee in the case of penalty u/s 271A is dismissed and in the case of penalty u/s 271B is allowed with no order as to cost

Order pronounced in the open court on 23 /01/2020.