M/S. VARUN SALES PVT. LTD.,KOLKATA vs. I.T.O., WARD - 11(1), KOLKATA, KOLKATA

The grounds of appeal raised by the assessee read as under:-

(1) That, the Ld. CIT(A) on the facts and in the circumstances of the case erred in having upheld the penalty of Rs.25,000/- u/s 271A of the Act solely on the reasoning as canvassed by the Ld. A.O., NFAC, Delhi and simply holding the assessee’s submission as liable to be dismissed on merits without pointing out any demerits whatsoever in the submission made before him challenging the levy of penalty and hence the penalty upheld by not passing a speaking order deserves to be quashed. (2) That, the Ld. CIT(A) erred in not considering that the penalty u/s 271A of the Act levied on the allegation of the assessee’s failure to maintain books of account as required u/s 44AB of the Act was factually incorrect when the Auditor’s Report certified maintenance of proper books of account which were filed earlier and further filed before the Ld. AO, NFAC on 28/01/2022 in response to notice dated 01/01/2022 issued during the penalty proceeding u/s 271A of the Act and hence the penalty levied is void ab initio. (3) That, without any prejudice to the above, the Ld. AO, NFAC, Delhi also erred in not applying his own mind on the evidence etc. filed before him during proceeding u/s 271A of the Act rather to rest on the conclusion of the earlier AO in the order u/s 147/254 of the Act in spite of the fact that Hon’ble Tribunal has also ratified maintenance of books of account u/s 44AB of the Act vide order dated 19.02.2020 for A.Y. 2010-11 under appeal. (4) That, therefore, as the impugned order upholding the penalty of Rs.25,000/- levied u/s 271A of the Act being based on factually incorrect facts of the case and also by not passing a speaking order, the same should be quashed and your appellant be given such relief(s) as prayed for.

At the outset, ld. Counsel for the assessee submitted that no penalty is imposable under section 271A of the Income Tax Act amounting to Rs.25,000/- as the assessee has duly maintained the books of account and furnished audited financial statements, which were also placed before the Tribunal during the course of appeal raised on merits of the case.

On the other hand, ld. D.R. supported the order of lower authorities.

We have heard the rival contentions and perused the relevant records placed before us. The assessee is aggrieved with the levy of penalty amounting to Rs.25,000/- under section 271A of the Act for not maintaining the books of account. Before us, ld. Counsel for the assessee placed the copy of decision of this Tribunal in assessee’s own case in dated 19.02.2020 placed at pages 16 to 18 of the paper book, wherein the issue raised was regarding addition of Rs.6,26,467/- made by the ld. Assessing Officer. While adjudicating the said issue, this Tribunal observed (‘SMC’ Bench) as follows:- “5. I also note that the assessee had filed the audited financial statement which is placed at pages 6 to 17 of the paper book. It is noted that since the assessee had not filed the return of income and the assessee did not reply to the 3 Assessment Year: 2010-2011 M/s. Varun Sales Pvt. Limited notice of the AO, the AO had made the GP addition. Regarding non-filing the ROI, the assessee had submitted that the accountant of the assessee Shri B. P. Mishra expired on 24.12.2012 and the director’s wife Smt. Sova Kanoria was also suffering from various ailments and she was admitted in M/s. Vision Care Hospital, Mukundapur, Kolkata and since the company incurred loss in this year, the director was of the bona fide belief that no return need to be filed. However, when the assessee received notice u/s. 142(1) of the Act he had filed the reply along with audited P&L Account and Balance Sheet and also other information which is shown (supra). Even though it is noted that the assessee had filed the aforesaid details still the AO has stated that there was no reply from assessee for his show cause notice u/s 144 of the Act. So he made the best judgment assessment. On appeal, the Ld. CIT(A) has not given any other reason to confirm the order of AO. In such a scenario, it is noted that the AO has not been fair while framing the assessment. It has to be kept in mind that the AO has dual role of an investigator as well as an adjudicator. As an adjudicator he has to be reasonable and fair to the assessee while framing assessment. In this case though the assessee had replied to the notice u/s. 142(1) of the Act though belatedly, the AO has brushed it aside/ignored it and had proceeded to estimate the income by resorting to best judgment assessment which cannot be countenanced. Thus, this is a case where, according to me, no proper opportunity has been given to the assessee during the assessment stage. In such a scenario, relying or the decision of the Hon’ble Supreme Court in Tin Box Company Vs. CIT (2001) 249 ITF 216 (SC), I am inclined to set aside the impugned order of the Ld. CIT(A) and remand the matter back to the file of AO for de novo assessment in accordance to law after affording reasonable opportunity of hearing to the assessee. The assessee is directed to diligently take part in the assessment proceeding and furnish documents before the AO and the AO to frame assessment as per law”.

From perusal of the above finding, we find that the assessee has placed the copy of audited financial statement and all other information relating to Profit & Loss Account and Balance-sheet and the said statement could have prepared only on the basis of books of account regularly maintained by the assessee. Since the Assessment Year: 2010-2011 M/s. Varun Sales Pvt. Limited books of account have been maintained by the assessee, provision of section 271A of the Act cannot be invoked. Since the assessee has properly demonstrated that it regularly maintained the books of account, we, therefore, under the given facts and circumstances are of the considered view that the assessee should not have been visited with the penalty under section 271A of the Act. We accordingly delete the penalty of Rs.25,000/- and allow the grounds raised by the assesese.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 16th February, 2023. Sd/- Sd/- (Sanjay Garg) (Manish Borad) Judicial Member Accountant Member Kolkata, the 16th day of February, 2023 Copies to :(1) M/s. Varun Sales Pvt. Limited, 3, Middle Road, Hasting, Kolkata-700022 (2) Income Tax Officer, Ward-11(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 (3) Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi; 4) Commissioner of Income Tax- ;