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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
The above captioned appeal filed at the instance of assessee is pertaining to assessment year 2009-10 is directed against the orders of Ld. Commissioner of Income Tax (Appeals) (in short ‘Ld.CIT’], Ujjain, dated 11.10.2017 which is arising out of the order u/s 271B of the Income Tax Act 1961(In short the ‘Act’) dated 30.01.2017 framed by ITO-Mandsaur.
ITANo.09/Ind/2018 Kishor Patidar
Brief facts is culled out from the records are that the assessee is an individual engaged in the business. Income of Rs.2,97,870/- declared in the return of income filed on 03.04.2013 and assessment u/s 143(3) r.w.s. 148 of the Act was completed on 28.07.2016, determining total income at Rs.6,26,617/-. During the course of assessment proceedings Ld. AO observed that in the trading account filed by the assessee in the return of income gross receipts were shown at Rs.39,78,709/- whereas in Form No.26AS gross receipts subjected to tax deducted at source were appearing at Rs.55,01,093/-. Ld. AO was of the view that since the turnover of the assessee exceeded to Rs.40 lakhs, he was required to get the account audited u/s 44AB of the Act. However, since the assessee failed to get the books of accounts audited u/s 44AB of the Act. Ld. AO levied the penalty u/s 271B of the Act, at Rs.27,505/-. Against the levy of penalty u/s 271B of the Act assessee filed an appeal before the ld. CIT(A) but failed to succeed.
Now the assessee is in appeal before the Tribunal raising following grounds: “
1. That on the facts and in the circumstances of the case the ld. CIT(A) erred in not holding that the order dated 30.01.2017 passed by Ld. Assessing Officer for levy of penalty u/s 271B of the Act was wrong and invalid as the same was (a) Barred by Limitation; and (b) passed by ignoring the reasonable causes u/s 234B; and (c) the default was merely technical and venial and revenue has not suffered any loss due to that ;and (d) due to other reasons.
2. Ground No.2 (in the nature of submission) 1.1 That the order dated 30.01.2017 is barred by limitation as; 2
ITANo.09/Ind/2018 Kishor Patidar (a) in the case of penalty u/s 271B, the period of limitation is prescribed in “Later Part” of Section 275(1) (Earlier part of section 275(1) is not applicable for section 271B as per various judicial decisions, as sec. 271B penalty can be initiated independently of any assessment etc. proceedings); (b) as per “Later Part” of section 275(1), no order imposing penalty could have been passed after the expiry of 6 months from the end of the month in which the action for imposition of penalty is initiated: (c) in this case, the first notice for initiating penalty proceedings was issued on i.e. action for imposition of penalty was initiated on 24.02.2016. (d) As such the above period of limitation expired on 30.08.2016, thus, the order passed on 30.01.2017 is barred by limitation. 1.2 That the reasonable cause is that the Form No.26AS was containing gave mistake (also mentioned in assessment order u/s 143(3), therefore, the appellant could not understood and remained under bonafide belief that his gross receipts after rectification of From No.26AS will not be more than Rs.40 lakhs and he may not be liable for audit u/s 44AB. 1.3 The main purpose of audit u/s 44AB is to assist the Ld. Assessing Officer in assessment proceedings u/s 143(3) etc. But nowhere in the assessment order, the Ld. Assessing Officer mentioned that he got any difficulty in doing assessment in absence of audit report. Rather he simply replaced the net profit rate of 8% by 11.50% and completed the assessment. He merely mentioned the reason for levying the penalty that the audit report is a legal requirement which is not complied with. Thus the default of non audit is merely technical and venial and the revenue has not suffered any loss. In such cases penalty may not be sustained (Judicial decisions relied upon mentioned in CIT(A)’s order).”
At the outset, Ld. counsel for the assessee submitted that the issues raised on merits against the levy of penalty u/s 271B of the ITANo.09/Ind/2018 Kishor Patidar Act is squarely covered in favour of the assessee by the decision of Coordinate Bench, Indore in the case of Vinay Agrawal in ITANo.933/Ind/2018 dated 31.10.2019. The reliance was also placed on the following decisions; 1. Brij Lal Goyal vs. ACIT (I.T.A.T., Del) 88 ITD 413 (2004) 2. Shri Satya Prakash Mundra vs. ITO Kishangarh (I.T.A.T. Jaipur) 3. Shri Nirmal Kumar Joshi vs. ITO Kishangarh ITA No.73/JP/2018 (I.T.A.T. Jaipur)
Per Contra Ld. Departmental Representative (DR) supported the orders of the lower authorities but failed to controvert the contention of the Ld. counsel for the assessee that the issue is covered in favour of assessee by the decision of Coordinate Bench, Indore in the case of Vinay Agrawal vs. ITO(supra).
We have heard rival contentions and perused the record placed before us and carefully gone through the decisions referred and relied by the ld. counsel for the assessee. Sole issue on merits relates to levy of penalty u/s 271B of the Act at Rs.27,505/- on the assessee for not getting account audited u/s 44AB of the Act. We observe that in the return of income filed in compliance notice u/s 148 of the Act assessee has disclosed turnover of Rs.39,78,709/- and offered income u/s 44AB of the Act @ of 8% as net profit. Since the turnover was less than of Rs.40 laksh, assessee did not get account audited u/s 44AB of the Act. During the course of ITANo.09/Ind/2018 Kishor Patidar assessment proceeding when the assessing officer examined the return filed by the assessee in light of Form No.26AS (which is a statement of tax deducted at source by various persons for the amounts paid to assessee). After examining Form No.26AS Ld. AO found that the gross turnover of the assessee for the year is Rs.55,01,093/- which exceeded prescribed limit of Rs.40 lakhs and thus the assessee was held liable for levy of penalty u/s 271B of the Act for not getting account audited u/s 44AB of the Act.
We observe that similar issue, facts and circumstances came up before Coordinate Bench, Indore in the case of Vinay Agrawal vs. ITO(supra). Coordinate Bench referred and relied on the decision of Coordinate Bench, Jaipur in the case of Shri Satya Prakash Mundra vs. ITO vide ITANo.754/JP/2016 dated 23.01.2019 observing as follows:
10. We have heard rival contentions and perused the record placed before us. The sole grievance of the assessee relates to levy of penalty u/s 271B of the Act at Rs.35,830/-. The undisputed facts remains that in the return of income, assessee has disclosed turnover of Rs.21,66,292/-. The assessee also disclosed commission income @1% of the turnover of Rs.49,48,900/- being a transactions of cash deposited and withdrawal relating to purchase of clothes for hawkars/Feriwalas. The assessee claim was denied by the Ld. AO and the alleged amount of Rs.49,48,900/- was treated as unexplained turnover.
In these given facts where the assessee was in a bona fide belief of treating the commission income as turnover along with other turnover accounted in the books of accounts during the year which was below of limit u/s 44AB of the Act, but Ld. AO
ITANo.09/Ind/2018 Kishor Patidar treated unaccounted turnover as part of total turnover and holding the assessee liable for paying penalty u/s 271B of the Act for not getting books of account audited, we find that the issue stands spuarely covered in favour of the assessee by the decision of the Coordinate Bench, Jaipur in the case of Shri Satya Prakash Mundra vs. ITO vide ITANo.754/JP/2016 dated 23.01.2019. For sake of convenience the grounds raised in the case of Shri Satya Prakash Mundra(supra) are mentioned below: "1. On the facts and circumstance of the case, the Ld. CIT(A) erred in confirming the penalty of Rs.31,607/- levied by Ld. AO u/s 271B of the Income Tax Act, when the turnover declared by assessee was merely Rs.24,80,995/-, i.e. below the limit prescribed u/s 44AB of the Act. Appellant prays the penalty so levied may please be deleted. 1.1 That, the Ld. CIT(A) has further erred in confirming the action of Ld. AO of including a sum of Rs.38,40,500/-, alleging the same as undisclosed turnover, to determine the limit prescribed u/s 44AB by ignoring the fact that the said amount was not recorded in regular books of accounts thus could not be considered for levy of penalty u/s 44 AB of the Income Tax Act, 1961.
2. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal."
12. The above grounds were adjudicated by the I.T.A.T., Jaipur Bench in favour of the assessee observing as follows: We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee has declared the turnover of Rs. 24,80,995/- and the income was declared U/s 44AD of the Act in the return of income. The turnover declared by the assessee in the books of account and return of income does not exceed the limit provided U/s 44AB of the Act and therefore, there
ITANo.09/Ind/2018 Kishor Patidar was no mandatory requirement of books of account to be audited U/s 44AB of the Act. The Assessing Officer during the survey U/s 133A of the Act conducted in the case of one Shri P.C. Vijayvargiya and others on 06/11/2011 found that Shri P.C. Vijayvargiya was having bank deposits which according to him was sale consideration of marble traders of Kishangarh. The A.O.proposed to make the addition of 10% of the unaccounted sale of Rs. 38,40,000/- found to be belonging to the assessee. The assessee agreed to the addition of 10% of the said unaccounted sale in the assessment proceedings. Based on the said addition, the Assessing Officer was of the view that the assessee's turnover has exceeded the limit of Rs. 60.00 lacs as provided U/s 44AB of the Act and consequently the assessee has violated the mandatory condition of his books of account to be audited. The penalty U/s 271B of the Act has been levied by the Assessing Officer due to the reason that there was an addition on account of unaccounted sale. Thus, it is clear that at the time of preparing the books of account, the turnover of the assessee was only Rs. 24,80,995/- and consequently it was not necessary to get the books of account audited as required U/s 44AB of the Act. The A.O. has made the addition based on the survey conducted in the case of one Shri P.C. Vijayvargiya, however, no corresponding material in the possession of the assessee was found by the Assessing Officer to show that at the time of preparing the books of account, the assessee's turnover was exceeding the limit of Rs. 60.00 lacs as provided U/s 44AB of the Act. Hence, the requirement of audit of the books of account as per Section 44AB of the Act is only in the case when the assessee on its own declared the turnover of more than the minimum amount prescribed U/s 44AB of the Act. The Coordinate Bench of this Tribunal in the case of Nirmal Kumar Joshi & Anr. Vs ITO (Supra) while considering the identical issue has held in para 9 and 10 as under:
ITANo.09/Ind/2018 Kishor Patidar
"9. We have heard the rival contentions and perused the material available on record. We find that the AO has accepted the income offered in the return of income filed under section 44AD of the Act and at the same time, has brought to tax the undisclosed business receipts of Rs.43,34,064/- offered for taxation during the course of assessment proceedings. The AO has thus come to a conclusion that since the combined receipts exceed the prescribed threshold of Rs 60 lacs, the assessee has failed to get his books of accounts audited. We find that by accepting the income offered under section 44AD(1), the AO has thus accepted the assessee's eligibility for presumptive basis of taxation under section 44AD. Once the said eligibility is accepted, if we read the provisions of section 44AD and in particular sub-section (5), it clearly provides that an eligible assessee who claims his income from the eligible business is below the presumptive rate of 8% of total turnover or gross receipts, he shall be required to maintain books of accounts and also get them audited and furnish a report as required under section 44AB of the Act. Therefore, only in a scenario, where such a claim is made by the assessee whereby he claims that his income to be lower than 8% of total turnover or gross receipts, he will be required to maintain books of accounts and get them audited. Corresponding provisions are provided in section 44AA(2)(iv) of the Act as well. In the instant case, the assessee has not made any such claim in his return of income. Further, the Revenue has accepted the claim of the assessee as being eligible for such presumptive taxation where the assessee has reported a net profit of 8.09% on total reported turnover of Rs 48,98,269. In such a situation, having not disturbed the said position under section 44AD, it cannot be said that the assessee has failed to get his books of accounted where undisclosed business receipts of Rs. 43,34,064/- are brought to tax during the course of assessment proceedings and whereby the prescribed turnover threshold has been breached. Had the Revenue rejected the assessee's claim under section 44AD of the Act and thereafter, taking into consideration 8
ITANo.09/Ind/2018 Kishor Patidar the declared turnover of Rs 48,98,269 and undisclosed business receipts of Rs 43,34,064, had come to a position that the assessee has failed to get offered his books of accounted, that in a such a scenario, the contention of the Revenue could have been accepted. Further, what has been referred in section 44AB is the books of accounts maintained in the regular course of business and where an admission is made by the assessee based on third party statement during the course of survey that the amount found deposited in the bank account belongs to the assessee, it cannot be said that regular books of accounts are maintained even in respect of unaccounted sales or business receipts and the penalty can be levied under section 271B of the Act. In this regard, we refer to the decision of the Coordinate Bench in case of Brij Lai Goyal vs. ACIT (supra) wherein it has been held as under: "11. It is evident from the aforesaid observation that books of account maintained in regular course only make the assessee eligible for grant of immunity from penalty and not with reference to any of such books, which have not been maintained in the regular course of business. Admittedly, the additional sales found as a result of search, was not recorded in the books of account regularly kept in the course of business by the appellant. Merely because the appellant accepted the additional sates for the purpose of assessment of the relevant year on the basis of entries in the seized documents, the same would not constitute accounts of the appellant maintained in the regular course of business and on that basis alone liability cannot be fastened on the assessee by holding him to have committed the default. Furthermore, the word "accounts" has not been defined under the IT Act However, under s. 34 of the Indian Evidence Act, 1872, sanctity is attached to the books of accounts, if the books are indeed "account books", i.e., in original if they show on their face, that they are kept in the 'regular course of business'. So, the accounts under s. 34 of Indian Evidence Act means accounts which are maintained in the regular course of 9
ITANo.09/Ind/2018 Kishor Patidar business. Accordingly we are satisfied that the record carrying entries from which the appellant admits of additional sales are not the accounts as referred to under s. 44AB of the Act. On that basis it was not open to the AO to hold that the sales of the assessee as referred in s. 44AB of the Act have exceeded to Rs. 40 lakhs and by not getting such accounts audited from an accountant, the appellant has committed a default. Such a finding arrived at by the AO is reversed."
In light of above discussions and in the entirety of facts and circumstances of the case, the penalty levied under section 271B is hereby deleted. In the result, the appeal of the assessee is allowed." The addition made by the Assessing Officer during the assessment proceedings on the basis of unaccounted sale cannot be regarded as the turnover for the purpose of Section 44AB of the act because the documents relied upon by the A.O. are neither the part of books of account nor would substitute the books of account or constitute the books of account of the assessee regularly maintained. Therefore, the books of account maintained by the assessee in regular course of business cannot be substituted by the material gathered by the Assessing Officer in the course of some survey in the case of third party though the said material may be relevant evidence for making the addition to the income of the assessee. Hence, in view of the facts and circumstances and following the earlier decision of this Tribunal, the penalty levied U/s 271B of the Act is deleted.
After going through the above decision of the Coordinate Bench, we are of the considered view that the issue raised before us is squarely covered by the decision of Coordinate Bench and the impugned penalty of Rs.35,830/- levied u/s 271B of the Act is thus liable to be deleted. Finding of the Ld. CIT(A) is thus set aside and appeal of the assessee is allowed.
We, therefore, in the facts and circumstances of the case and 10
ITANo.09/Ind/2018 Kishor Patidar respectfully following the decisions of Coordinate Bench, direct the revenue authorities to delete the penalty of Rs.27,505/- levied u/s 271B of the Act. Thus, finding of Ld. CIT(A) is set aside and the grounds of appeal raised on merits by the assessee stands allowed and other grounds are general in nature which needs no adjudication.
In the result appeal of the assessee is allowed.
The order pronounced in the open Court on 21.01.2020.