SHANKAR GOUD BALAGONI,HYDERABAD vs. INCOME TAX OFFICER, WARD-15(4), HYDERABAD

This appeal filed by the assessee is directed against the order dated 01.10.2018 of the Commissioner of Income Tax (A)-7, Hyderabad relating to Assessment Year 2013-14 whereby the penalty levied u/s 271A by the AO has been upheld by CIT(A).

The relevant facts as culled from the material on records are as under:

Assessee is an individual stated to be carrying on the retail business in Wines. He electronically filed his original return of income for A.Y 2013-14 on 26.09.2013 declaring total income at Rs.15,23,070/-. Thereafter, on 28.03.2014, he revised the return of income declaring an income of Rs.18,92,670/-. The case was selected for scrutiny and thereafter, assessment was framed u/s 143(3) vide order dated 07.03.2016 and the total income was determined at Rs.1,50,37,913/-.

During the assessment proceedings, it was noticed by the AO that assessee had shown net sales of Rs. 7.55 crores and admitted net profit of Rs.18,80,499/-. The assessee was asked to produce bills, vouchers and books of accounts maintained by him to which the Learned AR of the assessee inter alia stated that he is not in a position to produce any books of accounts, vouchers and bills etc. AO thereafter, in the absence of any books of accounts, bills and vouchers estimated the business income from Wine Business at Rs.30,69,865/- as against the income of Rs.18,80,499/- shown by the assessee thereby making an addition of Rs.11,89,366/-. Since, assessee had failed to produce the books of accounts, vouchers and bills, AO :- 3 -: vide penalty order dated 08.07.2016 passed u/s 271A levied the penalty of Rs.25,000/-.

Aggrieved by the penalty order of AO, assessee carried the matter before the CIT(A) who vide order dated 01.10.2018 in Appeal No.0212/CIT(A)-7/2017-18 upheld the order of AO and thereby dismissed the appeal of the assessee. Aggrieved by the order of CIT(A) assessee is now in appeal before us and has raised the grounds whereby the penalty levied u/s 271A has been upheld by CIT(A).

Before us, at the outset, Learned AR submits that there is a delay of 184 days in filing the present appeal by the assessee before the Tribunal. The assessee has filed an affidavit wherein it is stated that the appeal should have been filed on or before 28.01.2019 but has been filed on 31.07.2019 resulting into delay of 184 days. The reasons for delayed filing has been explained by the assessee in the affidavit and has prayed for condonation of delay.

Before us the Learned AR submitted that the delay in filing the present appeal was not in account of any malafide intention on the part of the assessee and prayed that in the interest of justice the delay in filing the appeal be condoned. Learned DR objected to the prayer of the Learned AR seeking condonation of delay. He submitted that the delay is inordinate and no justifiable reasons have :- 4 -: been given for the delay and therefore, the delay should not be condoned.

On the issue of condonation of delay in filing the appeal, we have gone through the affidavit filed by the assessee and heard both the parties. In view of the well settled principle of natural justice that no party should be condoned unheard and when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred and the rendering substantial justice should be the paramount consideration rather than rejecting on hyper technicalities. Further in the absence of any material on record placed by the Revenue to demonstrate that the delay in filing the appeal was with malafide intention or it was a deliberate act on assessee’s part, we are of the view that the delay needs to be condoned. We accordingly condone the delay in filing the appeal and proceed to dispose of the appeal on merits.

On the merits of the case, Learned AR submitted that the penalty in the present case has been levied u/s 271A of the Act. He submits that the penalty under section 271A is for failure to keep and maintain any books of account and documents required u/s 44AA or rules made thereunder. He submitted that in the present case, the assessee has maintained the books of account as can be :- 5 -: noted from the assessment order that the business income has been estimated after taking into consideration the opening stock, purchases and closing stock as disclosed by the Assessee. In support of his contention the books of accounts have been maintained by the Assessee, he pointed to observations in the tax audit report made by the auditor about the maintenance of Cash Books, Sales Register, Purchase Register and General Ledgers. He submitted that there is no material on record to demonstrate that assessee has not maintained the books of accounts. He further submitted that in the assessment order also AO has proceeded to initiate penalty u/s 271A. He submitted that since assessee has been maintaining the books of accounts but mere non-production of the books before the AO will not attract penalty u/s 271A. In support of his contention he also relied on the decision of Pune Bench of Tribunal in the case of Dr. Vinay T. Karnawat Sillod vs. ITO reported in [2007] 104 ITD 108 (PUNE). He submitted that the penalty levied be deleted. Learned DR on the other hand supported the order of lower authorities.

We have heard the rival submissions and perused the material available on record. The issue in the present case is with respect to levy of penalty u/s 271A of the Act. We find that the penalty has been levied by the AO for non- production of books of accounts and other documents :- 6 -: before the AO. We find that the penalty u/s 271A can be levied for failure to keep and maintain the books of accounts and other documents as required by section 44A or rules made thereunder. It is for non-maintenance or retaining the books of accounts and documents and not for the non-production of the same before the AO. Further, it is also a fact that the business income of the assessee has been estimated by the AO on the basis of the figures of Opening Stock, Purchases and Closing Stock, Sales as furnished by the assessee in the tax audit report. It is also a fact that the Tax Auditor in the Tax Audit Report has certified about maintenance of books of accounts by the assessee. In such situation, we are of the view that the AO was not justified in levying penalty under section 271A for non-production of the books of accounts and records before him. We, therefore, direct the deletion of penalty. In the result, the penalty is deleted. Thus, the grounds of appeal of the assessee are allowed.

In the result, the appeal filed by the assessee is allowed.