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Facts
The assessee made large cash deposits during the demonetization period. The AO initiated penalty proceedings under Section 271B for failure to get accounts audited, as the assessee's turnover exceeded the limit prescribed under Section 44AB.
Held
The Tribunal held that since the assessee did not maintain any books of accounts, the penalty under Section 271B for not getting accounts audited would not apply. The court cited the Allahabad High Court decision in CIT vs. Bisauli Tractors.
Key Issues
Whether penalty under Section 271B is leviable for failure to get accounts audited when the assessee has not maintained any books of accounts?
Sections Cited
271B, 44AB, 271A, 142(1), 144, 44AA, 271BA, 271DA
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE
Assessee by : Ms. Karuna Shridhankar, C.A. Revenue by : Ms. Kavitha Kaushik, Sr. D/R सुनवाई की तारीख/Date of Hearing : 13/10/2025 घोषणा की तारीख /Date of Pronouncement : 15/10/2025 आदेश/O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the assesse is preferred against the order dated 04/07/2025 by NFAC, Delhi, pertaining to AY 2017-18.
The solitary grievance of the assessee is that the ld. CIT(A) erred in confirming the penalty of Rs. 79,132/- levied by the AO on account of failure to get the accounts audited. 3. Briefly stated the facts of the case are that as per the information available on AIMS module of ITBA, it came to the knowledge of the AO that the assessee has made huge cash deposits in the bank account during the demonetization period. As per the information, the assessee had made cash deposits amounting to Rs. 26,43,000/- in the account with Canara Bank.
2 3.1. Since the assessee did not file its return of income, a notice u/s 142(1) of the Act dated 10/12/2017 was issued and served upon the assessee calling the assessee to prepare true and correct return of income. However, the assessee did not file any return of income in response to the notice and the AO proceeded to assess u/s 144 of the Act and completed the assessment at Rs. 16,14,550/-. The basis for the assessed income was estimation of profit @ 18% of the estimated turnover of Rs. 1,58,26,454/-. The business profit was estimated at Rs. 28,48,762/- and after allowing reasonable expenses of Rs. 12,34,212/-, the income was assessed at Rs. 16,14,550/-.
Since the turnover of the assessee exceeded the prescribed amount for getting the books of accounts audited u/s 44AB of the Act, the AO initiated penalty proceedings and levied penalty u/s 271B of the Act at Rs.79,132/-. The assessee carried the matter before the ld. CIT(A) and pleaded that the quarrel in respect of quantum addition has been settled under the Vivaad Se Vishwaas Scheme and, therefore, no penalty should be levied. In alternative, it was strongly contended that since the assessee did not maintain any books of accounts, there was no question of getting the same audited.
After considering the facts and submissions, the ld. CIT(A) observed that immunity from penalty when the dispute has been settled under theVivaad Se Vishwaas Scheme, does not cover penalties that are not limited to quantum assessment like penalty u/s 271B, 271BA, and 271DA of the Act.
3 6. Before us, the ld. Counsel for the assessee reiterated what has been stated before the lower authorities. The ld. D/R strongly supported the findings of the AO/ld. CIT(A).
We have carefully considered the orders of the authorities below. It is an undisputed fact that the assessee did not maintain any regular books of accounts. We are of the considered view that separate penalty has been provided for non-maintenance of account i.e., u/s 271A of the Act. In our considered opinion, if the assessee does not maintain books of accounts, then it is not possible to get the books of accounts audited u/s 44AB of the Act. Our view is fortified by the decision of the Co- ordinate Bench in the case of Jaydev Bavalal Thummar vs. ITO [2024] 159 taxmann.com 1594 (Rajkot-Trib.) and Rajnikant Hargovinddas Sanadia vs. Income Tax Officer ITA No. 267/Rjt/2022.
The Hon’ble Allahabad High Court in the case of CIT vs. Bisauli Tractors [2008] 299 ITR 219 (All.), has held that “Separate penalty has been provided for non-maintenance of accounts, i.e., under section 271A of the Act and for not getting the accounts audited and not furnishing the audit report i.e., under section 271B of the Act. In the present case, the Assessing Officer did not impose penalty under section 271A of the Act and instead proceeded to impose penalty under section 271B of the Act. If a person has not maintained the accounts book or any accounts the question of its audit does not arise. In such an event the imposition of penalty under the provision contained in section 271A of the Act for the alleged non-compliance of section 44AA of the Act may arise but the provisions of section 44AB of the Act does not get violated in case where the accounts have not been maintained at all and, therefore, penal provisions of section 271B of the Act would not apply."