D SAIVENUGOPAL,CHENNAI vs. ITO, NCW 6(1), CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 16, Chennai, dated 18.01.2019 relevant to the assessment year 2013-14.

Brief facts of the case are that the assessee is in the business of trading in broilers (MD of M/s. Saraswathi Broiler P. Ltd. and filed return of income for the assessment year 2013-14 on 17.05.2014 admitting total income of ₹.12,09,160/-. The assessment was completed under section 143(3) of the Income Tax Act, 1961 [“Act” in 2 short] dated 30.03.2016 by assessing total income of the assessee at ₹.30,84,318/-. In the statement of total income filed by the assessee, the assessee has claimed total sales of ₹.52,03,594/- and claimed profit at the rate of 5% on these to declare presumptive income of ₹.4,16,288/- under section 44AF of the Act. To be eligible for the availing the benefit of section 44AF of the Act, the proviso to sub- section (1) of the Act mandates that the total turnover should not exceed forty lakh rupees. In this case the total turnover was ₹.52,03,594/- and hence, the benefit of section 44AF of the Act is not available to the assessee. Accordingly penalty proceedings under section 271A of the Act has been initiated and noticed issued on 30.03.2016. The assessee has not filed any reply. Since the assessee failed to keep and maintain any such books of account and other documents as required by section 44AA of the Act, the Assessing Officer levied penalty of ₹.25,000/- under section 271A of the Act. On appeal, the ld. CIT(A) confirmed the penalty levied under section 271A of the Act.

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that as the claim made by the assessee for presumptive taxation has to be 3 allowed under section 44AD of the Act, the upper limit for turnover of eligible amount for the assessment year 2013-14 is ₹.60 lakhs. Since the turnover of the assessee is ₹.52,03,594/- for the assessment year 2013-14, the ld. Counsel for the assessee has submitted that the case of the assessee falls within the ambit of section 44AD of the Act and prayed for deleting the penalty levied under section 271A of the Act.

On the other hand, the ld. DR fairly conceded the submissions of the assessee.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessee had no business activity carried out during the said assessment year and hence there was no sales register or books of account. The assessee has only made a journal entry crediting the capital account and debiting Saraswathi Broilers Pvt. Ltd., a company in which the assessee is a director, which does not warrant maintenance of books of accounts. In the statement of total income filed by the assessee, the assessee has claimed total sales of ₹.52,03,594/- and claimed profit at the rate of 5% on these to declare presumptive income of ₹.4,16,288/- under section 44AF of the Act. We find that as per sub-section (6) to section 44AF of the Act, section 44AF of the Act is not applicable to the assessee to any assessment year commencing after 1st April, 2011 and therefore, the provision of section 44AA of the Act has no application in the assessee’s case. However, the Assessing Officer levied penalty under section 271A r.w.s. 44AA of the Income Tax Act for non-maintenance of books of accounts, which was confirmed by the ld. CIT(A). The claim of the assessee has to be allowed under section 44AD of the Act for which the upper limit for turnover of eligible amount is ₹.60 lakhs, whereas, in the present case, the total turnover was only ₹.52,03,594/-. Under the above facts and circumstances, the penalty levied under section 271A of the Act and confirmed by the ld. CIT(A) is not in accordance with law and, therefore, stands deleted.