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Facts
The assessee, a private limited company, failed to file its income tax return for AY 2019-20 and did not maintain books of accounts or get them audited, despite significant receipts. The AO reopened the assessment, estimated income, and initiated penalty proceedings under Section 271B of the Act.
Held
The Tribunal held that the assessee, being a private limited company, was obligated to maintain books of accounts and file returns. Despite claims of ignorance and TDS deduction by customers, the assessee's repeated failure to comply with tax laws warranted no leniency. The penalty under Section 271B was rightly imposed and confirmed.
Key Issues
Whether the penalty under Section 271B of the Income Tax Act is leviable for failure to maintain books of accounts and file return of income, despite the assessee's claim of ignorance and TDS deduction by customers.
Sections Cited
139, 148A, 148, 142(1), 44AA, 147, 144, 144B, 271B, 44AB, 250
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 28/03/2025 in respect of the A.Y. 2019-20 and raised the following grounds: “1. On the facts and in the circumstances of the case and in taw, the Ld. CIT(A), NFAC has grossly erred in passing the order u/s 250 of the Act dated 28.03.2025 bearing DIN & Order No: ITOWNFAC/S/250/2024-25/10751737970) (hereinafter referred to as the "impugned order" or "the order appealed against) in a manner passed by him, the impugned order is passed - without proper appreciation of facts and circumstances of the appellants case and material on record, in contravention of the express provisions of The Income Tax Act, 1961 (herein after referred to as the "Act") and law laid in several judicial. precedents on the issue involved. Therefore, the impugned order is bad in law and liable to be quashed.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), NFAC has passed the impugned order in gross violation of principles of natural justice and on the basis of his own notions, conjectures and surmises.
3. On the facts and in the circumstances of the case and in taw, The Commissioner of Income-tax (Appeals). The National Faceless Appeal Centre (NFAC) (hereinafter referred to as the Ld. CIT(A), NFAC) has grossly erred in confirming vide the impugned order the penalty of Rs. 1,50,000/- u/s 271B of The Income Tax Act, 1961 (hereinafter referred to as the "Act") which was levied upon the appellant by the Assessment Unit, Income Tax Department (hereinafter referred to as the "Ld. AO") vide the order passed u/s 271B dated 30.07,2024 bearing DIN: ITBA/PNLiF/2719/2024-25/1067141666(1) (hereinafter referred to as the "Order u/s 2718 of the Act").
4. On the facts and in the circumstances of the case and in taw, the Ld. CIT(A), NFAC has grossly erred in holding that the penalty levied by the AO u/s 271B is quite justified and sustainable in the eyes of law.
5. On the facts and in the circumstances of the case and in taw, the reliance on various case laws by the Ld. CIT(A), NFAC is grossly misplaced.
6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), NFAC has grossly erred in arbitrarily overlooking, ignoring and rejecting the appellant's reliance on various judicial precedents on the subject matter of imposition of penalty u/s 271B of the Act where no books of account are maintained at all.
7. In view of the above, it is prayed before the Hon'ble Members that - a. The impugned order and the related demand notices be quashed or the impugned penalty of Rs. 1,50,000/- which levied upon the appellant u/s 271B of Act be deleted, and b. any other relief Your Honours may deem fit be granted. The appellant craves leave, to add to amend modify rescind supplement or alter any of the grounds stated here in above either before or at the time before hearing this appeal.”
2. The brief facts of the case are that the assessee is a private limited company engaged in the business of supplying man power / labour. For the A.Y. 2019-20, the assessee had not filed their return of income u/s. 139 of the Act. Based on the form 26AS, the AO had proposed to reopen the assessment and issued a notice u/s. 148A(b) of the Act. Thereafter, an order u/s. 148A(d) was made and consequently, notice u/s. 148 was also issued. Subsequently notices u/s. 142(1) were issued. The assessee submitted their bank statements, sale bills, payroll attendance register, etc. but could not be able to produce the books of accounts and the audit report u/s. 44AA of the Act. The AO had not satisfied with the documents furnished by the assessee and concluded the assessment u/s. 147 r.w.s. 144 and 144B of the Act in which the AO had estimated the income at Rs. 99,45,850/- being the 10% of the business receipts. In the said order, the AO had also initiated proceedings for imposition of penalty u/s. 271B of the Act. The assessee submitted their reply to the notice issued u/s. 271B of the Act and prayed to drop the penalty proposals. The AO had not accepted the submissions and confirmed the penalty u/s. 271B of the Act. As against the said order imposing the penalty u/s. 271B of the Act, the assessee filed an appeal before the Ld.CIT(A) and prayed that the assessee had submitted the documents before the AO and therefore no penalty could be imposed. The assessee also relied on the reply dated 27/04/2024 in which the assessee had submitted that the customers from whom the money has been received for the man power supply had already deducted the TDS and remitted into the department and therefore there was no further liability to file the ITR. The Ld.CIT(A) had not accepted the explanations and confirmed the penalty imposed u/s. 271B of the Act.
As against the said order, the present appeal has been filed before this Tribunal.
At the time of hearing, the Ld.AR submitted that the assessee on the bonafide belief had not filed their return of income since their customers had deducted the tax and paid to the department. The Ld.AR further submitted that the assessee has no sufficient knowledge to get the books audited and therefore submitted that a lenient view may be taken by deleting the penalty proceedings.
The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeal.
We have heard the arguments of both sides and perused the materials available on record.
In the present case, it was admitted by the assessee that they have not maintained any books of accounts and had also not filed any return of income even though their receipts exceeds Rs. 9,94,58,505/-. Apart form that, their accounts were also not audited in spite of the receipts exceeds the threshold limit. Further, the assessee had submitted that because of the ignorance of law they have not filed their return of income and their books were not audited. The assessee also submitted that, their customers had deducted the TDS amounts while making the payments and therefore the assessee was under the impression that they need not file their return of income to the department.
We have considered the fact that the assessee was not well informed and in fact it is a private limited company and therefore they have to maintain the books of accounts and also file the return of income based on the said books. We have also noticed that it is not the first year and even in respect of the A.Y. 2018-19, the assessee had not filed their return of income and the assessment proceedings are completed u/s. 147 on 31/03/2023. Therefore it is clear that the assessee had not respected the provisions of the Act even though their receipts exceeds Rs. 9 crores. It is also seen that the assessee is not a defaulter for the first time in not filing the return of income and therefore even though the penalty proceedings are quasi criminal in nature, the assessee deserves no leniency. Further, the AO had observed that as per section 271B of the Act, the penalty at 0.5% of the tax dues or Rs. 1,50,000/- whichever is less can be imposed. In the present case, the tax dues at 0.5% comes about Rs. 4,97,293/- whereas the AO had imposed the minimum penalty of Rs. 1,50,000/- as contemplated under the said provision.
Considering the status of the assessee and the fact that they have not maintained any books of accounts and not audited the said accounts and furnished the report of such audit as required u/s. 44AB of the Act, the AO had rightly imposed the penalty u/s. 271B of the Act which was also confirmed by the Ld.CIT(A). We, therefore dismiss the appeal filed by the assessee.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open court on 07th November, 2025.