SHAHNAZ KHANAM,JHALAWAR vs. INCOME TAX OFFICER, JHALAWAR

per the provisions of Section 44AA and 44AB of the Act respectively. So

far as the appeal before us the same is against the levy of penalty U/s

271B for non audit of accounts. The ld. AR of the assessee has

submitted that since the assessee has not maintained any books of

accounts therefore, the question of audit of same does not arise and

once the penalty has already been levied U/s 271A of the Act then no

penalty can be levied U/s 271B for not getting accounts audited. The ld.

AR has relied upon the decision of Hon’ble Allahabad High Court in case

of CIT Vs. Bisauli Tractors 299 ITR 219 as well as the decision of

Hon’ble Gauhati High Court in case of Surajmal Parsuram Todi vs.

CIT 222 ITR 691. The ld. AR has also relied upon the decision of Delhi

Benches of the Tribunal in case of Nirmal Kumar Jain vs. ITO in ITA

No. 6696 & 6645/Del/2014 dated 02.03.2016. Hence, the ld. AR has

submitted that when the assessee has not maintained the regular books

ITA No. 38/JP/2018 Shahnaz Khanam vs. ITO

of account and the penalty was imposed U/s 271A of the Act then no

penalty can be levied for violation of Section 44AB of the Act.

authorities below and submitted that the assessee has disclosed

incorrect turnover of Rs. 38,95,987/- whereas the actual turnover of the

assessee was found to be Rs. 2,15,09,422/-. Hence, the assessee has

violated the provisions of Section 44AA as well as 44AB of the Act for

not maintaining the regular books of accounts as well as audit of the

same.

material on record we note that the assessee has committed the default

for not maintaining the regular books of accounts as required U/s 44AA

of the Act. The Assessing Officer has already imposed the penalty U/s

271A for violation of the provisions of Section 44AA of the Act. The AO

has also imposed the penalty U/s 271B for not getting the books of

accounts audited. It is pertinent to note that when the assessee did not

maintain the regular books of account then the question of getting of

books of accounts audited does not arise. Once, there is a violation of

provisions of section 44AA of the Act the said violation cannot be

extended to section 44AB of the Act. The provisions of Section 44AB of

ITA No. 38/JP/2018 Shahnaz Khanam vs. ITO

the Act can be invoked only when the assessee has complied with the

provisions of Section 44AA of the Act. Therefore, the violation of Section

44AA of the Act cannot continue because once it is found that the

assessee did not maintain the regular books of account the said

violation cannot travel beyond the provisions of Section 44AA and

hence, cannot be held as a further violation of Section 44AB of the Act.

The Hon’ble Allahaband High Court in case of CIT Vs. Bisauli Tractors

(supra) while dealing with this issue as held in paras 11 to 14 as

under:-

“11. In the case of S. Narayanappa & Bros. v. CIT [1961] 41 ITR 125 the Mysore High Court has held as follows : "What was urged before us was that in a case where an assessee has furnished no return at all before the Income-tax Officer, it should be presumed for the purposes of section 28(1)(b) that he has furnished a return of his income intimating the Income-tax Officer that his income is nil. It seems to me that the language of section 28(1) does not admit of any such construction since the clear requirement of the provisions of this sub-section is that an assessee on whom a penalty is proposed to be imposed under section 28(1)(b) should have in the first instance furnished his return. That, in my opinion, is the ordinary and grammatical meaning of the words occurring in the Act. To interpret the language of this provision in the manner suggested by the learned Government Pleader would, in my opinion, be too artificial and too far-fetched to commend itself for acceptance. Although it is true that the provisions of a statute like those contained in section 28(1)(b) have to receive to construction so as to promote the object of the statute, it is clear that when we interpret a penal provision like that contained in section 28(1)(b), the 5

ITA No. 38/JP/2018 Shahnaz Khanam vs. ITO

interpretation we should place upon it must accord with reason and justice and must be in accordance with the plain ordinary and rational meaning of the words contained in those provisions. So interpreted, I would not, in my opinion, be right in placing on section 28(1)(b) the construction for which the learned Government Pleader contends." (p. 133) 12. The Madras High Court in the case S. Santhosa Nadar v. First Addl. ITO [1962] 46 ITR 411 has gone to the extent that a voluntary return filed after the period of four years from the close of the assessment year is not a valid return and such a case should be regarded as if no return has been filed at all and it cannot be said in such a case that there has been a concealment of the particulars of income or deliberate furnishing of inaccurate particulars and section 28(1)(c) of the Income-tax Act, 1922 would not be applicable. The Madras High Court has held as follows : "When we come to section 28(1)(c ), it deals specifically with the concealment of ‘particulars’ of income or the deliberate furnishing of inaccurate ‘particulars’ of income. In the setting in which this sub- section finds place it is impossible to construe section 28(1)(c) except as relating to a case where a return has been filed but from which return particulars of income have been omitted or any particulars have been deliberately inaccurately furnished. The use of the expression ‘particulars of his income’ and ‘particulars of such income’ would be wholly inapposite in a case where no return has at all been filed; such a case would clearly come within the scope of section 28(1)(a) alone." 13. This Court in CWT v. Yadu Raj Narain Singh [2006] 286 ITR 564 also taken the same view. It has held as follows : "Thus applying the strict construction of penalty provisions contained in clause (1) of sub-section (c) of section 18 of the Act, we find that prior to the amendment in Explanation 3 by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989 in a case where the person who has previously been assessed under the Act does not file any return in response to the notice or even where time for filing 6

ITA No. 38/JP/2018 Shahnaz Khanam vs. ITO

the return has expired has not filed any return there cannot be any concealment for which penalty provision can be imposed. In view of the foregoing discussions, we are of the considered opinion that in the present case the respondent assessee has not concealed the particulars of his income for which wealth no penalty under clause (1) of sub-section (c) of section 18 of the Act is exigible. 14. Therefore, section 271B of the Act is not attracted in a case where no account has been maintained and instead recourse under section 271A can be taken.”

in case of Surajmal Parsuram Todi vs. CIT (supra) and held in para 6

as under:-

“6. We have gone through the provisions of sections 44AA, 44AB, 271A and 271B of the Act. Maintenance of accounts is envisaged under section 44AA and on failure to do so the assessee shall be guilty and liable to be penalised under section 271A. Even after maintenance of books of account the obligation of the assessee does not come to an end. He is required to do something more, i.e., by getting the books of account audited by an accountant. But when a person commits an offence by not maintaining the books of account as contemplated by section 44AA the offence is complete. After that there can be no possibility of any offence as contemplated by section 44AB and, therefore, in our opinion, the imposition of penalty under section 271B is erroneous. The Tribunal has overlooked this aspect of the matter. Of course, it is apparent from the records that the assessee failed to maintain the books of account as required under section 44AA and for that penalty is prescribed under section 271A. It is for the Tribunal to take action in accordance with law.

ITA No. 38/JP/2018 Shahnaz Khanam vs. ITO

The Delhi Benches of the Tribunal in case of Nirmal Kumar Jain vs. ITO

(supra) has held in paras 3 & 4 as under:-

“3. In so far as the penalty u/s 271B is concerned, it is noticed that the AO has recorded a categorical finding on page 2 of the assessment order that no books of account were maintained by the assessee. Under such circumstances, a question arises as to whether any pnalty can be imposed u/s 271B for not getting the books of account audited. The Hon'ble Gauhati High Court in SuraiMal Parasuram Todi vs. CIT (1996) 222 ITR 691 (Gau.), has held that where no books of account are maintained, penalty should be imposed for non- maintenance of books of account u/s 271A and no penalty can be imposed u/s 271B for violation of section 44AB requiring ITA Nos.6696 & 6645/Del/2014 audit of accounts. Similar view has been taken by the Hon'ble Allahabad High Court in CIT vs. Bisauli Tractors (2008) 299 ITR 219 (All). The Hon'ble Aliahabad High Court reiterated the similar view in CIT and Anr. Vs. S.K. Gupta and Co. (2010) 322 ITR 86 (All) by holding that requirement of getting the books of account audited can arise only where the books of account are maintained. In the absence of the maintenance of books of account, there Can be no penalty u/s 271B of the Act. In view of the foregoing legal position emanating from the judgment of the two Hon’ble High Courts, we are convinced that penalty u/s 271B ought not to have been levied because the assessee admittedly did not maintain any books of account as has been recorded in the assessment order itself. We, therefore, order for the deletion of penalty.

ITA No. 38/JP/2018 Shahnaz Khanam vs. ITO

Court in CIT vs. Aero Traders P. Ltd. (2010) 322 ITR 316 (Del) has upheld the view taken by the Tribunal in deleting penalty u/s 271(1)(c) which was imposed on the basis of addition made by the AO on estimated profit. Similar view has been taken in a series of judgments including the Hon'ble Punjab & Haryana High Court in CIT vs. Dhillon Rice Mills (2002) 256 ITR 447 (P&H). In this case also, the Hon'ble Punjab & Haryana High Court approved the view taken by the Tribunal in deleting the penalty u/s 271(1)(c) which was based on an estimate of income made by the AO. In view of the foregoing decisions, it is clear that the penalty so confirmed in the instant case cannot be sustained because it was imposed by the AO on the estimate of income made by him. We, therefore, order for the deletion of penalty.” Accordingly, in view of the binding precedent, we hold that once the

assessee found to have not maintaining the regular books of account as

contemplated by Section 44AA of the Act the default was completed

and therefore, after the default of not maintaining the books of

accounts there cannot be a further default for not getting the same

audited as required U/s 44AB of the Act. Hence, the penalty of levy by

the AO U/s 271B is not justified and the same is deleted.

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

Order pronounced in the open court on 30/05/2018. Sd/- Sd/- ¼Hkkxpan ½ ¼fot; iky jko½ (Bhagchand) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 30/05/2018. 9

ITA No. 38/JP/2018 Shahnaz Khanam vs. ITO *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Shahnaz Khanam, Jhalawar. 2. izR;FkhZ@ The Respondent- ITO, Ward, Jhalawar. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 38/JP/2018} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत