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Facts
The assessee, an individual engaged in wholesale tea trading, was penalized Rs. 98,524/- by the Assessing Officer under section 271B of the Income Tax Act for not furnishing a tax audit report within the specified time, despite her turnover exceeding the audit limits. The assessee contended that she had not maintained books of accounts, rendering the requirement for a tax audit inapplicable. The CIT(A) upheld the penalty, leading to the present appeal.
Held
The Income Tax Appellate Tribunal held that penalty under Section 271B is not attracted when the assessee has not maintained books of accounts at all; in such cases, Section 271A (for non-maintenance of books) should be considered. Citing jurisdictional High Court decisions and other ITAT benches, the Tribunal concluded that no penalty u/s 271B was leviable as the assessee had not maintained books of accounts.
Key Issues
Whether a penalty under Section 271B for failure to furnish a tax audit report is leviable when the assessee claims not to have maintained books of accounts, or if Section 271A for non-maintenance of books of accounts is the appropriate provision.
Sections Cited
Section 271B of the I.T. Act, Section 44AB of the I.T. Act, Section 271A of the I.T. Act, Section 139(1) of the I.T. Act, Section 148 of the I.T. Act, Section 194A of the I.T. Act, Section 194B of the I.T. Act, Section 143(3) of the I.T. Act, Section 147 of the I.T. Act, Section 144B of the I.T. Act, Section 273B of the I.T. Act, Section 44AA of the I.T. Act, Section 2(12A) of the I.T. Act, Rule 12(2) of the I.T. Rules, Section 101 of the Indian Evidence Act, 1872, Section 103 of the Indian Evidence Act, 1872, Section 106 of the Indian Evidence Act, 1872
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Income Tax Appellate Tribunal, ALLAHABAD BENCH ‘SMC’, ALLAHABAD
Before: SHRI ANADEE NATH MISSHRA & SHRI SUBHASH MALGURIA
has been filed by the assessee for assessment year 2018-19 against impugned appellate order dated 19/07/2024 (DIN & Order No.ITBA/NFAC/S/250/2024- 25/1066831001(1) of Commissioner of Income Tax (Appeals) [“CIT(A)” for short].
(B) In this case, order under section 271B of the I.T. Act was passed by the Assessing Officer levying penalty amounting to Rs.98,524/-, holding that the assessee had not furnished audit report within the time specified under section 44AB of the Act. The assessee’s appeal against the aforesaid order Assessment Year:2018-19 2 was dismissed by the learned CIT(A) vide impugned appellate order dated 19/07/2024. The relevant portion of the order of learned CIT(A) is reproduced as under:
Assessment Year:2018-19 3 Assessment Year:2018-19 4 Assessment Year:2018-19 5 Assessment Year:2018-19 6 Assessment Year:2018-19 7 (C) The present appeal has been filed by the assessee against the aforesaid impugned appellate order of learned CIT(A). In the course of appellate proceedings, a paper book containing written submissions was filed from the assessee’s side:
Assessment Year:2018-19 8 Assessment Year:2018-19 9 Assessment Year:2018-19 10 Assessment Year:2018-19 11 Assessment Year:2018-19 12 Assessment Year:2018-19 13 (C.1) Alongwith the written submissions; copies of the decisions in the following cases were also filed from the assessee’s side:
(a) ITAT Agra Bench order in the case of Mahadev Cold Storage vs. Jurisdictional Assessing Officer [2021] 190 ITD 273; [2021] 127 taxmann.com 722, & 42/Agr/2021, order dated 14/06/2021 (b) ITAT Bangalore Bench order in the case of Nagesh Consultants vs. DCIT, order dated 07/03/2023 (c) ITAT Delhi Bench order in the case of Arvind Aggarwal vs. Income Tax Officer, [2025] 137 TCL 174, order dated 09/01/2025 (d) Hon'ble Allahabad High Court order in the case of CIT vs. S. K. Gupta and Co. [2010] 322 ITR 86 (All)
(C.2) A paper book containing the following particulars was filed from Revenue’s side:
Assessment Year:2018-19 14 Assessment Year:2018-19 15 Assessment Year:2018-19 16 Assessment Year:2018-19 17 (C.2.1) The oral submissions made at the time of hearing by learned Departmental Representative were also separately presented in writing, which is reproduced below:
Assessment Year:2018-19 18 Assessment Year:2018-19 19 Assessment Year:2018-19 20 Assessment Year:2018-19 21 Assessment Year:2018-19 22 Assessment Year:2018-19 23 (D) At the time of hearing, learned Counsel for the assessee relied on the aforesaid written submissions and decisions referred to in the foregoing paragraph (C) and (C.1) of this order. The learned Departmental Representative placed reliance on the aforesaid paper book, referred to in foregoing paragraph (C.2) of this order. Further, he made oral submissions, which have also been separately presented in writing, as referred to in goregoing paragraph (C.2.1) of this order.
Assessment Year:2018-19 24 (E) We have heard both sides. We have perused materials available on record. The assessee’s claim is that books of account were not maintained by her; therefore penalty under section 271B of the I.T. Act could not have been levied. The claim of Revenue is that the assessee maintained books of account. However, convincing evidence has not been presented by Revenue to prove that the assessee maintained books of account. Although some doubts have been created by Revenue; they fail to establish that the assessee did indeed maintain books of account. The written submissions made from the assessee’s side, as referred to in foregoing paragraph (C) of this order are persuasive. The case of the assessee is also covered in assessee’s favour by decisions of Agra Bench of ITAT in the case of Madadev Cold Storage vs. Jurisdictional Assessing Officer (2021) 190 ITD 273 (Agra/(2021) 127 taxmann.com 722. Moreover, the assessee’s case is also covered in assessee’s favour by decision of Bangalore Bench of ITAT in the case of Nagesh Consultants vs. DCIT (order dated 07/03/2023 in I.T.A. No.32/Bang/2023). Therefore, when order of jurisdictional High Court is in favour of the assessee, we are not persuaded by the Revenue’s contention to take guidance from contrary decisions of non jurisdictional High Court (Karnataka High Court) and non-jurisdictional Bench of ITAT (Ranchi) Bench of ITAT). In any case, decision of Delhi Bench of ITAT in the case of Arvind Aggarwal vs. ITO (DEL-TRIB): (2025) 137 TLC 174 is also in assessee’s favour, relevant portion of which is reproduced below:
Assessment Year:2018-19 25 Assessment Year:2018-19 26 (E.1) The assessee’s case is squarely covered by order of Hon'ble Allahabad High Court, which is the jurisdictional High Court, in CIT vs. Bisauli Tractors (2007) 165 Taxman 1(Allahabad) wherein it was held that section 271B of I.T. Act is not attracted in a case in which books of account have not been maintained.
(E.2) In the case of CIT vs. S. K. Gupta & Co. (All-HC): (2010) 322 ITR 86 also, relevant portion of which is reproduced below; Hon'ble Allahabad High Court has taken a view in favour of assessee:
(E.2.1) In view of the foregoing, and respectfully following the precedents in CIT vs. Bisnauli Tractors (supra); and in CIT vs. S. K. Gupta & Co. (supra); the penalty levied under section 271B of the I.T. Act is hereby deleted.
(E.3) In the result, the assessee’s appeal is allowed.
(Order pronounced in the open court on 28/11/2025)