SUBHASH BHASKAR UTTURKAR,MUMBAI vs. ITO 18(2)(2), MUMBAI

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ITA 1365/MUM/2015Status: DisposedITAT Mumbai17 August 2016AY 2008-094 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a penalty under Section 271B cannot be levied for failure to maintain books of account. Since the assessee was not maintaining any books of account, the penalty was not sustainable.

What were the facts?

The assessee treated share transactions as capital gains, but the AO reclassified them as business income. Consequently, the AO levied a penalty under Section 271B for failure to get accounts audited as per Section 44AB, as the turnover exceeded the prescribed limit.

What were the issues?

Whether penalty under Section 271B is leviable for failure to get accounts audited when the assessee is not maintaining any books of account.

Which sections of the Income-tax Act were involved?

Section 271B,Section 44AB,Section 271A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI

Before: SHRI G.S.PANNU & SHRI AMARJIT SINGH

For Appellant: Shri Ashok Shah
For Respondent: Shri A.K.Kardam
Hearing: 21/07/2016Pronounced: 17/08/2016

ORDER PER G.S.PANNU,A.M:

The captioned appeal filed by the assessee pertaining to assessment year 2008-09 is directed against an order passed by CIT(A)- 33 Mumbai dated 10/12/2014, which in turn arises out of an order passed by the Assessing Officer under section 271B of the Income Tax Act, 1961 (in short ‘the Act’) dated 11/04/2012.

2.

The only issue in this appeal is with regard to penalty imposed under section 271B of the Act of Rs.1.00 lac for the failure to get the accounts audited in terms of section 44AB of the Act.

3.

Briefly put, the relevant facts are that the assessee is an individual, who field his return of income on 28/05/2008 declaring an income of Rs.72,860/-. The return of income filed by the assessee, inter-alia, included gain/loss on sale of purchase of shares, which was treated as capital gains. The Assessing Officer however, treated the transaction in sale of shares and securities as a business income and computed the total income at Rs.11,33,790/-. The aforesaid aspects are not in dispute before us. Subsequent to the assessment, the Assessing Officer noted that since the transactions of sale and purchase of shares have been treated as transactions of business, the provisions of section 44AB of the Act are attracted. In terms of section 44AB of the Act an assessee has to get his accounts audited if turnover of the business exceeds the limits specified therein. Considering that the assessee’s turnover of the transactions was in excess of the limit prescribed in section 44AB of the Act, the Assessing Officer held that the assessee was liable to get his accounts audited under section 44AB of the Act. For the failure to get the accounts audited the Assessing Officer has levied penalty of Rs.1.00 lac under section 271B of the Act. The levy of penalty has since affirmed by the CIT(A), against which assessee is in further appeal before the Tribunal .

4.

Before us, the Ld. Representative for the assessee pointed out that the assessee was not maintaining any books of account as it was not having any business income. It was pointed out that assessee is a retired individual, who was deriving income from the savings held in fixed deposits, bonds, debentures, mutual funds and also in equity shares. No books of account were maintained and, therefore, there was no requirement of considering the applicability of the section of 44AB of the Act. Moreover, it was also pointed out that it is only during the assessment proceedings that the transactions of sale and purchase of shares have been treated as a business income, whereas assessee had treated the same as assessable under the heads capital gains.

5.

On the other hand, Ld. Departmental Representative has justified the levy of penalty for the reasons advanced by the Assessing Officer, which we have already adverted in the earlier paras and is not being repeated for the sake of brevity.

6.

We have carefully considered the rival submissions. In the present case, it is quite evident that assessee is not maintaining any books of account. Ostensibly, the failure to maintain books of account can lead to levy of penalty under section 271A of the Act and penalty under section 271B of the Act cannot be levied for failure to maintain books of account. The aforesaid proposition has been laid down by the Hon’ble Gauhati High Court in the case of Surajmal Parsuram Todi vs CIT, 222 ITR 691(Gau) and in our view the facts of the present case are fully covered by the said judgment. Accordingly, we set-aside the order of the CIT(A) and direct the Assessing Officer to delete the penalty of Rs.1.00 lacs imposed under section 271B of the Act.

7.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 17/08/2016

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