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

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.

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 .

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.

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.

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.

In the result, appeal of the assessee is allowed.