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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SMT DIVA SINGH & SH.PRASHANT MAHARISHI
Date of Hearing 17.03.2016 Date of Pronouncement 16.05.2016 ORDER
PER DIVA SINGH, JM
The present appeal has been filed by the assessee assailing the correctness of the order dated 05.11.2015 of CIT(A)-20, New Delhi pertaining to 2013–14 assessment year on the following grounds:-
1. “That the Ld.CIT(A) has erred in confirming the penalty of Rs.21,289/- imposed by the Assessing Officer u/s 271B of the Act.
2. That the LD.CIT(A) has erred in holding that the provisions of section 44AB are applicable to the assessee despite the fact that the assessee was not the professional i.e. Doctor by profession. 3. That the order passed by ld.CIT(A) confirming the penalty is perverse in law and on facts. 4. That the appellant seeks leave to add, amend, alter, abandon or substitute any of the above grounds during the hearing of the appeal.” 2. The relevant facts of the case are that the assessee declared an income of Rs.4,15,000/-. The AO taking note of the fact that the accounts of the assessee were I.T.A .No.-354/Del/2016 not audited, initiated penalty proceedings under section 271B. Finding that the assessee was a Doctor by profession and she had received professional receipts amounting to Rs.42,57,882/- from the profession referring to section 44 AB of the Income Tax Act 1961, he required the assessee was to explain why the accounts for the year under consideration were not audited. Reference was made to Notification No. 34 dated 01.05.2013 issued by CBDT, immediately effective from 01.04.2013.
Considering the position, the AO was of the view that the assessee was required to file such audit report i.e. Form 3CA/3CB and 3CD in electronic form. Since despite opportunities the assessee made no compliance before the Assessing Officer, penalty amounting to Rs.21,289/- was imposed.
3. The assessee was unsuccessful in its appeal before the CIT(A) whereas the explanation offered on behalf of the assessee has been extracted on page 4 of the impugned order, however finding it to be not convincing the appeal of the assessee was dismissed by the CIT(A).
Aggrieved by this the assessee is in appeal before the Tribunal.
The Ld. AR appearing on behalf the assessee, invited attention to the explanation filed before the CIT(A) which has been extracted in the order. Relying upon the same it was submitted that the finding that nothing has been said before the AO in the penalty proceedings has been assailed by way of a specific ground which issue has not been addressed by the CIT(A). It was also her submission that the assessee by way of a specific ground has stated that she is not a Doctor and the explanation offered before the AO has been repeated and without discussing the issues the CIT(A) has confirmed the penalty order. It was submitted that all along the assessee right from before the Assessing Officer has pleaded that the assessee is an Page 2 of 6
I.T.A .No.-354/Del/2016 unqualified person who has opened an X-ray cum Pathological Laboratory with the help of technicians etc. It was submitted that she has also argued that she is not a qualified medical professional as such she is not required under the Income Tax Act to get her accounts audited as her receipts are business receipts and not professional receipts wherein the Statutory limit set is of Rs.One crore for getting the accounts audited. In the circumstances, it was submitted the penalty has been wrongly imposed.
The Ld. Sr. DR relies upon the impugned order.
We have heard the rival submissions and perused the material available on record. The assessee in the facts of the present case admittedly was running an X-ray cum Pathological Laboratory with the help of technicians and is not holding the qualification of a Doctor. Since the accounts were not audited, penalty u/s 271B has been imposed and confirmed leading to the filing of the present appeal. We find from the record that before the CIT(A) amongst other grounds the assessee had also raised the following two grounds:-
“That the assessing officer has erred in not considering the reply which was filed and the copy of the same was personally given to the Income Tax Officer.
4. That the appellant is not a Doctor and therefore the provision of section 271B are not attracted in the facts and circumstances of the case.”
We find that these material issues have not been addressed by the CIT(A) who has mechanically confirmed the penalty order. Section 271B of the Act which has been invoked by the Revenue reads as under:-
Failure to get accounts audited 271B. “If any person fails to get his accounts audited in respect of any report of such audit as required under section 44AB, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half percent of the total sales, turnover or gross receipts, as the case may be, in Page 3 of 6
I.T.A .No.-354/Del/2016 business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less.”
8.1. Section 44AB of the Income Tax Act, 1961 whose violation invites penalty u/s 271B reads as under:-
44AB. Audit of accounts of certain persons carrying on business or profession. Every Person,- (a) Carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds [One crore rupees] in any previous year; or (b) Carrying on profession shall, if his gross receipts in profession exceed [twenty five lakh rupees] in any previous year; (c) ……………………… (d) ……………………… (emphasis provided) 9. The relevant provision has been extracted above which clearly shows that for a person who is “carrying on a business” the limits set in sub-clause (a) of section 44AB would kick in at Rs. One crore and for a person who is “carrying on a profession”, the limits as fixed time to time by the Legislature in sub-clause (b) of Section 44Ab would apply. These limits are revised from time to time in order to reduce the compliance burden on small businesses and professionals. Under the existing provisions of Section 44AB at the relevant point of time every person carrying on business was required to get his accounts audited if the total sales, turn-over of gross receipts in the previous year exceeds Rs. One crore. Similarly a person carrying on a profession was required to get his accounts audited if the total sales/turn-over or gross receipts in the previous year exceeds Rs.25 lacs.
We find from the record that consistently the assessee has contended that she was not a professionally qualified person as she has no medical professional qualification and the specific pathological lab was being run with the help of I.T.A .No.-354/Del/2016 technicians. The said submission is found extracted in page 4 of the impugned order and the fact that such a claim has been made by the assessee all along is not in dispute. We find that this consistent claim has not been rebutted by the Revenue either by any finding or by way of any evidence. We find no good reason on record why the said claim of the assessee should not be accepted. In the absence of any rebuttal thereon, considering the above Statutory requirements in the facts and circumstances of the case, we are of the view that without first holding that the assessee was a professionally qualified medical Doctor the Revenue cannot avoid the conclusion that the receipts from the Pathological Laboratory have to be considered as business receipts, as for earning professional receipts holding of a professional qualification would be sine qua non. The threshold limit for getting accounts audited in the case of business receipts admittedly for the year under consideration have been set by the Statute at Rs. One Crore. We find that in the peculiar facts and circumstances of the case, the occasion for imposing penalty u/s 271B did not arise.
In such a situation, where the assessee does not hold any professional medical qualification, we do not see how it can be held that the assessee is carrying on a profession as the venture carried on with the help of technically qualified people necessarily would fall in the category of “carrying on business” wherein the Statutory threshold for getting accounts audited has been fixed at Rs. One crore. Accordingly, we find that in the facts of the present case, considering the claim of the assessee put forth before the CIT(A) stated to have been identically made before the AO also, we hold that the penalty u/s 271B wherein the gross receipts were only Rs.42 lacs.
Accordingly examining the issue from all angles, we find that in the facts of the present case, the penalty imposed u/s 271B deserves to be quashed. As not only on Page 5 of 6
I.T.A .No.-354/Del/2016 facts, it could not have been imposed but even otherwise considering the explanation of the assessee in the facts of the present case, it should have been quashed on the grounds of reasonable cause. Ordered accordingly.
In the result the appeal of the assessee is allowed.
The order is pronounced in the open court on 16 of May, 2016.