SUBHASH CHAND SAINI,JAIPUR vs. ITO WARD, BEHROR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 230/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2017-18 cuke Subhash Chand Saini ITO, Village-Maid, Tehsil-Virat Nagar Vs. Ward, Behror Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: CEFPS 7350 G vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P. K. Garg (C.A.) jktLo dh vksj ls@ Revenue by : Smt Monisha Choudhary (Addl. CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 17/08/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 12/09/2023 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by the assessee aggrieved from the order of the National Faceless Appeal Centre (NFAC), Delhi [ Here in after referred as (NFAC) ] for the assessment year 2017-18 dated 13.02.2023, which in turn arises from the order passed by the Assessing Officer passed under Section 271B of the Income tax Act, 1961 (in short 'the Act') dated 22.12.2021.

2 ITA No. 230/JP/2023 Subhash Chand Saini vs. ITO

grounds:-

“1. That Ld. AO had erred in levying penalty for failure to get the books of accounts audited as no books of accounts were maintained by the assessee.

return of income for A. Y. 2017-18 declaring income of Rs.

5,89,190/- filed on 28.03.2018. The assessee has declared income

from business or profession for the year under consideration. The

case was selected through CASS under scrutiny with remarks “ (i)

cash deposit during the year”. Notice u/s 143(2) of the I.T. Act,

1961 was issued on 14.08.2018 fixing the case for hearing on

29.08.2018. Further notice u/s 142(1) was issued on 22.04.2019

along with query letter fixing the case for hearing on 07.05.2019.

No compliance made by the assessee. Further notice u/s 142(1)

was issued on 30.05.2019 fixing the case for hearing on

07.06.2019. Online written reply received on 07.05.2019 along with

copy of ITR and computation of income and copy of bank

statements. Thereafter notice u/s 142(1) was issued on 25.09.2019

3 ITA No. 230/JP/2023 Subhash Chand Saini vs. ITO along with query letter fixing the case for hearing on 10.10.2019. In

compliance to this notice the assessee has furnished documents,

details and produced relevant documents which were examined on

test check basis and replies filed were placed on record. Assessee

is engaged in the business of wholesale trading of vegetables

during the year under consideration.

initiated issued notice for penalty proceedings u/s 271B for failure

to file audit report as per provision of section 44AB of the Income

Tax Act, as the turn over as declared in the return of income is

exceeding to Rs. 1 cr. Based on these the ld. AO passed an order

u/s 271B of the Act levying penalty of Rs. 90,874/- being 0.5% of

turnover Rs. 1,81,74,825/- is levied on the assessee company u/s

271B of the Income Tax Act, 1961 holding that the assessee has

committed default and has not shown reasonable cause for such

default and therefore, the penalty u/s 271B of the Act levied from

the assessee.

penalty of Rs. 90,874/-, assessee preferred an appeal before the

4 ITA No. 230/JP/2023 Subhash Chand Saini vs. ITO

ld. CIT(A)/NFAC. A propose to the grounds so raised the relevant

finding of the ld. CIT(A)/NFAC is reiterated here in below:

“The grounds of appeal are decided as under:- 3.1 Ground No.1 : That the ld. AO had erred in levying penalty u/s 271B during pendency of appeal against quantum assessment order. In this case the assessee has himself declared the turnover to be Rs. 1,10,47,462/- in his return of income which was above Rs. 1 crore and therefore, there was no role of the appellate proceedings on the penalty proceedings u/s 271B of the Act. Further, there are certain limitations provided in section 275 of the Act, beyond which penalty cannot be imposed but there is no bar in completing the penalty proceedings u/s 271B of the Act during pendency of first appeal. However, it has been found that on request of the appellant that the penalty proceedings should be kept in abeyance till the decision of quantum appeal. The assessee was to given an opportunity to file his submission vide notice dated 27.12.2022 which was after the decision in the quantum appeal dated 22.11.2022 passed by the CIT(Appeal), NFAC. The appellant did not filed any reply in this case. I find that the turnover which was worked out as Rs. 1,81,74,825/- by the Assessing Officer during the assessment proceedings has been reduced to Rs. 1,74,59,825/- after decision in the quantum appeal. However, the turnover remains above Rs. 1 crore and the appellant was therefore require to get his account audited as per provisions of section 44AB of the Act. As the appellant neither got the account audited before the due date nor furnished any reasonable cause for failure to do so, the provisions of section 271B of the Act are clearly attracted. Therefore the penalty of Rs. 90,874/- imposed by the Assessing Officer u./s 271B has rightly been imposed. However, as the turnover has been reduced to Rs. 1,74,59,825/- by the CIT(Appeal), the penalty is reduced to Rs. 87,299/-(being 0.5% of Rs. 1,74,59,825/-). Therefore, the ground of appeal is partly allowed as discussed above.”

penalty and was slightly reduced to Rs. 87,299/- against levy at

5 ITA No. 230/JP/2023 Subhash Chand Saini vs. ITO

Rs.90,874/-. The assessee has challenged the balance levy of

penalty of Rs.87,299/- confirmed by ld. CIT(A) before this tribunal

on the grounds as raised hereinabove. Apropos to the grounds so

raised the ld. AR appearing on behalf of the assessee has placed

their written submission which is extracted in below;

“As per Sec 44AD of Income Tax Act, 1961, (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession": [Provided that this sub-section shall have effect as if for the words "eight per cent", the words "six per cent had been substituted, in respect of the amount of total turnover or gross receipts which is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year.] (2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed. (3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years. (4) Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1)

6 ITA No. 230/JP/2023 Subhash Chand Saini vs. ITO

(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income tax, shall be required to keep and maintain such books of account and other documents as required under sub- section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.] (6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to- (i) a person carrying on profession as referred to in sub-section (1) of section 44AA; (ii) a person earning income in the nature of commission or brokerage; or (iii) a person carrying on any agency business. Explanation. For the purposes of this section,- (a) "eligible assessee" means,- (i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and (ii) who has not claimed deduction under any of the sections 10A, 10AA, 108, 108A or deduction under any provisions of Chapter VIA under the heading "C. Deductions in respect of certain incomes" in the relevant assessment year; (b) "eligible business" means, - (i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and (ii) whose total turnover or gross receipts in the previous year does not exceed an amount of [two crore rupees] In view of above, penalty of Rs. 87299/- levied u/s 2718 deserves to be quashed.”

6.1 In this appeal the ld. AR of the assessee submitted a detailed

paper and the index of the paper book index is extracted here in

below :

7 ITA No. 230/JP/2023 Subhash Chand Saini vs. ITO

S. No. Particulars Page No. Authority before whom presented 1 Affidavit 1-2 NA 2 Copy of return filed for AY 17-18 3-9 NA 3 Lokesh Kumar Sharma vs. ITO [ITA No. 10-22 Case Law 278/JP/2022]

assessee filing of the return u/s 44AD even if the turnover

exceeding at Rs. 1,10,47,462/- is permitted or not and thereby the

penalty u/s 271B of the Act is leviable or not. Therefore, on

08.08.2023, the matter was adjourned to 17.08.2023 and on that

date of hearing, ld. DR did not bring anything contrary to the

provision of section 44AD so as to debar of the assessee even

though the turnover exceeding Rs. 1 cr to file the return of income

or any decision to support the view for levy of penalty. Thus ld. DR

heavily relied upon the finding of ld. AO and thereby ld. CIT(A)

while levying the penalty u/s 271B of the Act and thereby prayed to

sustain the penalty.

placed on record. The bench noted that the return of income filed

8 ITA No. 230/JP/2023 Subhash Chand Saini vs. ITO

by the assessee is under the provisions of section 44AD of the Act

and even in the assessment proceeding the income based on the

estimate as per provision of section 44AD of the Act was accepted.

The return of income filed by the assessee u/s. 44AD in the

assessment was disputed for computing the turnover based on the

bank statement and thus the estimated income was again

increased based on the presumptive taxation. The ld. AO based on

this fact also noted that the assessee is liable to get his books of

accounts audited and therefore, he failed to comply with the

provisions of section 44AB of the Act to and get the books of

account audited. On careful perusal of the provision of section

44AD and 44AB of the Act, the bench noted that section 44AB lays

down that

(e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year, get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed : Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:

9 ITA No. 230/JP/2023 Subhash Chand Saini vs. ITO Whereas the section 44AD also effected a change with effect from

01.04.2017 wherein the words “eight per cent”, substitute to six per

cent”, in respect of the amount of total turnover or gross receipts

which is received by an account payee cheque or an account

payee bank draft or use of electronic clearing system through a

bank account [or through such other electronic mode as may be

prescribed] during the previous year or before the due date

specified in sub-section (1) of section 139 in respect of that

previous year. Thus, on conjoint reading of the section the

assessee is eligible to avail the benefit of presumptive taxation up

to Rs. 2 crores turnover. Thus, based on these set of facts and on

perusal of the record, turnover of the assessee has determined

finally by the ld. CIT(A) at Rs. 1,74,59,825/- which is below at Rs. 2

crores and the assessee has already filed his return of income

under the provisions of section 44AD of the Act at it is evident from

the paper book page No. 5 wherein the assessee has disclosed

turnover as well as opted that the provisions of section 44AD by

offering 6 % of estimated income on that turnover in the return of

income, the relevant extract from the paper book is extracted

herein below:

10 ITA No. 230/JP/2023 Subhash Chand Saini vs. ITO

discussed herein below. We are of the considered view that the

assessee has not controverted the provisions of section 44AB of

the Act and since turnover is not exceeding the revised limit of Rs.

2 crores. The levy of penalty by the lower authority is against the

provisions of law and therefore, the same is deleted based on

these observations. Thus, the grounds of appeal raised by the

assessee are allowed.

In the result the appeal of the assessee is allowed.

Order pronounced in the open Court on 12/09/2023 Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judcial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 12/09/2023 *Ganesh Kumar, PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Subhash Chand Saini, Jaipur

11 ITA No. 230/JP/2023 Subhash Chand Saini vs. ITO izR;FkhZ@ The Respondent- ITO, Ward, Behror 2. 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. 230/JP/2023} vkns'kkuqlkj@ By order सहायक पंजीकार@Aेेज. त्महपेजतंत