SHRI ANIL OMPRAKASH MISHRA,SURAT vs. INCOME TAX OFFICER, WARD-1(2)(1), SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 314/Srt/2023 (Assessment Year 2011-12) (Virtual hearing) Shri Anil Om Prakash Mishra, I.T.O., A-281, Shubham Bunglows, Sachin, Ward-1(2)(1), Vs. Surat-394230. Surat. PAN No. AJNPM 7661 F Appellant/ assessee Respondent/ revenue

Assessee represented by Shri K.P. Dewani, Advocate Shri B.K. Neema, ADvocate Department represented by Shri Vinod Kumar, Sr. DR Date of Institution of Appeal 03/05/2023 Date of hearing 03/07/2023 Date of pronouncement 03/07/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A)) dated 27/03/2023 in confirming the penalty of Rs. 1.50 lacs levied under Section 271B of the Income Tax Act, 1961 (in short, the Act) for the Assessment Year (AY) 2011-12. 2. Brief facts of the case are that on the ITS Database that the assessee made share and commodities transaction of Rs. 9.90 crores and the assessee has received contract income of Rs.1,90,350/- as reflected in Form AS-26, the case of assessee was reopened under Section 147 of the Act. The assessment was completed under Section 143(3) r.w.s.

ITA No. 314/Srt/2023 Sh. Anil Omprakash Mishra Vs ITO 147 of the Act on 10/12/2018. The Assessing Officer while passing the assessment order made ad hoc addition at the rate of 20% disallowance of total expenses of Rs. 72,000/-, out of which Rs. 36,000/- on account of telephone expenses and Rs. 36,000/- on account of conveyance expenses. The Assessing Officer initiated penalty for failure to comply with the provisions of Section 44AB of the Act. The Assessing Officer levied penalty of Rs. 1,50,000/- under Section 271B vide order dated 27/06/2019. 3. Before levying penalty, the Assessing Officer recorded that in response to notice under Section 148 of the Act, the assessee filed his return of income declaring income of Rs. 4,76,200/-. The assessee was engaged in the business of job work in the name of M/s Shree Ji Weaves and trading in shares and derived brokerage income, dividend of shares and bank interest. The assessee was having job work receipt of Rs. 3.08 lacs and sales of shares of Rs. 4.27 crores. The gross receipt/sales of assessee exceed Rs. 60.00 lacs, thus the assessee was required to get his books of account audited as per provisions of Section 44AB of the Act. The assessee failed to get his books of account audited despite exceeding gross receipt of Rs.60.00 lacs. A show cause notice dated 10/12/2018 and on 12.02.2019 was issued to the assesse to show cause for levying penalty. The Assessing officer recorded that no reply

ITA No. 314/Srt/2023 Sh. Anil Omprakash Mishra Vs ITO was received from assessee. The Assessing Officer thereby levied minimum penalty of Rs. 1.50 lacs under Section 271B of the Act. 4. Aggrieved by the penalty levied under Section 271B of the Act, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee submitted that the assessee was not maintaining books of account and the provisions of Section 44AB of the Act was not attracted. Total receipt from job work was of Rs. 3.08 lacs and share trading at Rs. 4.27 crores. The assessee was having net profit of Rs. 4,76,200/-. The net profit was shown on the basis of bank statement and rough jotting. The assessee was not maintaining any books of account. No account was maintained in respect of job work. The profit was declared on estimation basis. The only documents available with the assessee was bank passbook and TDS details. The provisions of Section 44AB of the Act is not attracted as the assessee was not maintaining books of account. 5. The ld. CIT(A) after considering the submission of assesse, held that the assessee failed to make any compliance in response to various notices issued for levying penalty. The assessee was unable to furnish cogent reason for his failure to bring sufficient and reasonable cause for not getting its account audited under Section 44AB of the Act despite having total receipt beyond threshold limit. Thus, the Assessing Officer was justified in levying penalty under Section 271B of the Act.

ITA No. 314/Srt/2023 Sh. Anil Omprakash Mishra Vs ITO Further aggrieved, the assessee has filed present appeal before the Tribunal. 6. I have heard the submissions of the learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue. The ld. AR of the assessee submits that in response to notice under Section 148 of the Act, the assessee filed return of income showing profit at Rs. 4,76,200/-. The net profit was shown on the basis of bank statement and rough jotting. The assessee was not maintaining any account so no statutory audit was required to be done. Even otherwise, the audit report cannot be obtained/prepared in absence of proper books of account. The only document available with the assessee were the bank passbook and TDS details shown in the Form AS-26. Assessee before the lower authorities relied on certain case laws and submitted that when no proper books of account was maintained, no audit report was required to be obtained under Section 44AB of the Act. To support his case, the assessee relied upon various decisions including decision of Hon'ble Allahabad High Court in CIT Vs. Bisauli Tractors 299 ITR 0219/(2008) 165 Taxman 0001 (All). The ld. AR of the assessee submits that in a recent decision, the Banglore Bench of the Tribunal in Marahaikana Halli Jayashella Shetty Pradeepkumar Vs ACIT in ITA No. 1136/Bang/2022 order dated 30/03/2023 by following the decision of Hon'ble Guwahati High Court in

ITA No. 314/Srt/2023 Sh. Anil Omprakash Mishra Vs ITO Surajmal Parsuram Todi Vs CIT (1996) 222 ITR 691 (Gau) and Allahabad High Court in CIT Vs. Bisauli Tractors (supra) held that provisions of Section 44AB do not get violated in case where accounts have not been maintained at all. The ld. AR of the assessee submits that he has placed on record copy of decision of Hon'ble Allahabad High Court in CIT Vs. Bisauli Tractors (supra). 7. On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld. Sr. DR for the revenue submits that all such submissions as submitted by the ld. AR of the assessee has already been considered by the Ld. CIT(A). 8. I have considered the submissions of both the parties and have perused the record carefully. There is no dispute that the Assessing Officer has levied penalty under Section 271B of the Act. Admittedly, no penalty is imposed under Section 271A for not maintaining books of account. The case of assessee right from the beginning is that the assessee is not maintaining books of account and income is shown on the basis of entry in the bank account and TDS reflected in Form 26AS. Once it is shown that the assessee was not maintaining books of account, there was no occasion for assessee to get the books of account audited under Section 44AB of the Act. Hence, imposition of penalty for non-furnishing of audit report would not arise as has been held by the Coordinate Bench of Bangalore Tribunal in Marahaikana Halli Jayashella Shetty Pradeep

ITA No. 314/Srt/2023 Sh. Anil Omprakash Mishra Vs ITO Kumar Vs ACIT (supra) by following the decision of Hon'ble Guwahati High Court in Surajmal Parsuram Todi Vs CIT and Allahabad High Court in CIT Vs. Bisauli Tractors (supra). For completeness of this order, the relevant part of decision of Bangalore Tribunal is as under: “6. We have heard the learned DR the perused the material on record. The solitary issue is whether penalty can be imposed u/s 271B of the I.T.Act on the facts of the instant case. Admittedly, in the instant case, the A.O. had imposed penalty u/s 271A of the I.T.Act r.w.s. 44AA of the I.T.Act for non- maintenance of books of account. When the assessee has admittedly not maintained the books of account, there is no question of getting the books of account audited u/s 44AB of the I.T.Act. Therefore, imposition of penalty for non-furnishing of audit report u/s 271B does not arise. The Hon’ble Gauhati High Court in the case of Surajmal Parsuram Todi v. CIT reported in (1996) 222 ITR 691 (Gau) had held that when the assessee is liable to pay penalty u/s 271A of the I.T.Act, penalty u/s 271B of the I.T.Act cannot be levied for nonfurnishing of audit report. The relevant finding of the Hon’ble Gauhati High Court, reads as follows:- “We have gone through the provisions of Sections 44AA, 44AB, 271A and 271B of the Act. Maintenance of accounts is envisaged under Section 44AA and on failure to do so the assessee shall he guilty and liable to be penalised under Section 271A. Even after maintenance of books of account the obligation of the assessee does not come to an end. He is required to do something more, i.e., by getting the books of account audited by an accountant. But when a person commits an offence by not maintaining the books of account as contemplated by Section 44AA the offence is complete. After that there can be no possibility of any offence as contemplated by Section 44AB and, therefore, in our opinion, the imposition of penalty under Section 271B is erroneous. The Tribunal has overlooked this aspect of the matter. Of course, it is apparent from the records that the assessee failed to maintain the books of account as required under Section 44AA and for that penalty is prescribed under Section 271A. It is for the Tribunal to take action in accordance with law.”

ITA No. 314/Srt/2023 Sh. Anil Omprakash Mishra Vs ITO 7. A similar view has also been held by the Hon’ble Allahabad High Court in the case of CIT v. Bisauli Tractors reported in (2008) 299 ITR 219 (All.), wherein it is held that if a person is not maintained books of account, the question of audit does not arise. Further, it was held by the Hon’ble High Court that in such an event, the imposition of penalty u/s 271A of the I.T.Act for alleged non-compliance with section 44AA of the I.T.Act may arise but the provisions of section 44AB of the I.T.Act do not get violated in a case where accounts have not been maintained at all. Therefore, it was concluded by the Hon’ble Allahabad High Court that the penal provisions of section 271B of the I.T.Act would not apply. In the instant case as mentioned earlier, admittedly, the assessee has not maintained books of account, penalty imposed u/s 271B of the I.T.Act for non- furnishing of audit report does not arise. Therefore, we delete the penalty imposed u/s 271B of the I.T.Act. It is ordered accordingly. 8. In the result, the appeal filed by the assessee is allowed.” 9. In view of the aforesaid factual and legal discussion and keeping in view the fact that where the assessee was not maintaining books of account, there was no occasion for assessee to get the books of account audited under Section 44AB of the Act. Thus, I direct the Assessing Officer delete the penalty. In the result grounds of appeal raised by the assessee are allowed. 10. In the result, this appeal of assessee is allowed. Order announced in open court on 3rd July, 2023.

Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 03/06/2023 *Ranjan

ITA No. 314/Srt/2023 Sh. Anil Omprakash Mishra Vs ITO Copy to: 1. Assessee – 2. Revenue – 3. CIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Surat