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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED, & SHRI SIDDHARTHA NAUTIYAL
Assessee by : Shri Chetan Agarwal, A.R Revenue by : Shri B.D. Gupta, Sr. D.R सुनवाई क� तारीख/Date of Hearing : 07/07/2022 घोषणा क� तारीख /Date of Pronouncement: 14/09/2022 आदेश/O R D E R PER BENCH:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income tax (Appeals)-2, Rajkot, dated 10/12/2019 arising in the matter of order passed under s.271B of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2015-16.
The only issue raised by the assessee is that learned CIT (A) erred in confirming the penalty levied by the AO for ₹ 1,50,000/- under the provisions of section 271B of the Act on account of failure of getting the accounts audited.
The facts in brief are that the assessee in the present case is an individual and running his proprietary concern from retail trade of milk and milk products. The AO during the assessment proceedings found that the turnover of the assessee from his business stands at ₹ 7,92,73,920.00 which exceeds the threshold limit specified under the provisions of section 44AB of the Act for getting the accounts audited. But the assessee failed get the accounts audited and therefore the AO levied the penalty for a sum of ₹1,50,000 under the provisions of section 271B of the Act.
On appeal before the learned CIT (A), the assessee submitted that he is acting as the commission agent for the company namely M/s Maahi Milk Company and earning commission income on the sales made by him of the products of such company i.e. M/s Maahi Milk Company. Accordingly he was under the bona-fide believe that the amount of commission from the sale of the products of the company shall only be considered to decide whether the accounts were liable to be audited under the provisions of section 44AB of the Act instead of the gross sales amount recorded by him. Accordingly, the penalty under the provisions of section 271B of the Act is not attracted.
However the learned CIT-A disregarded the contention of the assessee by observing that the assessee failed to furnish the supporting evidence that he is acting the commission agents under the nature of transaction for the sale and purchase.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 42 and submitted that the assessee was under the bona fides believe that only the commission income shall be considered for deciding the issue whether the accounts were subject to audit under the provisions of section 44AB of the Act.
7.1 The learned AR also contended that the income declared by the assessee was accepted in the assessment framed under section 143(3) of the Act. As such, the income of the assessee was not disturbed during the assessment proceedings. The purpose of getting the accounts was to find whether there was no loss to the revenue insofar the income disclosed by the assessee. As there was no change in the income declared by the assessee, then the assessee cannot be visited with the penalty under the provisions of section 271B of the Act. The learned AR in view of the above prayed that penalty under the provisions of section 271B should not be levied in the given facts and circumstances.
On the other hand the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the assessee is subject to the tax audit under the provisions of section 44 AB of the Act in a situation where its turnover exceeds the threshold limit which is ₹1 crore for the year under consideration. Undoubtedly, the assessee admitted that the turnover of the assessee was exceeding ₹1 crores but being a commission agent, he was under the bona-fides believe that his gross commission income of ₹7,39,475.00 only needs to be considered for inviting the provisions of section 44AB of the Act. Therefore, the assessee failed to get the accounts audited. Accordingly it has been pleaded before us by the learned AR that the failure on the part of the assessee for getting the accounts audited was a bona fides believe having no mala-fides intent to avoid the accounts audited.
9.1 Under section 271B of the Income-tax Act, 1961, if a person required to get the accounts audited under the provisions of section 44 AB of the Act, fails to do so, the Assessing Officer may impose on him a penalty for a sum of Rs. 1,50,000.00 or .5% of the turnover whichever is less. The use of the word ‘may’ in this section also indicates that it is not mandatory but discretionary. It cannot be imposed in each and every case of default but the Assessing Officer shall issue a notice to the assessee for affording the opportunity of hearing. Thus after hearing the assessee and after considering to the circumstances of each case and also taking into consideration the provisions of section 273B which may be taken by the assessee in order to escape from the penalty, the AO may come to the conclusion whether any penalty is imposable or not. Accordingly, we note that the penalty under the provisions of section 271B of the Act is not automatic. Likewise, the provisions of section 273B of the Act provides that there shall not be any penalty if the assessee fails to get its accounts audited under the provisions of section 44 AB of the Act if he proves that there was reasonable cause for the said failure. The provisions of section 273B is extracted below: "273B. Penalty not to be imposed in certain cases: Notwithstanding anything contained in the provisions of [Clause (b) of sub-Section(1) of Section 271, Section 271A, Section 271AA,Section 271B, Section 271BA, Section 271BB, Section 271C, section 271CA, Section 271D, Section 271E, Section271F, Section 271FA, Section 271FAB, Section 271FB, section 271G, Section 271GA, Section 271GB, Section 271H, Section 271-I, Section 271J, clause (c) or clause (d) of sub-section (1) or sub-section(2)of section 272A, sub-section (1) of section 272AA or Section 272B or sub-section (1) or sub-section (1A) of section 272BB or sub-section (1) of Section 272BBB or clause (b) of sub-section (1) or clause (b) or clause(c) of sub- section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.]"
9.2 In the light of the above discussion, we have to see whether there was a reasonable cause for failure on the part of the assessee to get his accounts audited. In this regard, we note that the learned CIT-A has given finding that the assessee failed to furnish any documentary evidence to justify that he has earned commission income from the company namely M/s Maahi Milk Co. Admittedly, the onus lies upon the assessee to justify his contention based on the tangible materials. But we find that the assessee has not brought anything on record.
9.3 Be that as it may be, we find that one of the objectives of tax audit is to ascertain/derive/report the requirements of Form Nos. 3CA/3CB and 3CD. Apart from reporting requirements of Form Nos. 3CA/3CB and 3CD, a proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they truly reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of accounts before the tax authorities and considerably save the time of Assessing Officers in carrying out routine verifications, like checking correctness of totals and verifying whether purchases and sales are properly vouched for or not. Admittedly, in the given case the income declared by the assessee in the return of income has been admitted by the revenue without any variation though the assessee has furnished necessary documents in support of the return filed by him. This fact can be verified from the observations of the AO contained in the assessment order. The relevant extract is reproduced as under:
A.R of the assessee attended from time to time and furnished written submission which are placed on record. The assessee filed all relevant accounts, bank statement, filed explanation/clarification of source of cash deposit in bank accounts etc. which were duly verified and placed on records. The cash book was produced for verification. The case was discussed with him.
9.4 From the above, there remains no ambiguity to the fact that all the necessary details were available before the AO during the assessment proceedings in support of the return of income filed by the assessee and no infirmity of whatsoever was pointed out by the AO during the assessment proceedings. Therefore, the AO after due application of mind and carrying out the necessary verification has accepted the income declared by the assessee. As such we are of the view that there was no leakage of the revenue to the government exchequer on account of failure on the part of the assessee for not getting the accounts audited under the provisions of section 44AB of the Act. On this count, we are of the view that the assessee should not be visited with the penalty under the provisions of section 271B of the Act. Accordingly, in the interest of justice and fair play we are of the view that the penalty under the provisions of section 271B of the Act is not sustainable in the given facts and circumstances. Thus, we set aside the finding of the learned CIT (A) with the direction to the AO to delete the penalty levied by him upon the assessee. Hence the ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 14/09/2022 at Ahmedabad.