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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / ORDER PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 08.12.2022, which in turn arises from the order passed by the A.O. under Sec. 271B of the Income-tax Act, 1961 (in short ‘the Act’) dated 12.01.2022 for the assessment year 2017-18. The assessee has assailed the impugned order on the following grounds of appeal before us :
“1. That the order of Ld. CIT(A) has erred is bad in law as well as on facts.
2. The Learned CIT(A) has erred in law and on facts in upholding the validity of the order passed by the Income Tax Officer dated 12/01/2022 under section 271B of the Act which is bad in law and invalid.
3. The Ld. CIT(A) has erred in law and on facts in sustaining the order of the Assessing Officer levying penalty under section 271B of the income tax act amounting to Rs. 61,365/-.
4. Without prejudice to above, the order passed by Ld. CIT (Appeals) is illegal, ab initio void & unsustainable as the same has been passed without giving any opportunity of hearing to I the appellant, contrary to mandatory NIL requirement of law. Hence, consequent order is illegal & liable to be quashed/annulled.
5. That the appellant craves leave, to urge, add, amend, alter, enlarge, modify, substitute, and NIL delete any of the Ground or Grounds and to adduce fresh evidence at the time of the hearing of the appeal.”
3 Prakash Bhansali Vs. ACIT-4(1), Raipur
Controversy involved in the present appeal lies in a narrow compass, i.e., sustainability of the penalty of Rs. 61,365/- imposed by the A.O u/s.271B of the Act, which thereafter had been upheld by the CIT(Appeals), NFAC vide his order dated 08.12.2017.
Shorn of unnecessary details, the assessee who is engaged in retail trading of diamond and gold/silver ornaments and is a partner in a firm, viz. M/s. Samriddhi Jewellers had filed his return of income for A.Y.2017- 18 on 27.12.2017, declaring an income of Rs.19,13,000/-.
As is discernible from the records, income returned by the assessee inter alia was comprised of presumptive income from retail trading in jewelry u/s.44AD of the Act (Page 47 of APB). On a perusal of the return of income, it transpires that the assessee had, under Section 44AD of the Act, disclosed profit @8.02% on the gross turnover/receipts of his eligible business of retail trading in jewelry of Rs.1,22,73,090/-. The A.O. thereafter framed assessment vide his order passed u/s.143(3) of the Act, dated 30.12.2019, wherein the income of the assessee was assessed at Rs.27,48,520/-. The A.O. in the body of the assessment order initiated penalty proceedings u/s. 271B of the Act.
After putting the assesse to notice and considering his reply, the A.O. observed that the assessee had, without reasonable cause, failed to get his accounts audited and furnished a tax audit report within the stipulated
4 Prakash Bhansali Vs. ACIT-4(1), Raipur period as required under Sec. 44AB of the Act. Accordingly, the A.O. vide his order dated 12.01.2022 saddled the assessee with a penalty of Rs. 61,365/- u/s.271B of the Act.
Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. The CIT(Appeals), while upholding the penalty imposed by the A.O u/s.271B of the Act, observed as under:
“5. DECISION: All the grounds of appeal are related to the solitary issue of penalty under section 271B. I have carefully considered the facts of the case, findings of the AO in the penalty order, as well as grounds of appeal. The AO has levied penalty u/s 271 B of the Act on the ground that the assessee has without any reasonable cause failed to comply to section 44AB of the Act. It is noticed that the receipts of the firm for the relevant Assessment Year was to the tune of Rs. 1,22,73,090/-. As per the provision of the Act the assessee was required to maintain books of account and get it audited. As per Section 271B of the I.T. Act, 1961 if any person fails to get his accounts audited u/s.44AB in respect of any previous year or years relevant to an assessment year, the AO may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in 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. The assessee has without reasonable cause, failed to get his accounts audited by the Auditor within due date as provided u/s.139(1) of the I.T. Act, therefore, the assessee is liable to penal action u/s.271B of the I.T.Act, 1961. After considering the facts of the case and nature of default committed by the assessee, I am satisfied that this is a fit case for levy of penalty u/s.271 B of the I.T.Act, 1961.As per the provision of section 44AB of the Act assessee firm was liable to maintain books of account and get its audited as it receipts exceeds the threshold limit. However, assessee failed to do so that also without any reasonable cause. Therefore, the penalty levied by the A.O u/s.271B is justify and the same is confirmed. Hence, all the grounds are dismissed.”
5 Prakash Bhansali Vs. ACIT-4(1), Raipur
The assessee, being aggrieved with the order of the CIT(Appeals), has carried the matter in appeal before us.
We have heard the ld. Authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record and considered the judicial pronouncements that had been pressed into service by them to drive home their respective contentions.
Shri B. Subramanyam, Ld. Authorized Representative (for short ‘AR’) for the assessee submitted that as the assessee had declared profit from his eligible business of retail trading in jewelry under the provisions of sub- section (1) of Section 44AD of the Act, i.e., @8.02% of his gross sales/total turnover of Rs.1.22 crore (approx.), therefore, as per the “3rd proviso” to Section 44AB of the Act (as had been made available on the statute vide the Finance Act, 2017 w.e.f. 01.04.2017), he was obligated to get his accounts audited only if his total sales/turnover/gross receipts would have exceeded an amount of Rs.2 crore during the previous year. The Ld AR drew our attention to the “3rd proviso” to Section 44AB. The Ld AR submitted that as the gross sales/total turnover of the assessee during the year under consideration was less than the threshold limit of Rs. 2 crore provided in the “3rd proviso” to Section 44AB of the Act, therefore, no obligation was cast upon him to get his accounts audited as per the mandate of the said statutory provision.
6 Prakash Bhansali Vs. ACIT-4(1), Raipur
Per contra, the Ld. Departmental Representative (for short, ‘DR’) relied on the orders of the lower authorities. The Ld DR submitted that one of the aspects that had weighed in the mind of the A.O while imposing penalty u/s.271B of the Act was that as the assessee had filed his return of income in “Form ITR-3” and not in “Form ITR-4” (as prescribed in the case of the assessee declaring income u/s.44AD of the Act), therefore, the “3rd proviso” to Section 44AB of the Act was not applicable in his case.
We have thoughtfully considered the issue before us in the backdrop of the contentions advanced by the Ld. ARs of both parties. Admittedly it is a matter of fact borne from the record that the assessee had, inter alia, disclosed his income from the eligible business of trading in jewelry under the presumptive scheme of taxation contemplated in Sec. 44AD of the Act, i.e., @8.02% of his gross turnover/total sales of Rs.1.22 crore (supra). On a perusal of the records, the assessee's income (including income declared u/s.44AD of the Act) has thereafter been assessed by the A.O. vide his order passed u/s.143(3) of the Act dated 30.12.2019. It is not the case of the revenue that the return of income filed by the assessee was at any stage held to be invalid and defective, but on the contrary, the same was acted upon, scrutinized, and subjected to assessment by the A.O.
Be that as it may, it is a matter of fact borne from the record that the return of income of the assessee, inter alia, comprised of profit that was 7 Prakash Bhansali Vs. ACIT-4(1), Raipur derived by him from the eligible business of trading in jewellery, which was disclosed by him in his return of income under sub-section (1) of Section 44AD of the Act. As stated by the Ld. AR, and rightly so, as per the “3rd proviso” to Section 44AB of the Act, the assessee who had declared profit from his eligible business of retail trading in jewellery under sub-section (1) of Section 44AD of the Act would have been required to get his accounts audited only if his total sales/gross turnover of the business would have exceeded Rs.2 crore during the previous year. For the sake of clarity, the “3rd proviso” to Section 44AB of the Act is culled out as under:
“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. (emphasis supplied by us)
Because the gross turnover/sales of the assessee on which he had disclosed presumptive profit u/s.44AD of the Act, i.e., @8.02% was substantially less than the threshold limit of two crore rupees as envisaged in the “3rd proviso” to Section 44AB of the Act; therefore, we concur with the claim of the Ld. AR that no obligation was cast upon him to get his accounts audited as per the mandate of the aforesaid statutory provision.
We, thus, in terms of our observations above, are unable to persuade ourselves to subscribe to the penalty of Rs. 61,365/- imposed by the A.O. u/s.271B of the Act, which thereafter had been upheld by the CIT(Appeals),
8 Prakash Bhansali Vs. ACIT-4(1), Raipur and vacate the same. Accordingly, we set aside the order of the CIT(Appeals) and vacate the penalty of Rs. 61,365/- imposed by the A.O. u/s 271B of the Act.
In the result, the assessee's appeal is allowed in terms of our observations above.
Order pronounced in open court on the 18th day of August 2023.