Section 271B of the Income Tax Act
The decision most relied on for Section 271B is Ashok Pai v. CIT (292 ITR 11), cited in 812 of the 1,993 judgments on BharatTax that turn on this section.
Leading authorities on Section 271B
“Concealment of particulars of income” and “furnishing inaccurate particulars of income” are two distinct offences under Section 271(1)(c) of the Income Tax Act. A penalty cannot be levied under one limb if the show cause notice or basis for penalty specifies the other, as this constitutes a complete variance in the reasons for assuming jurisdiction.
A penalty under Section 271B for failure to get accounts audited cannot be levied if a penalty under Section 271A has already been imposed for non-maintenance of books of account.
If a penalty is levied under Section 271A for failure to maintain books of account, then a separate penalty under Section 271B for failure to get accounts audited under Section 44AB cannot also be levied.
If an assessee has not maintained books of accounts, the question of getting those accounts audited under Section 44AB does not arise, and therefore, a penalty under Section 271B for failure to get accounts audited cannot be levied. Non-maintenance of books is separately punishable under Section 271A.
A penalty under sections like 271D or 271E is not automatically imposed if the assessee proves there was a reasonable cause for the failure. The interpretation of 'reasonable cause' is that which would prevent a person of average intelligence and ordinary prudence from acting negligently or in bad faith.
If a sum is not chargeable to tax in the hands of the recipient, the payer is not obligated to deduct tax at source, and consequently, no disallowance under section 40(a)(i) can be made. The Bombay High Court also affirmed that penalty proceedings under section 271B may be quashed in certain circumstances.
Whether an assessee has shown 'reasonable cause' under Section 273B, particularly in the context of penalties under Section 271D for violations of Section 269SS, is a question of law involving a legal inference from primary facts. Penalties under Section 271D are not leviable if reasonable cause is established, even for journal entries, provided transactions are genuine and bona fide.
When an assessee fails to maintain books of account, resulting in a confirmed penalty under section 271A, no additional penalty under section 271B can be levied for the failure to get accounts audited under section 44AB, as there are no accounts to audit.
Penalty under section 271B is not leviable for a venial technical breach, such as the late filing of a tax audit report, if there is no mala fide intention and the assessee demonstrates reasonable cause.
Penalty under section 271(1)(c) cannot be imposed based on a protective assessment order. Initiation of penalty proceedings is impermissible without a substantive assessment order that finally adds income to the assessee's hands.
