2015 (10) TMI 923 - AT - Income Tax

Penalty u/s.271B - Failure to get accounts audited - Held that - Considering the accounting of the assessee the claim of the assessee was not approved, however as far as the question of levy of penalty for non auditing of account being gross receipts have exceeded ₹ 40 lacs, we have noted that some of the commission income pertained to A.Y.2003-04 and part of the income pertained to A.Y. 2004-05 and likewise another part of the income belonged to A.Y. 2005-06. This position of segregation of income for respective years was finally settled by the Respected Co-ordinate Bench. Therefore, the argument before us was that the assessee was under a bona fide belief that the commission income for the year under consideration was less than ₹ 40 lacs; hence under that impression he has not obtained the audited accounts. On the question of bona fide of tax payers, viz-a-viz, the provision of Section 271B of IT Act a decision of Hon ble Gujarat High Court has been cited in the case of ITO Vs. Sachinam Trust(2009 (3) TMI 186 - HIGH COURT OF GUJARAT ). Respectfully following this decision, we hereby hold that in view of the provisions of Section 273B of IT Act the assessee was prevented by a reasonable cause; hence the penalty levied u/s. 271B deserves to be deleted. - Decided in favour of assessee. Penalty u/s. 271(1)(c) - Non deduction of TDS on commission - Held that - We are of the considered opinion that in a situation when the commission income was subject to TDS and that commission income was disclosed in the respective years following one method of accounting which was not accepted and taxed in A.Y.2004-05 on the basis of another system of accounting; then it is not fair to hold that the assessee has deliberately concealed the facts of the income for the year under consideration. For this legal proposition, we hereby place reliance upon the decision of Hon ble Supreme Court pronounced in the case of Reliance Petro Product Pvt. Ltd., reported in (2010 (3) TMI 80 - SUPREME COURT) and reverse the findings of learned CIT(A). We hereby direct to delete the penalty.- Decided in favour of assessee.

Summary

Issues:
1. Penalty u/s.271B of IT Act
2. Penalty u/s.271(1)(c)

Penalty u/s.271B of IT Act:
The Appeals were filed by the Assessee against the penalties confirmed by the CIT(A) under sections 271(1)(c) and 271B of the IT Act. The AO had levied the penalty under section 271B due to the failure of the Assessee to get its accounts audited as required under section 44AB. The AO excluded a portion of the commission income pertaining to a previous year, resulting in the total commission income exceeding the threshold for audit. The ITAT noted that the Assessee had appealed in a separate case where it was held that the income should not be taxed twice. The ITAT considered the segregation of income for different years and held that the Assessee was under a bona fide belief that the commission income for the year was below the audit threshold. Citing a decision of the Gujarat High Court, the ITAT concluded that the penalty under section 271B should be deleted as the Assessee was prevented by a reasonable cause.

Penalty u/s.271(1)(c):
The penalty under section 271(1)(c) was levied based on the Assessee's claim of commission income for a particular year, which the AO deemed should have been declared in a previous year. The Assessee explained that due to the nature of its business and accounting practices, it was challenging to ascertain the correct income without considering it in the year it was received. The First Appellate Authority upheld the penalty, emphasizing the requirement to offer income based on the mercantile system of accounting. However, the ITAT disagreed with this decision, citing the Supreme Court's ruling in Reliance Petro Product Pvt. Ltd. The ITAT found that since the commission income was subject to TDS and disclosed following a particular accounting method, it was not a deliberate concealment of income. Consequently, the ITAT directed the deletion of the penalty under section 271(1)(c).

In conclusion, both penalties under sections 271B and 271(1)(c) were deleted by the ITAT in favor of the Assessee based on different legal grounds and interpretations of the facts presented during the proceedings.