2015 (10) TMI 1436 - AT - Income Tax

Levy of penalty u/s 271B - Failure to get accounts audited - Held that - Income of the Assessee is basically from commission on transportation. The penalty levied u/s 271B is not a blanket penalty but is subject to the control of Sec. 273B. Thus, the Assessee does have the ground to raise the issue of reasonable cause. The Assessee has explained and shown with evidence that the Assessee is accounting only the commission as its income/turnover in its Profit & Loss account. Admittedly, no defect in its books of accounts have been found to show that the Assessee has done any fraudulent activity either. It is also an accepted fact that the Freight payable account is separately maintained which contains the details of the Freight payable which is received by the Assessee and which is disbursed by the Assessee. This being so, the claim of the Assessee that he was under reasonable and bona fide belief that his turnover did not exceed ₹ 40 lacs is clearly a bona fide claim on which no penalty is leviable u/s 271B. In the circumstances, the penalty levied u/s 271B by the AO, and as confirmed by the ld. CIT(A) stands deleted. - Decided in favour of assessee.

Summary

Issues:
Appeal against levy of penalty u/s 271B for A.Y 2007-08 and A.Y 2008-09.

Analysis:
The Assessee, a booking agent for transportation of goods, challenged the penalty u/s 271B. The Assessee's gross receipts and commission income were detailed for both years. The Assessee maintained a separate 'Freight payable' account for total freight received and paid to truck operators. The Assessee argued that since its turnover was below Rs. 40 lacs and only commission income was accounted for, no audit was required. The AO included the 'Freight payable' account, alleging a violation of Sec. 44AB. The Assessee contended that the penalty should be deleted as turnover didn't exceed Rs. 40 lacs.

The Tribunal noted the Assessee's income was primarily from commission on transportation. The penalty u/s 271B requires a reasonable cause, subject to Sec. 273B. The Assessee demonstrated accounting only for commission income and maintained a separate 'Freight payable' account. No fraudulent activity was found in the books. The Assessee's belief that turnover was below Rs. 40 lacs was deemed bona fide, justifying no penalty under Sec. 271B.

Regarding the comparison to a prior case involving accommodation entries, the Tribunal distinguished the Assessee's case. In the previous case, fraudulent activities were evident, unlike the present scenario. As the Assessee was not involved in accommodation entry business, the penalty u/s 271B was unjustified. Consequently, the penalty imposed by the AO and upheld by the CIT(A) was deleted, and the Assessee's appeals were allowed.

The judgment was delivered on 18/06/2015 by the Appellate Tribunal ITAT PANAJI, with detailed arguments from both parties and a thorough analysis of the Assessee's case, ultimately leading to the deletion of the penalty under Sec. 271B for the relevant assessment years.